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CAFC+NEV “dual credit” scheme “adjusted:” new ratios set for 2021-2023

BEIJING – China’s “dual credit” scheme for passenger vehicles is getting a makeover.

The Parallel Administrative Measures for Passenger Vehicle Corporate Average Fuel Consumption (CAFC) and New Energy Vehicle (NEV) Credits, which was officially released nearly two years ago and put into effect in April 2018 jointly by the Ministry of Industry and Information Technology (MIIT), Ministry of Finance, Ministry of Commerce, General Administration of Customs and the former Administration of Quality Supervision, Inspection and Quarantine (now State Administration for Market Regulation), is being revised, according to a notice posted on the website of MIIT on July 9.

MIIT is seeking public feedback on the revisions, which it said were aimed at promoting the healthy and sustainable development of China’s energy-saving and new energy vehicle sectors and speeding up the transformation and upgrading of the overall auto industry, for a month until August 9.

The announcement comes just a week after MIIT released industry and manufacturer CAFC and NEV credit results for 2018, which showed that industry CAFC (based on 141 passenger vehicle manufacturers and importers) reached 5.8L/100 km and more than 4 million NEV credits were generated (see China PV CAFC reaches 5.8L/100 km in 2018, more than 4 million NEV credits generated). The country sold almost 1.03 million new energy passenger vehicles in 2018.

Here are highlights of key revisions and additions being considered:

  • Revision: Traditional energy PVs (including non-plug-in hybrids) now include those powered by alcohol ether fuel in addition to those powered by gasoline, diesel and natural gas;
  • Addition: Low fuel consumption PVs refer to traditional energy PVs with combined fuel consumption that is less than the product of the relevant vehicle fuel consumption target value specified in Evaluation Methods and Standards of Passenger Vehicle Fuel Consumption and CAFC requirement value (rounded to the nearest decimal);
  • Addition: Traditional energy PV CAFC actual value refer to CAFC actual value without taking into account NEVs;
  • Revision: Domestic PV manufacturers that keep their R&D, production and operation independent and produce fewer than 2,000 vehicles annually and authorized importers of overseas PV manufacturers that import fewer than 2,000 PVs annually enjoy a relaxed CAFC credit requirement based on the following: those with annual CAFC reductions of 4 percent and above from 2021 to 2023 will get a 60 percent increase in acceptable values and those with annual reductions of above 2 percent and below 4 percent receive a 30 percent increase. Requirements for 2024 and beyond will be announced at a later date;
  • Addition: When calculating acceptable values for NEV credits, production or import volume of low fuel consumption PVs are multiplied by a factor of 0.2;
  • Revision: PF manufacturers or importers should produce or import enough NEVs that generate NEV credits equivalent to 14, 16 and 18 percent of sales volumes in 2021, 2022 and 2023 respectively, while percentage requirements for 2024 and subsequent years will be announced in the future;
  • Revision: NEV credits can be traded openly but those that are generated in 2019 and beyond should be carried forward (effective for no more than three years) based on the following rules: 1) credits generated in 2019 can be fully carried forward to 2020; 2) those remaining in 2020 can be carried forward further but only half of the values can be carried over with each transaction; 3) those with ratio of traditional energy PV CAFC actual value and overall CAFC acceptable value in 2021 and beyond of no more than 123 percent are allowed to carry forward NEV credits generated that year but only half of the values can be carried over with each transaction. Those that only produce or import NEVs can carry forward half of their credits generated that year:
  • Revision: NEV credit calculation has been updated (see TABLE).

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