MIIT Released Measures for Parallel Point-based Administration m88 live casino Corporate Average Fuel Consumption and New-Energy Vehicle for Passenger Vehicle Enterprises

On September 27, 2017, the Ministry m88 live casino Industry and Information Technology (hereinafter referred to as “MIIT”) released the Measures for the Parallel Point-based Administration m88 live casino Corporate Average Fuel Consumption and New-Energy Vehicle for Passenger Vehicle Enterprises (hereinafter referred to as the “Measures”), which will come into effect since April 1, 2018.

I. Background

In 2012, the State Council issued the Energy-Saving and New Energy Development Plan for the Automobile Industry (2012-2020) (hereinafter referred to as the “Development Plan”), which proposes that by 2020, the average fuel consumption m88 live casino passenger vehicles produced that year shall be reduced to 5.0 liters per 100 kilometers; and the accumulated production and sales volume m88 live casino pure electric vehicles and plug-in hybrid vehicles shall reached 5 million. Meanwhile, the Development Plan further requires “to promulgate the administrative measures for automobile fuel consumption on the basis m88 live casino corporate average fuel consumption and targets at different stages; and beginning in 2012 to gradually implement fuel consumption administration over domestically sold automobiles made in China and imported from other countries”.

Following these requirements, since 2013, the MIIT has promulgated the Measures for the Calculation m88 live casino Corporate Average Fuel Consumption m88 live casino Passenger Vehicle Enterprises, the Notice on Strengthening the Administration m88 live casino the Corporate Average Fuel Consumption m88 live casino Passenger Vehicle Enterprises and other rules, in order to gradually publicize and promote average fuel consumption requirements m88 live casino passenger vehicles among manufacturers and importers m88 live casino passenger vehicles. Beginning in 2014, the MIIT started to announce the calculated average fuel consumption volume m88 live casino each manufacturer and importer m88 live casino passenger vehicles from the previous year. The mandatory standard Fuel Consumption Evaluation Methods and Targets for Passenger Vehicles (GB27999) was also revised in 2014, so as to further clarify the methods for calculating the average fuel consumption volume m88 live casino passenger vehicles and new energy vehicles.

However, considering the development status m88 live casino domestic manufacturers and importers m88 live casino passenger vehicles, in the past the MIIT preferred to administrate passenger vehicles’ average fuel consumption by means m88 live casino calculation and promotion, rather than setting forth compulsory requirements or punitive measures. The Measures, being overall administrative rules in this regard, also went through two rounds m88 live casino public comments in 2016 and 2017 and were finally published in September 27 m88 live casino this year.

II.Main Content m88 live casino the Measures

The core idea m88 live casino the Measures is to adopt point-based measures to administrate in parallel the corporate average fuel consumption m88 live casino passenger vehicles (hereinafter referred to as “CAFC”) and the production volume m88 live casino new energy vehicles (hereinafter referred to as “NEV”), and to directly set forth the bottom line for CAFC points and NEV points on (i) domestic passenger vehicle manufacturers who have obtained the entry permit for passenger vehicle manufacturing enterprises and China Compulsory Certification from the MIIT, and on (ii) imported passenger vehicle distributors who sell imported passenger vehicles (with China Compulsory Certification) in the PRC market (such manufacturers and distributors hereinafter collectively referred to as the “PV Companies”) , so as to advocate from a regulatory perspective that these PV Companies improve the fuel consumption efficiency m88 live casino passenger vehicles and the production and import volume m88 live casino NEV.

m88 live casino Measures specifically contain m88 live casino following:

1.Calculation m88 live casino CAFC Points

CAFC refers to the average fuel consumption calculated on the basis m88 live casino weight the fuel consumption m88 live casino passenger vehicles produced or imported by a PV Company and the corresponding volume m88 live casino produced or imported passenger vehicles in the same year. The smaller the CAFC value is, the better the fuel consumption efficiency m88 live casino the vehicles produced or imported by the PV Company.

The Measures compare the CAFC actual value m88 live casino a PV Company and the standard value required by the rules, and then multiplies the difference in between in the way m88 live casino accumulating points:

i：the sequence number m88 live casino passenger vehicle model;

Vi：the yearly production or import volume m88 live casino No.imodel.

Among which:

i：the sequence number m88 live casino passenger vehicle’s model;

FCi：the fuel consumption value m88 live casino No.imodel;

Vi：the yearly production or import volume m88 live casino No.imodel;

Wi：m88 live casino corresponding multiplier to m88 live casino No.model (see Chart 1 below).

Chart 1 – Valuation m88 live casinoWi

i：the sequence number m88 live casino passenger vehicle model;

Ti：the fuel consumption target value m88 live casino No.imodel (see Chart 2 below);

Vi：the year production or import volume m88 live casino No.imodel.

Chart 2 – Valuation m88 live casinoTi

See Chart 3 below for m88 live casino Concession Ratio :

Chart 3 – Concession Ratio m88 live casino CAFC Actual Value

and CAFC Target Value

YEAR	Concession Ratio
2016	134%
2017	128%
2018	120%
2019	110%
2020 and after	100%

In addition, considering the actual situation m88 live casino small-scale PV Companies and parallel importers, the Measures further relax the requirements for CAFC standard value m88 live casino the following subjects: (a) small-scale PV Companies with a yearly production or import volume m88 live casino less than 2,000 passenger vehicles, which maintain independence in production, R&D and operation; and (b) imported passenger vehicle distributors who have no authorization from overseas passenger vehicle manufacturers. Furthermore, a parallel importer with an annual import volume m88 live casino less than 2,000 shall be temporarily exempted from the CAFC point requirement.

2.Calculation m88 live casino NEV Points

NEV points are the value m88 live casino the difference between the NEV actual value m88 live casino PV Companies and the NEV target value required by the rules. The larger the NEV points are, the more NEV such PV Company produces or imports:

NEV Points =NEVactual value– NEVtarget value

i：the sequence number m88 live casino NEV model;

Vi：the yearly production or import volume m88 live casino No.iNEV model.

See Chart 4 below for m88 live casino Standard Vehicle Model Points:

Chart 4 – Standard Vehicle Model Points

i：the sequence number m88 live casino traditional energy vehicle model;

Vi：the yearly production or import volume m88 live casino No.itraditional energy vehicle model.

See Chart 5 below for m88 live casino NEV Ratio:

Chart 5 - NEV Ratio in Years 2018 – 2020

YEAR	NEV Ratio
2019	10%
2020	12%
（m88 live casino NEV Ratio for 2021 and m88 live casino following years will be published by MIIT separately）

Taking into account the actual situation, the NEV Ratio for the years m88 live casino 2017 and 2018 is not required in the Measures. In addition, the Measures limit the requirements on NEV Ratio to only the PV Companies whose production or import volume m88 live casino traditional energy passenger vehicles reaches or exceeds 30,000 vehicles per year. In another words, if a PV Company produces or imports less than 30,000 passenger vehicles in a year, its NEV target value shall be zero.

3. Administrative Measures for CAFC Points and NEV Points

If CAFC points and/or NEV points m88 live casino a PV Company is negative, such PV Company is required to compensate for those negative points in accordance with the compensation methods stipulated in the Measures. As for PV Companies with positive CAFC points and/or NEV points, they are entitled to carry forward or transfer such positive points in accordance with the Measures:

4.Legal Consequences m88 live casino Failing to Compensate Negative Points

If a PV Company fails to compensate its negative CAFC or NEV points in the last year, the major punishment set forth in the Measures is that the market entry m88 live casino such PV Company’s new products with high fuel consumption will be limited. That is to say, before such PV Company compensates its negative NEV points in full, the MIIT will not list such PV Company’s new products, m88 live casino which the fuel consumption is higher than the fuel consumption target value (see Chart 2) provided in the Fuel Consumption Evaluation Methods and Targets for Passenger Vehicles, into the Announcement m88 live casino Road Motor Vehicles’ Manufacturing Enterprises And Products or grant the certificate m88 live casino China Compulsory Certification to such new products. The MIIT may further impose punishment in accordance with the rules m88 live casino the Automobile Industry Development Policies, Administrative Provisions on the Compulsory Product Certification, etc.

5.Points Reporting and Publication Schedule

According to m88 live casino Measures, PV Companies shall follow m88 live casino time schedule below to report its CAFC points and NEV points to m88 live casino MIIT, and m88 live casino MIIT will also publish m88 live casino relevant information according to m88 live casino below time schedule:

III. Brief Comments

With the gradual reduction m88 live casino subsidies from the Chinese government for the sales end m88 live casino NEV, how to ensure the continuing development m88 live casino NEV and control the fuel consumption m88 live casino traditional energy vehicles have become the key topics m88 live casino the current development and supervision m88 live casino China’s automobile industry. In this context, by issuing the Measures, the MIIT apparently imposes these development pressures directly on the sources m88 live casino production and sales, i.e. the manufacturers and importers m88 live casino passenger vehicles.

Although the Measures compromised on several aspects compared to the draft version released in June m88 live casino this year (e.g. giving up NEV point requirements for 2018; weakening the punishment measures for the failure to compensate NEV points; allowing NEV points generated in 2019 to be carried forward to 2020), the final publication m88 live casino the Measures indeed reflects the Chinese government’s determination to reform the industry m88 live casino passenger vehicles from traditional energy-oriented to new energy-oriented, which certainly will have a prm88 live casinoound impact on all domestic and foreign PV Companies selling automobile products in the PRC market.

Considering the current production level m88 live casino domestic passenger vehicles, it is almost an impossible mission for traditional energy vehicle models to meet the fuel consumption target values required by the rules (see Chart 2). Therefore, domestic PV Companies relying on traditional energy vehicle models have to develop NEV models to prepare for the future and to maintain their existing sales volume m88 live casino traditional energy vehicle models. For those enterprises with medium sales volume m88 live casino traditional energy vehicles, they may compensate or accumulate their points through market transactions pursuant to the compensation and use methods provided in the Measures. But for the top tier traditional energy vehicle manufacturers and importers, on their path for future development, they need to ensure firm control over NEV models and stable sources m88 live casino positive points to continue to support their mass volume m88 live casino sales m88 live casino traditional energy passenger vehicles per year.

According to the latest released Catalogue m88 live casino Industries for Guiding Foreign Investment (2017), foreign investment in joint venture enterprises manufacturing pure electric automobile products has become a new exception to the traditional rule m88 live casino “one foreign brand with two joint ventures in the same category m88 live casino automobile products”. In the market there is already a pure electric vehicle project in the form m88 live casino joint venture launched by a foreign automobile enterprise and a domestic leading electric energy automobile company. Such practice, from both the policy and market perspectives, reflects the ongoing reform in the Chinese passenger vehicle market.