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NEV entry threshold: easier or harder?

The National Development and Reform Commission (NDRC), China’s top economic planner, on March 28 approved Henan Suda Electric Vehicle Technology’s program of producing 100,000 EVs a year. Suda became the 12th company over the last year to get approval for an EV production license.

The company actually came under the spotlight last year when the media portrayed it as a “zombie company” which carried out “illegal fund raising” and “authorized construction.”

The company got construction land for its EV program in 2011, just one year after its establishment. But for several years after the purchase, it just hoarded the land, with no plant construction or model release. Since a “notorious” company such as Suda can get a license, the NEV entry threshold mechanism has been put into doubt.

Some believe the nation has set too low an entry threshold on EV production and some local governments have intervened too much on the market, pushed unfair competition and thus harmed the industry.

For a long time, there is a saying that the nation would only grant 10 EV production licenses. Now with the number already up to 12, many expect at least 10 or more licenses will be given this year, including a few of the so-called “internet carmakers,” with loosened standard and shortened censorship period.  

It could encourage more companies to try to enter and boosts the market. But when it comes to mass manufacturing, the companies should strengthen their quality control and deliver sound products, according to an industry expert.

But winning production licenses is only the first step for the 12 companies. Most of them haven’t released production models. Before their models hit the market, they have to pass several tests and be included on recommended lists. Also the EV production license is only valid for three years before being rechecked and extended.

For traditional OEMs, they can choose to produce either gasoline vehicles or NEVs. But these EV license holders can only produce EVs. Whether the NEV industry entry threshold is getting easier or harder is still debatable, but a problem is looming. 

Last October the State Council said “in principle no new gasoline vehicle manufacturing company will be permitted,” and recently NDRC urged at a meeting local governments to strengthen auto investment program administration. They all pointed to the problem of industry overcapacity.

It might be a similar problem facing the NEV industry with overgrowth of EV and battery manufacturers and capacities.

But Miao Wei, minister of Industry and Information Technology, has said in public the nation hopes more catfishes come in to energize the industry since it is still in the infant stage.

At present, the focus should be on how to grow and elevate the industry qualitatively, rather than quantatively.

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