E-car rules to clean up chaotic sector

Central government to tighten regulations to standardize the market and improve competitiveness

China's Ministry of Industry and Information Technology is seeking public opinion on draft regulations for new energy vehicles, signaling its intention to bring order to a chaotic sector.

Compared with the 2009 regulations, the draft released on Aug 12 is much stricter on products and car manufacturers, and experts say it is intended to improve competitiveness and clean up a market plagued by shoddy products.

The draft has streamlined the definition of new energy vehicles to cover purely electric vehicles, plug-in hybrids and fuel-cell cars, and demands that makers monitor the condition and reliability of cars during their life span.

Zhang Zhiyong, an independent analyst in Beijing, believes that if a vehicle's quality is monitored for life, carmakers will pay more attention to standards and gradually build customer confidence in their products, thereby improving sales.

More than 200 manufacturers in China produce new energy passenger vehicles, buses and special-use vehicles, but they lag behind global leaders in terms of quality, reliability and key technology, according to a report in July by the National Development and Reform Commission, the top economic planner.

Dong Yang, executive vice-president of the China Association of Automobile Manufacturers, says the ministry aims to reduce the number of manufacturers to about 10 competitive companies.

According to the draft regulations, carmakers would not be allowed to apply for a license unless they are capable of developing a control system and coordinating power and drive systems. In the 2009 rules, knowledge of one of the three systems was sufficient, and both carmakers and car modifiers were allowed to apply for a license.

Huang Xili, an auto market analyst for Changjiang Securities, says in a report that the revision would make it difficult for companies to enter the sector, but would benefit companies that have been working hard in research and development, such as BYD and JAC Motors.

Some experts, including Zhang, believe it would be better if there were a clearer and detailed definition for "developing" a system.

However, Huang does not share the concern that removing car modifiers would affect sales. Citing his company's data, he says e-cars from car modifiers accounted for 30 percent of the total sold last year, but carmakers can compensate for those parts because they have sufficient capacity.

Industry insiders also believe the revised rules would prevent repetition of previous cases in which companies falsely claimed government subsidies.

China promulgated plans in 2009 to stimulate the sector and set a goal in 2012 to have 5 million new energy vehicles on the roads by the end of 2020.

To that end, China's central and regional governments started offering subsidies in 2010 to makers and buyers of new energy cars, and there were reports of some companies illegally claiming subsidies by producing substandard cars and selling them to subsidiaries.

A report from the State Council showed the central government gave 28.4 billion yuan ($4.26 billion; 3.77 billion euros) in subsidies, with regional governments offering more than 20 billion yuan to the sector between 2013 and 2015.

Dong says that once the black sheep are removed, the market will be cleaner and people will have easier access to better-made products.

In addition to making it difficult for newcomers to enter the sector, the draft regulations also demand that those already on China's list of carmakers and auto products must reapply for licenses within 24 months.

Despite the absence of detailed rules, it is clear that the ministry will introduce a mechanism to add and remove companies from the approved list, rather than allowing them to stay on it permanently once approved.

By the end of last year, the list featured 277 new energy models, but only 43 had annual production of more than 1,000 units, according to ministry statistics.

lifusheng@chinadaily.com.cn

(China Daily Africa Weekly 08/26/2016 page30)