China tightens controls on vehicle production

The Chinese government has come up with a new set of regulations for its automotive industry to limit production of gasoline and diesel-fuelled vehicles.

The country's top economic planning body NDRC this week announced the new regulations that will ban automotive manufacturers from building new production plants for gasoline and diesel-fuelled vehicles, effective from 10 January next year.

Automotive manufacturers will not be allowed to relocate their plants to other provinces. The government will prohibit them from raising their production capacity of fossil fuel vehicles unless their actual output of new energy vehicles (NEVs) has been above the industry average over the last two years.

Gasoline and diesel-fuelled vehicles in the regulations refer to traditional fuel vehicles, regular hybrid vehicles and plug-in hybrid vehicles.

The decree also includes several clauses that are designed to manage investment in the electric vehicle sector. The minimum output capacity of any new project that produces all-electric passenger cars must be at least 100,000 units a year, with the minimum capacity for all-electric commercial vehicles set at 5,000 units a year.

The government in the regulations has urged electric car producers to improve their research and development ability, conceptual design and product quality.

Beijing in September 2017 hinted that it will ban the production and sale of gasoline and diesel-fuelled vehicles to reduce pollution, without providing further details.

The move follows a series of countries announcing plans to ban gasoline and diesel-fuelled cars. The UK and French governments will enforce the ban in 2040, and India, Norway, Germany and the Netherlands are scheduled for 2025-30.

China produced 807,000 units of all-electric vehicles and 247,000 plug-in hybrids during January-November this year. It is expected to exceed its initial target of producing 1mn electric vehicles in 2018, following rises in output over the past few months.

The Chinese government has tightened its control on NEV subsidies, which are scheduled to be completely removed by the end of 2020. The authorities in February cancelled a subsidy of 20,000 yuan ($2,900) for pure EVs with a driving range of below 150km and reduced the subsidy for EVs with a range of 150-200km to Yn15,000 from Yn36,000. The subsidy for those that have a range of 200-250km was lowered to Yn24,000 from Yn36,000, while the subsidy for those with a range of 250-300km was slashed by Yn10,000 to Yn34,000.