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[Focus] The domestic auto market for new energy vehicles such as "Eight Immortals Crosses the Sea, Each Shows His Magic"
In recent years, the streets have seen a growing number of new energy vehicles, yet for most traditional automakers, internal combustion engine vehicles remain their core business. The dual-integration policy, which combines passenger car fuel consumption limits with new energy vehicle integration, heavily emphasizes new energy vehicles. For instance, a company's negative fuel consumption balance can be offset by various methods, including the positive credits gained from selling new energy vehicles. Conversely, new energy vehicle credits can only be balanced by other new energy vehicle credits.
This essentially sets a fixed quota for new energy vehicle production. Recently, Zheng Lixin, spokesperson for the Ministry of Industry and Information Technology and director of the Operation Monitoring and Coordination Bureau, announced that the "Measures for the Concurrent Management of the Average Fuel Consumption of Passenger Vehicle Enterprises and New Energy Vehicle Integration," also known as the dual-integration policy, will soon be officially released. According to this policy, the percentage of new energy vehicles will rise to 8%, 10%, and 12% in 2018, 2019, and 2020, respectively, with no carryover of credits across years.
The strong push towards new energy vehicles began in 2009 when China surpassed the U.S. as the world's largest auto market. By 2016, China's automobile production and sales topped 28 million, leading globally for eight consecutive years. With market upgrading and environmental concerns driving demand, the Chinese government has been committed to promoting new energy vehicles. Since 2009, numerous policies and development plans have been introduced to support this sector.
The "Medium- and Long-Term Development Plan for the Auto Industry," released in April 2017, aims for new energy vehicle production and sales to reach two million annually by 2020. Meanwhile, adjustments to financial subsidies for new energy vehicles indicate the gradual withdrawal of government support. Starting in 2017, subsidies decreased by 20%, with no further subsidies planned after 2020, affecting the industry significantly. Industry insiders report that new energy vehicle sales have already felt the impact of reduced subsidies.
Analysts suggest that the dual-integration policy aligns with subsidy adjustments, setting a high growth rate for new energy vehicles. This benefits domestic new energy car brands, allowing them to offset fuel consumption deficits and potentially sell excess credits. A representative from BYD noted that subsidies are temporary measures set to end in 2020, while the dual-credit policy ensures long-term mechanisms for fuel-efficient companies to subsidize new energy vehicles.
Despite the promising outlook for domestic brands, disparities exist in the new energy sector. BYD, Geely, and BAIC rank among the top global new energy vehicle sellers, with domestic new energy buses achieving world-class technological standards. However, some traditional automakers struggle to adapt. Companies like SAIC Motor and Volkswagen China boast annual sales exceeding two million vehicles, yet most have made little progress in new energy. These firms may become major buyers of new energy credits in the future.
Great Wall Motors, dominating the high fuel consumption SUV market without significant new energy contributions, faced severe penalties last year. To comply with the dual-integration policy, Great Wall has invested 30 billion yuan to expand its new energy lineup, launching its first EV in May 2017.
International automakers are also adapting. BMW Brilliance focuses on new energy R&D, with several models already launched. Nissan plans to enter the top three in China's pure electric market, while Honda and Toyota aim to introduce fuel cell vehicles and electric options by 2020. Volkswagen and Daimler have partnered with Chinese companies to meet policy requirements.
As the 2018 deadline approaches, automakers are diversifying strategies. Early adopters are leveraging advantages, while others navigate challenges to keep pace.