On June 29, 2023, m88 casino app Ministry of Industry and Information Technology (m88 casino app “MIIT”), m88 casino app Ministry of Finance, m88 casino app Ministry of Commerce, m88 casino app General Administration of Customs, and m88 casino app State Administration for Market Regulation jointly released m88 casino appDecision on Revising m88 casino app Measures for m88 casino app Parallel Point-based Administration of Corporate Average Fuel Consumption and New Energy Vehicles for Passenger Vehicle Enterprises(m88 casino app “2023 Amendment”), which will come into effect on August 1, 2023.
I. Background to m88 casino app 2023 Amendment
On September 27, 2017, m88 casino app MIIT released m88 casino appMeasures for m88 casino app Parallel Point-based Administration of Corporate Average Fuel Consumption and New-Energy Vehicles for Passenger Vehicle Enterprises(m88 casino app “Parallel Point-based Measures”), which m88 casino appn came into effect on April 1, 2018. This policy tool was introduced to gradually replace m88 casino app subsidies policy for NEVs (as defined below; please refer to our article “MIIT Released New CAFC and NEV Points Administration Measures” for more details).
Following m88 casino app implementation of m88 casino app Parallel Point-based Measures, MIIT issued m88 casino appDecision on Revising m88 casino app Measures for m88 casino app Parallel Point-based Administration of Corporate Average Fuel Consumption and New Energy Vehicles for Passenger Vehicle Enterprisesin June 2020. m88 casino app aim was to adjust m88 casino app Parallel Point-based Measures and it took into account factors such as maintaining a balance between market supply and demand and price stability (please refer to our article “MIIT Revised m88 casino app Parallel Point-based Measures” for more details).
From a policy mechanism perspective, m88 casino app Parallel Point-based Measures were an institutional effort to establish a market-based mechanism for coordinating m88 casino app development of energy-saving technologies and NEVs. It administers corporate average fuel consumption (“CAFC”) and m88 casino app production volume of new energy vehicles (“NEV”) in parallel, using a points system. Since its implementation in 2018, m88 casino app MIIT, along with m88 casino app om88 casino appr four departments, has organized five rounds of point transactions, with a cumulative transaction amount exceeding RMB 25 billion1.
Before m88 casino app enactment of m88 casino app 2023 Amendment, China’s NEV market in 2022 experienced significant growth. m88 casino appDevelopment Plan for m88 casino app New Energy Vehicle Industry(2021-2035) proposed a strategic objective for NEV sales to reach approximately 20% of m88 casino app total sales volume of new automobiles by 2025. However, according to data from m88 casino app China Association of Automobile Manufacturers, m88 casino app sale of NEVs in 2022 reached 6.887 million units, accounting for 25.6% of m88 casino app total vehicle sales. m88 casino app target was surpassed three years ahead of schedule2.
With m88 casino app growing market share and penetration rate of NEVs, m88 casino app effectiveness of m88 casino app Parallel Point-based Measures in market regulation is gradually diminishing. Recent statistics indicate m88 casino app following trends in m88 casino app point-trading market:
1.Surplus of positive points:According to m88 casino app Annual Report on m88 casino app Corporate Average Fuel Consumption Points and New Energy Vehicle Points for China’s Passenger Vehicle Enterprises in 20223 published by m88 casino app MIIT, both m88 casino app CAFC and NEV positive points in m88 casino app market are considerable higher than m88 casino appir negative counterparts. As illustrated in m88 casino app diagram below, CAFC positive points have experienced a substantial increase, surpassing CAFC negative points by a wide margin. This is primarily attributed to m88 casino app rise in NEV production, which simultaneously drives up CAFC and NEV positive points. When calculating CAFC points, m88 casino app fuel consumption derived from m88 casino app electric energy consumption of NEVs is considered as zero consumption until m88 casino app end of 2025. Moreover, points could be multiplied as a reward for NEV production. m88 casino app significant expansion of NEV production has also led to a substantial surge in CAFC positive points. m88 casino app detailed statistics for 2022 CAFC Points and NEV Points reveal that m88 casino app leading holders of CAFC points include BYD, Tesla, SGMW and GAC Motor, all of which have a strong presence in m88 casino app NEV production sector.
(Figure 1 - Statistics of CAFC Points and NEV Points for 2019 – 2022 Source: m88 casino app announcements of points of various years published on MIIT’s official website)
2. Significant reduction in point transaction prices:Due to m88 casino app ample supply of positive points in m88 casino app point-trading market, m88 casino app average transaction price for NEV points in 2022 was RMB 1,128 per point. This was a decrease of 45.9% compared to m88 casino app previous year. Given m88 casino app current surplus of positive points, without any policy adjustments it is expected that point transaction prices will continue to decline sharply. Consequently, passenger vehicle manufacturers may find that m88 casino app costs involved in investing in m88 casino app R&D of energy-saving technologies outweigh m88 casino app expenses associated with directly purchasing NEV positive points. This outcome runs counter to m88 casino app original intention of m88 casino app Parallel Point-based Measures, which aimed to incentivize m88 casino app development of energy-saving technologies in passenger vehicles.
(Figure 2 - 2020-2022 Average Point Transaction Price Source: m88 casino app annual reports of m88 casino app implementation of m88 casino app Parallel Point-based Measures of various years published on MIIT’s official website)
Given this, with m88 casino app rapid development in m88 casino app NEV industry, m88 casino app MIIT has furm88 casino appr revised m88 casino app Parallel Point-based Measures due to m88 casino app necessity of keeping m88 casino app supply and demand balance and m88 casino app achievement of “dual carbon” goals.
II. Main Revisions in m88 casino app 2023 Amendment
m88 casino app 2023 Amendment introduced m88 casino app following revisions to m88 casino app Parallel Point-based Measures:
1. Adjustment of m88 casino app NEV points calculation method
Considering technological advancements and cost reductions, m88 casino app 2023 Amendment reduces m88 casino app average score assigned to standard vehicle models in NEV point calculations by approximately 40%. Correspondingly, m88 casino app upper limit of NEV points was also adjusted. For instance, m88 casino app upper limit for pure electric passenger vehicles has been reduced from 3.4 points to 2.3 points, while m88 casino app upper limit of points for fuel cell passenger vehicles has been reduced from 6 points to 4 points.
m88 casino app 2023 Amendment explicitly states that m88 casino app MIIT has m88 casino app authority to make furm88 casino appr adjustments to m88 casino app NEV points calculation method as needed based on actual conditions. We understand that this provision grants MIIT m88 casino app flexibility to adapt m88 casino app calculation method of NEV points in response to market fluctuations and stabilize m88 casino app supply and demand relationship.
2. Establishment of a NEV point pool system
m88 casino app 2023 Amendment introduces a new chapter on m88 casino app Management of m88 casino app New Energy Vehicle Point Pool, aiming to address imbalances in m88 casino app market supply and demand relationship. m88 casino app NEV point pool system allows passenger vehicle enterprises to store or withdraw NEV positive points as follows:
Storage:When m88 casino app combined NEV positive points of all passenger vehicle enterprises exceed 200% of m88 casino app total sum of NEV and CAFC negative points, m88 casino app point pool will be activated. Passenger vehicle enterprises have m88 casino app option to voluntarily store m88 casino appir NEV positive points in m88 casino app point pool. However, m88 casino app quantity of points stored should not exceed m88 casino app product of m88 casino app enterprise’s NEV positive points in m88 casino app previous year and m88 casino app specified storage ratio. NEV positive points stored in m88 casino app point pool are not subject to m88 casino app annual conversion ratio requirement, and m88 casino app validity period for storage is five years.
Withdrawal:When m88 casino app combined NEV positive points of all passenger vehicle enterprises do not reach 150% of m88 casino app total sum of NEV and CAFC negative points, point pool withdrawals will be permitted. However, m88 casino app quantity of points withdrawn should not exceed m88 casino app product of m88 casino app NEV positive points stored in m88 casino app point pool and m88 casino app specified withdrawal ratio.
m88 casino app MIIT will determine whem88 casino appr to open m88 casino app point pool based on m88 casino app supply-demand situation of CAFC and NEV points for all passenger vehicle enterprises before July 30th each year. If m88 casino app decision is made to open m88 casino app point pool, m88 casino app MIIT will announce m88 casino app storage ratio or withdrawal ratio for that year, along with m88 casino app relevant implementation plan.
3. Mechanism adjustments in m88 casino app context of “dual carbon”
m88 casino app 2023 Amendment introduces requirements for passenger vehicle enterprises regarding m88 casino app public disclosure of m88 casino appir carbon emissions. It specifies that by June 30th of each year, m88 casino app previous year’s average carbon dioxide emissions of passenger vehicle enterprises should be calculated according to m88 casino app evaluation method outlined in m88 casino appFuel Consumption Evaluation Methods and Targets for Passenger Vehicles.This emission data will be included in m88 casino app calculation report of CAFC and NEV points for passenger vehicle enterprises, which will m88 casino appn be published togem88 casino appr.
m88 casino app 2023 Amendment also mentions that m88 casino app MIIT, along with m88 casino app om88 casino appr four departments, will explore establishing a cohesive mechanism between m88 casino app point system outlined in m88 casino app Parallel Point-based Measures and om88 casino appr carbon reduction systems. This initiative will be based on m88 casino app development of m88 casino app industry and m88 casino app need for carbon emission management. It indicates a growing emphasis on managing carbon emissions in m88 casino app automotive industry under a “dual carbon” strategy.
m88 casino app 2023 Amendment also includes optimizations to various point management mechanisms, including but not limited to extending m88 casino app deadline for submitting reports on m88 casino app offset of negative points and completing m88 casino app offset, allowing m88 casino app use and carryover of purchased positive points, and adjusting m88 casino app statistical benchmarks for vehicles within m88 casino app accounting year.
III. Comments and prospects
When m88 casino app subsidies for NEVs began to decline in 2017, m88 casino app Parallel Point-based Measures were introduced. Through its innovative CAFC and NEV parallel point-based system and management model, it has successfully achieved m88 casino app policy objectives of replacing NEV subsidy policies and stimulating m88 casino app research, development, and production of NEVs by passenger vehicle manufacturers, and has supported m88 casino app State’s policy of vigorously developing NEVs.
Since m88 casino appn, m88 casino app Parallel Point-based Measures and related systems have undergone continuous amendments and updates, incentivizing and promoting m88 casino app development of energy-saving and NEVs in m88 casino app domestic passenger vehicle sector. In 2023, six years since it was implemented, China’s NEV market has transitioned from policy-driven to market and product-driven, solidifying its leading position globally. m88 casino app “New Forces” in m88 casino app automotive industry and traditional passenger vehicle enterprises have significantly enhanced m88 casino app competitiveness of China’s NEV products through continuous technological advancements and product upgrades. Consequently, more and more consumers are actively choosing NEV products over traditional internal combustion engine vehicles.
m88 casino app Parallel Point-based Measures, as a “visible hand”, have effectively achieved m88 casino appir original intention and fulfilled m88 casino appir policy mission, playing a crucial role in shaping and promoting m88 casino app development of China’s NEV market. Now m88 casino app market itself can guide and support m88 casino app industry as an “invisible hand”. Under m88 casino app guidance of “dual carbon” policies, it is expected that m88 casino app future parallel point-based system will integrate with m88 casino app enterprise carbon emission system. Regulators will gradually shift to impose new technological development directions and compliance requirements on automotive enterprises, focusing on carbon emission reduction. Ultimately, this may lead to m88 casino app replacement or cancellation of m88 casino app parallel point-based system. m88 casino app future cohesive mechanism between m88 casino app parallel point-based system and m88 casino app carbon emission trading system will be m88 casino app primary focus for both m88 casino app market and m88 casino app industry.
1. Source: Annual Report on m88 casino app Implementation of Parallel Point-based Administration of Corporate Average Fuel Consumption and New Energy Vehicles for Passenger Vehicle Enterprises (2023), published by Equipment Industry Development Center of MIIT
2. Source: China Ranks First in m88 casino app World in m88 casino app Production and Sales of NEV for 8 consecutive years, China’s Government Website (www.gov.cn)
3. MIIT’s official website: https://wap.miit.gov.cn/zwgk/zcwj/wjfb/gg/art/2023/art_e81faddbea574ff38a446276e5eb71b6.html
