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From NEV to CEV: the government work report and the auto industry

The annual sessions for the CPPCC and NPC, China’s top legislative and advisory bodies, were held in early March.

The Two Sessions is a time for automotive executives who are also CPPCC or NPC members to submit a variety of proposals and motions aimed at improving the industry and in some way benefiting their own companies, and it’s no different this year.

But a major highlight of this year’s government work report delivered by Premier Li Keqiang as it relates to the auto industry is his use of the term “clean energy vehicle (CEV)” rather than “new energy vehicle (NEV),” which was used in government work reports over the past several years.

The subtle change in the term from NEV, which in China specifically means plug-in hybrids, battery electrics and fuel cell vehicles, to CEV is seen by many in the industry as a strong sign that the country’s leaders maybe considering diversifying alternative fuel and propulsion technologies that constitute as an NEV.

Such as the use of methanol or solar power, as proposed by Geely Chairman Li Shufu and Hanergy Holding Chairman Li Hejun, or low-speed EVs that are popular in rural areas but powered by controversial lead-acid batteries with sales in the millions annually, as proposed by Shifeng Chairman Liu Yifa and Tianneng Chairman Zhang Tianren.

The use of the CEV term by the Premier and various proposals submitted by executives related to it comes at a time when NEV sales “tanked” in January and February mostly due to the effects of reduced subsidies and refresh of national and local NEV product catalogues, and as China continues to fight pollution and seek to meet long-term fuel efficiency targets.

As Miao Wei, Minister of Industry and Information Technology, pointed out to reporters during the Two Sessions, the country is currently soliciting comments from various stakeholders on a trading mechanism for fuel consumption and NEV credits to be used as a major policy driving the NEV market once subsidies are completely phased out in 2020.

For the time being, the country will continue to focus on promoting and driving NEV sales, in particular battery EVs as that account for more than 70 percent of the registration volume of new energy passenger vehicles. The use of the CEV term is likely a reflection of a realization from top leaders that NEVs alone probably will not get the job done in terms of long-term fuel efficiency targets and China must consider additional solutions that complement existing ones.

Balancing policies and regulations with market reality is always tough and it will be interesting to see whether the use of the CEV term will transpire to any meaningful policies this year.

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