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China steps up efforts to boost auto industry, lowers market access requirements for EV makers
08 April 2020IHS Markit Automotive Expert
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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