Within the transportation sector, road transportation accounts for about 70% of CO2 emissions. Vehicle electrificat… https://t.co/Gi18TmP5rU
China steps up efforts to boost auto industry, lowers market access requirements for EV makers
China will loosen market access requirements for new energy vehicle (NEV) manufacturers to help the industry to recover following the coronavirus disease 2019 (COVID-19) virus outbreak, reports China Daily. The report, centred on China's move to support the faltering new energy vehicle sector, highlighted several changes made by China's top industry regulator, the Ministry of Industry and Information Technology (MIIT) to lower the threshold for automakers to enter the sector. The industry regulator on 7 April has removed some specific requirement items, including one that asks new entrants to the sector to show capacity for electric vehicle (EV) design and development. The authorities will also allow automakers with product permits to halt production for up to 24 months, an extension of 12 months from the prior regulation. Such moves are widely interpreted as China's intention to help small players to stay in the industry. On the consumption side, China's State Council said on 1 April that the subsidies for NEVs will be extended by another two years, ending months of debate over whether the central government should react to falling NEV sales by keeping such financial aids.
At regional level, increasing number of cities have announced stimulus designed to help auto sales. Programmes vary from city to city. However, measures rolled out so far are either offering cash incentives for new purchases or releasing more licence plate quotas. Changsha has announced a subsidy of up to CNY3,000 (USD425) on purchases of new vehicles built by a local manufacturer. The programme will benefit automakers with local operations in the city such as Volkswagen (VW), Fiat Chrysler Automobiles (FCA), and BYD. Hangzhou has said it will add an additional 20,000 units to the quota for new vehicles this year.
Outlook and implications
China is now the first country to start to recover from the COVID-19 virus outbreak, but it has now been faced with another challenging task helping its automotive industry to return from the downturn. China Passenger Car Association (CPCA)'s retail data show average daily sales volume reached around 25,800 units in the third week of March, compared with 21,700 units in the second week and 16,700 units in the first week. However, the pace of wholesale growth is still lagging, indicating dealers have yet to recover from stalled sales in January and February. A series of incentives have been announced by local governments during the past two weeks, but still it will take time for these policies to have an effect on the auto sales. Compared to local authorities, stimulus offered the central government will certainly have a greater impact. Focus will be placed on support the development the NEV sector while speeding up the replacement of high-emission vehicles. Several OEMs, including Great Wall and GAC Group, have lowered their sales targets for 2020 to realign with investors what to expect over the remaining of the year. Geely, as an exception, said last week that it would keep its sales target for 2020 despite the losses suffered in February. In IHS Markit's March forecast update, we anticipate China's light-vehicle production volumes to drop by 11.5% during 2020 to around 21.6 million units. A slew of automakers intend to play down specific targets as the Chinese market has yet to fully absorb the impact from the COVID-19 outbreak.
One observation from March is that automakers are pulling out all the stops to stick to their planned new car launches. VW began trial production of its forthcoming Tayron X earlier this week, and a larger SUV from the VW brand is also in the pipeline. Audi has been warming up for the unveiling of the new Audi A4L. The new A4L, one of the best-selling nameplates from Audi's Chinese line-up, is slated for market launch on 10 April.
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