2020.07.15 ZHENG, Yu、WANG, Kai、ZHANG, Xiaobin
After two rounds of opinion solicitation, the Ministry of Industry and Information Technology (“MIIT”) recently released the Decision on Revising the Measures for the Parallel Point-based Administration of Corporate Average Fuel Consumption and New-Energy Vehicles for Passenger Vehicle Enterprises (the “Amendment”), which will come into effect on January 1, 2021.
In 2017, MIIT released the Measures for the Parallel Point-based Administration of Corporate Average Fuel Consumption and New-Energy Vehicles for Passenger Vehicle Enterprises (the “Parallel Point-based Measures”), which came into effect on April 1, 2018. As a policy tool to replace the subsidies for new energy vehicles, the Parallel Point-based Measures administer the corporate average fuel consumption (“CAFC”) and the production/import volume of new energy passenger vehicles (“NEV”) in the form of points, outlining the target value of points, the transferring methods and the possible punishments. The Parallel Point-based Measures impose policy pressure on passenger vehicle enterprises to improve both the energy-saving level of traditional energy vehicles and the production/import volume of NEVs, thus avoiding the grave decline of production capacity that may occur after the drop off of subsidies for NEVs. According to MIIT's statistics, in 2019, the sales of NEVs in China reached 1.06 million, ranking first in the world for five consecutive years1. From a perspective of promoting the production/import of NEVs, the Parallel Point-based Measures have achieved relatively good results after implementation, and have met their objectives.
Having said that, some new issues have surfaced during the implementation of the Parallel Point-based Measures. The most important issue lies in the trend of the large number of NEV positive points being generated and the decrease of CAFC positive points. By comparing the statistics of NEV points and CAFC points in the passenger vehicle industry for 2016-2019, we may see that 2018 was a watershed year — despite the fact that CAFC negative points' increment was 1.3 million points compared to that in 2017, CAFC positive points' steady growth trend in the past few years was terminated with a shortfall of nearly 2.5 million points, the reduction ratio of which was nearly 20%. On the other hand, NEV points have increased with a volume of 2.3 million points, a growth ratio of 125%. The statistics in 2019 keep reflecting the aforesaid trend of 2018. Despite the fact that CAFC negative points increased to nearly 2.15 million points compared to that in 2018, CAFC positive points were greatly reduced by 3.5 million points with a reduction ratio of 35%, while NEV positive points basically maintained the same level as 2018.
(Figure 1 - Statistics of CAFC Points and NEV Points for 2016 – 2019
Source: the announcements of points of various years published on MIIT's official website)
The above data demonstrates that after the implementation of the Parallel Point-based Measures, passenger vehicle enterprises have excessively focused on the increase of the production capacity for NEVs, instead of investing in energy-saving measures for traditional energy passenger vehicles. The reason behind this could be due to the fact that on the basis of the existing fuel consumption levels, it requires a large investment in R&D to improve the energy consumption level of traditional energy passenger vehicles. Instead, the R&D investment in NEVs will be much lower; In terms of generating points, the production (or import) of an NEV can directly bring considerable CAFC positive points and NEV positive points to passenger vehicle enterprises. In contrast, the outcome in generating points by enhancing the energy consumption level of traditional energy passenger vehicles is quite insignificant. It is therefore not surprising that passenger vehicle enterprises choose to take the shortcut of expanding the production of NEVs.
This single-handed way is obviously contrary to the original intention of the policy. According to the requirements under the Energy-Saving and New Energy Development Plan for the Automobile Industry (2012-2020) promulgated by the State Council in 2012, by 2020, the cumulative production and sales of pure electric vehicles and plug-in hybrid vehicles shall exceed five million units; the average fuel consumption of passenger vehicles produced in that year shall be reduced to 5.0 liters/100 kilometers. At present, the former target of total production and sales of five million new energy vehicles should be reached without a problem. However, considering the current actual fuel consumption level (5.5 liters/100 kilometers in 2019), the latter fuel consumption target of 5.0 liters/100 kilometers is still far from being reached. As a result of that, at the policy level, lowering the proportion of NEV points under the entire parallel point-based system and thereby guiding passenger vehicle enterprises to make a prompt adjustment from the production side naturally becomes the background for the promulgation of this Amendment.
The main revisions in this Amendment include (1) adjusting the formula for calculating the NEV standard vehicle model points; (2) stepwise enhancing the ratio requirement of the target value of NEV points from 2021 to 2023 and granting the preferential treatment to low-fuel-consumption passenger vehicles; (3) establishing carry-over rules for NEV points linked to the bottom level of CAFC of traditional energy passenger vehicles; (4) establishing channels for the transfer of CAFC positive points among several domestic passenger vehicle manufacturers established by the same overseas passenger vehicle manufacturer; (5) adding the policy adjustment power to MIIT to cope with the negative impact of COVID-19 on passenger vehicle enterprises; and (6) other updated revisions.
According to the Parallel Point-based Measures, the standard vehicle model points of each NEV and its production/import volume in the calculating year constitutes the NEV points of that vehicle model, and the sum of NEV points of each NEV model produced/imported by passenger vehicle enterprises constitutes the actual value of NEV points of that enterprise. By adjusting the formula for calculating the standard vehicle model points of each NEV, the Amendment reduces the standard vehicle model points, thereby further reducing the overall NEV points. Please see below for details:
Note：R refers to the running distance per charge in comprehensive working condition (km)；P refers to the specified power of the fuel cell system (kW)
Besides, the Amendment further specifies the adjustment of vehicle model points under the different power consumption conditions of the above three types of new energy vehicles. Taking the pure electric vehicle as an example, the Amendment introduces three variables (i.e. “Running Distance Adjustment Factor”, “Power Consumption Adjustment Factor” and “Energy Density Adjustment Factor”) to calculate the NEV points, thereby imposing higher technical requirements on the pure electric vehicles from three different perspectives of running distance, power consumption level and battery energy density, thus avoiding passenger vehicle enterprises unilaterally pursuing high running distances and neglecting the development of energy density and power consumption.
According to the Parallel Point-based Measures, the target value of NEV points is the production of the production/import volume of traditional energy passenger vehicles and the NEV ratio in the calculating year. The NEV ratio in 2019 and 2020 are 10% and 12% respectively. This Amendment further stipulates that the NEV ratios from 2021 to 2023 are 14%, 16% and 18% respectively to further increase the target value of NEV points.
Despite the Amendment imposing higher requirements on the NEV ratio, it also introduces the concept of “Low Fuel-Consumption Passenger Vehicles2 and provides more preferential NEV measures to encourage passenger vehicle enterprises to increase their investment in the energy-saving of traditional energy passenger vehicles. Specifically, when calculating the target value of NEV points, the production/import volume of Low Fuel-Consumption Passenger Vehicles will be calculated at 0.5 times in 2021, 0.3 times in 2022 and 0.2 times in 2023, of its actual number. Therefore the requirement of the target value of NEV points for such Low Fuel-Consumption Passenger Vehicles will be significantly lowered, thus guiding and encouraging passenger vehicle enterprises to further research and develop, manufacture and import Low Fuel-Consumption Passenger Vehicles.
Under the Parallel Point-based Measures, NEV positive points can be freely traded but cannot be carried over (except for 2019). Considering the large number of NEV positive points generated, the Amendment makes a further adjustment to the carrying over of NEV positive points to future years, permitting NEV positive points to be carried over to future years according to the following rules, provided that the validity period of such carrying over does not exceed three years:
(1) NEV positive points generated in 2019 may be carried over to be used for one year at the equal amount;
(2) The ratio for each carrying over of NEV positive points in 2020 shall be 50%;
(3) If the ratio of the CAFC actual value (calculating traditional energy vehicles only) to the CAFC target value of the enterprise in and subsequent to the year of 2021 is not higher than 123%, the NEV positive points generated in that year are permitted to be carried over and the ratio for each carrying over is 50%. NEV positive points, generated by passenger vehicle enterprises which only manufacture or import new energy vehicles, shall be carried over at a ratio of 50%.
The above rules could effectively ingest a large number of NEV positive points that have already been generated so far, slow down the production of NEVs by passenger vehicle enterprises and avoid overcapacity. On the other hand, from 2021, the carrying over of NEV positive points will be directly linked to the CAFC performance status, thus further encouraging passenger vehicle enterprises to increase their investment in the saving of power consumption in traditional energy passenger vehicles.
Under the Parallel Point-based Measures, the affiliates allowed to transfer CAFC positive points include imported passenger vehicle suppliers authorized by the overseas passenger vehicle manufacturer and the domestic passenger vehicle manufacturers whose more than 25% shares are directly or indirectly held by the said overseas passenger vehicle manufacturer. However, it is not clear under the original Parallel Point-based Measures whether different domestic passenger vehicle manufacturers, with more than 25% shares directly or indirectly held by the same overseas passenger vehicle manufacturer respectively, shall be deemed as the affiliates. This Amendment solves the said issue by further clarifying that the different domestic passenger vehicle manufacturers, whose more than 25% shares are directly or indirectly held by the same overseas passenger vehicle manufacturer respectively, shall also constitute the affiliates and thus CAFC positive points can be transferred among them.
In 2020, the global passenger vehicle industry has been adversely affected by the COVID-19 pandemic. To alleviate the impact of the pandemic on the passenger vehicle industry, this Amendment further adds the policy adjustment power to MIIT on top of the original draft for public opinion, to cope with the possible impact of the pandemic on the passenger vehicle enterprises, which includes,
(1) MIIT has the power to extend the compensation period and adjust the ratio for carrying-over NEV positive points in 2020 according to the development status of the automobile industry;
(2) MIIT may allow passenger vehicle enterprises to use NEV positive points generated in 2021 to compensate for NEV negative points generated in 2020 according to the development status of the automotive industry.
Apart from the aforementioned revisions, the Amendment also includes the following updated revisions:
(1) Incorporating passenger vehicles fueled by alcohol ether into the category of traditional energy passenger vehicles;
(2) Updating and loosening the requirements of CAFC concession compliance for small-scale passenger vehicle enterprises3 from 2021 to 2023 to replace the expired policy in 2020 under the Parallel Point-based Measures;
(3) According to the institutional reform of the State Council, the “General Administration of Quality Supervision, Inspection and Quarantine” set out in the Parallel Point-based Measures is revised into the “State Administration for Market Regulation”.
During the NPC and CPPCC Sessions in 2018, Mr. MIAO Wei, the minister of MIIT, publicly stated that the ratio of production and sales of new energy vehicles shall reach 10% in 2020. In other words, the remaining 90% of the production and sales shall still be comprised of traditional energy vehicles. It is therefore very significant for the entire automobile industry to optimize the power consumption level for traditional energy vehicles. The utmost objective of this Amendment is to make a prompt adjustment to the issues arising from the implantation of the Parallel Point-based Measures and lower the proportion of NEV points under the entire parallel point-based system, thus guiding passenger vehicle enterprises to improve the power consumption levels of traditional energy passenger vehicles and increase the comprehensive technical levels of NEVs.
The Parallel Point-based Measures promulgated in 2017, which uniquely created the parallel point-based system and the parallel management mode, have effectively achieved the policy objective to succeed the subsidy policy and to stimulate passenger vehicle manufacturers to continue the production of NEVs, and have created a large number of positive points. However, in addition to the points generated, the Parallel Point-based Measures also concentrate on the trading of points. Currently, the industry's CAFC positive points are still far more than the CAFC negative points (although the gap is shrinking), and there are still a large number of NEV positive points. Hence, the trading of points is not active and is regarded more as an adjusting method for medium and small-scale vehicle enterprises. The officials from MIIT also revealed during the Amendment press conference that, MIIT, through its point management platform, had only implemented two transactions of points so far4. In this respect, the original purpose of realizing the balance between supply and demand through the market trading mechanism under the Parallel Point-based Measures and maximizing the utilization of resources has not yet been achieved. A large number of positive points have been shelved. As a result of this, we speculate that in the near future the Parallel Point-based Measures will be further adjusted to narrow the gap between the positive and negative points and to promote the trading of points. We will continue to monitor the latest updates in this regard.
1.Press conference held by the officers of the Policy and Regulation Bureau and Equipment Industry First Bureau of the MIIT regarding the Decision on Revising the Measures for the Parallel Point-based Administration of Corporate Average Fuel Consumption and New-Energy Vehicle for Passenger Vehicle Enterprises (http://www.miit.gov.cn/n1146295/n7281315/c7981645/content.html).
2.Refers to the traditional energy passenger vehicles of which the comprehensive power consumption does not exceed the production of (i) the target value of power consumption of corresponding vehicle model contained in the Fuel Consumption Evaluation Methods and Targets for Passenger Vehicles (GB 27999) and (ii) the CAFC requirement of the enterprise in such calculating year.
3.Refers to (i) the domestic passenger vehicle manufacturers that have an annual production capacity of 2,000 units or less and whose production, R&D and operation remain independent, or (ii) the imported passenger vehicle supply enterprises authorized by the overseas passenger vehicle manufacturers with an import volume fewer than 2,000 units.
4.Please refer to endnote No.1.