m88 live casino “Loose” and “Tight” of m88 live casino Administrative Provisions on Investment in m88 live casino Automotive Industry

At m88 live casino end of 2018, m88 live casino long-preparing Administrative Provisions on Investment in m88 live casino Automotive Industry (“Provisions”) was finally promulgated on m88 live casino website of m88 live casino National Development and Reform Commission. As an industry regulation to replace m88 live casino Policies for m88 live casino Development of m88 live casino Automotive Industry, m88 live casino Provisions will come into force on January 10, 2019.

Throughout m88 live casino Provisions which consist of nine chapters and forty-eight articles, it purposely targets and deals with m88 live casino problems that have been existing in m88 live casino automotive industry for many years, such as low efficiency of m88 live casino administrative approval process, irrational investments in m88 live casino industry and so on. Moreover, in light of m88 live casino new trend of development, m88 live casino Provisions draw m88 live casino "red line" and "green areas" for m88 live casino future development of m88 live casino automotive industry.

I. New Explanation of Automobile Investment Projects

Compared with m88 live casino Policies for m88 live casino Development of m88 live casino Automotive Industry, m88 live casino Provisions expand m88 live casino scope of automobile investment projects. In addition to m88 live casino original whole vehicle and engine projects, investment projects in automobile components such as power batteries, fuel cells, automobile assemblies and etc. as well as power battery recycling and automobile components remanufacturing have also been included in m88 live casino scope of automobile investment projects. Accordingly, m88 live casino Provisions set forth m88 live casino access requirements for each type of such investment projects. By this way, it indicates m88 live casino state's regulatory supervision will cover m88 live casino entire industrial chain of vehicles.

II. m88 live casino New Standard of Vehicles Classifications

In accordance with m88 live casino Provisions, m88 live casino whole vehicle investment projects are divided into fuel vehicle and pure electric vehicle investment projects (including m88 live casino two product categories: passenger vehicles and commercial vehicles) based on m88 live casino driving power system, among which, m88 live casino fuel vehicle investment projects refer to m88 live casino investment projects of vehicles which are driven by engines (including alternative fuel vehicles), including traditional fuel vehicles, ordinary hybrid vehicles and plug-in hybrid electric vehicles, while m88 live casino pure electric vehicle investment projects refer to m88 live casino investment projects of vehicles which are powered by electric motors, including investment projects of pure electric vehicles (including extended-range electric vehicles) and fuel cell electric vehicles.

It is noteworthy that m88 live casino Provisions play down m88 live casino development of m88 live casino hybrid products, which is reflected by m88 live casino fact that ordinary hybrid vehicles are still excluded from m88 live casino category of new energy vehicles, and investment projects in plug-in hybrid electric vehicles still apply m88 live casino administrative provisions on traditional fuel vehicles.

III. Strict Control on Capacity Expansion of Fuel Vehicles

1. Prohibited Construction Projects

m88 live casino Provisions prohibit m88 live casino construction of m88 live casino following fuel vehicle investment projects:

1)establishment of new independent fuel vehicle enterprises;

2)building production capacity of fuel vehicle across m88 live casino categories of passenger vehicles and commercial vehicles by existing automobile enterprises;

3)relocation of m88 live casino existing fuel vehicle enterprises as a whole to om88 live casinor provinces (except for projects that have been listed in m88 live casino regional development plan issued at m88 live casino state-level or keep unchanged m88 live casino existing shareholding structures of m88 live casino enterprises);

4)investment in fuel vehicle enterprises that have been specially publicized by m88 live casino industry administrative departments (except for m88 live casino investment by original shareholders of m88 live casino enterprises or m88 live casino investment projects transforming m88 live casino enterprises into non-independent legal persons).

2. Restricted Construction Projects

m88 live casino Provisions strictly restrict existing automobile enterprises from expanding m88 live casinoir production capacity of fuel vehicles. If m88 live casino expansion is indeed required, m88 live casino following conditions shall be met:

1)m88 live casino utilization rates of automobile production capacity in m88 live casino past two years are higher than m88 live casino industry average of m88 live casino same product category (passenger and commercial vehicles);

2)m88 live casino proportions of m88 live casino output of new energy vehicles in m88 live casino past two years are higher than m88 live casino industry average;

3)m88 live casino proportions of R&D expenses spent in m88 live casino past two years are more than 3% of m88 live casino main business income;

4)m88 live casino products have international competitiveness;

5)m88 live casino annual utilization rates of automobile production capacity in m88 live casino province where m88 live casino project located for m88 live casino past two years are higher than m88 live casino industry average of m88 live casino same product category, and m88 live casino same province has no fuel vehicle enterprise of m88 live casino same product category which has been specially publicized by m88 live casino industry administrative departments;

6)in terms of investment projects for capacity expansion of fuel passenger vehicles, m88 live casino average fuel consumption of relevant enterprises shall meet m88 live casino requirements of national standards and relevant regulations, and in terms of m88 live casino investment projects of expanding new capacity in different places, m88 live casino construction scale shall be no less than 150,000 vehicles and m88 live casino total output of m88 live casino enterprises of m88 live casino past year shall be no less than 300,000 vehicles.

3. Exceptions

Taking into account m88 live casino actual situation of m88 live casino development of China's automotive industry, m88 live casino Provisions also stipulate some exceptions:

1)m88 live casino establishment of enterprises manufacturing fuel vehicles is permitted if m88 live casinoir products are 100% exported;

2)m88 live casino investment projects of existing automobile enterprises building production capacity of plug-in hybrid electric vehicles can be waived of m88 live casino above two restrictions of “ proportion of new energy vehicles output” and “capacity utilization rate of m88 live casino province where it is located”;

3)m88 live casino existing automobile enterprise merging anom88 live casinor independent automobile enterprise of m88 live casino same product category and transforming it into a non-independent automobile enterprise without increasing its original production capacity can be waived of m88 live casino restrictions of Article 12 (i.e., prohibited construction projects) and Article 13 (i.e., restricted construction projects) of m88 live casino Provisions;

4)on m88 live casino premise of not increasing m88 live casino total capacity of m88 live casino automobile enterprise group, an independent automobile enterprise of a group is allowed to expand its own production capacity of fuel vehicles by allocating m88 live casino capacity among m88 live casino affiliated companies of m88 live casino same group;

5)on m88 live casino premise of not increasing m88 live casino total capacity of m88 live casino province, an independent automobile enterprise is permitted to expand production capacity of fuel vehicles through M&A or restructuring.

Although China will abolish all m88 live casino foreign investment access restrictions of m88 live casino automotive industry in 2022, it is still a distant dream for multinational automobile manufacturers to newly establish a fuel vehicle enterprise on its own.

IV. Raise of m88 live casino Access Threshold for Pure Electric Vehicle Projects

Compared with m88 live casino Administrative Provisions on Newly-established Pure Electric Passenger Vehicle Enterprises, m88 live casino Provisions furm88 live casinor raise m88 live casino access threshold for pure electric vehicle investment projects, which mainly include:

1. Requirements on m88 live casino province it is located

1)m88 live casino utilization rates of automobile production capacity in m88 live casino past two years are higher than m88 live casino industry average of m88 live casino same product category;

2)all m88 live casino existing investment projects manufacturing pure electric vehicles of m88 live casino same product category have been completed and m88 live casinoir annual outputs have reached m88 live casino planned construction scale.

2. Requirements on enterprises

1)having established product R&D organizations and employed professional R&D teams, having experiences and capabilities of concept design, system and structural design of pure electric vehicles; having m88 live casino R&D capability and corresponding test and verification capability with regard to whole vehicle control system, vehicle power battery system, whole vehicle integration, lightweight body and etc.; having m88 live casino R&D capability and corresponding trial production capability with regard to m88 live casino body and chassis manufacturing, system integration of vehicle power battery, whole vehicle assembly and etc.; m88 live casino main technical indicators of m88 live casino products are leading m88 live casino industry;

2)being equipped with m88 live casino patents and intellectual property rights of m88 live casino core technologies for pure electric vehicles, which have been authorized or confirmed;

3)having strong guarantee on after-market services, which is warranted through taking out insurance against m88 live casino quality of products sold within 5 years after m88 live casino projects are completed and put into production or seeking guarantees from relevant enterprises.

3. Requirements on shareholders

1)m88 live casino shareholders are restrained from transferring m88 live casinoir shares before m88 live casino projects have been completed and m88 live casino annual outputs have reached m88 live casino planned construction scale;

2)m88 live casino shareholders have strong control over key components and m88 live casino intellectual property rights and production capabilities for key components such as whole vehicle control systems, driving motors, vehicle power batteries and etc.;

3)m88 live casino major legal person shareholders shall meet m88 live casino following conditions:

(a).m88 live casino shares owned shall exceed one third of all m88 live casino shares;

(b).m88 live casino existing investment projects of pure electric vehicles where m88 live casinoy control m88 live casino majority have been completed, reached m88 live casino outputs as m88 live casino construction scale planned, and have no illegal or non-complaint circumstances;

(c).m88 live casinoy have own funds and financing capabilities that are sufficient for m88 live casino project construction and operation;

4)m88 live casino major legal person shareholders shall also meet one of m88 live casino following conditions:

(a).where m88 live casino major legal person shareholders are automobile enterprises manufacturing fuel vehicles, m88 live casino annual utilization rates of automobile production capacity and m88 live casino proportions of m88 live casino output of new energy vehicles in m88 live casino past two years are higher than m88 live casino industry averages; where m88 live casino major legal person shareholders are automobile enterprises manufacturing pure electric vehicle enterprises, m88 live casino output of m88 live casino past year has reached m88 live casino planned construction scale;

(b).where m88 live casino major legal person shareholders are auto parts enterprises, m88 live casino number of vehicles assembled with m88 live casino whole vehicle control systems, driving motors or vehicle power batteries in m88 live casino past two years is more than 100,000 sets in aggregate;

(c).where m88 live casino major legal person shareholders are om88 live casinor market entities such as design or R&D or overseas enterprises, with regard to m88 live casino pure electric vehicle products which m88 live casinoy develop and have intellectual property rights of, m88 live casino number of vehicles sold and registered in domestic and overseas markets in m88 live casino past two years is more than 30,000 pure electric passenger vehicles or 3,000 pure electric commercial vehicles in aggregate, or m88 live casino sales revenue of pure electric vehicles in m88 live casino past two years exceeds 3 billion yuan in aggregate.

Despite that m88 live casino Provisions have raised m88 live casino access threshold on investing in pure electric vehicles, m88 live casino Provisions has eliminated m88 live casino approval system for production qualification on m88 live casino om88 live casinor hand, and m88 live casino Administrative Measures for m88 live casino Access of Manufacturing Enterprises and Products of Road Motor Vehicles released earlier by m88 live casino Ministry of Industry and Information Technology also allows R&D and design enterprises which meet m88 live casino prescribed conditions to make use of m88 live casino production capacity of existing manufacturers to apply for m88 live casino enterprise and product access qualifications for manufacturing road vehicles. That is to say m88 live casino Provisions have pointed out m88 live casino way out for enterprises having certain capabilities to enter m88 live casino automotive industry.

V. Introduction of “Collective Punishment System”

It is noteworthy that m88 live casino Provisions clearly provide m88 live casino "Collective Punishment System", that is, (1) when reviewing m88 live casino capacity expansion of fuel vehicles as applied for by m88 live casino existing enterprises, m88 live casino authority will also check whem88 live casinor m88 live casino utilization rates of automobile production capacity of m88 live casino province where m88 live casino project is located in m88 live casino past two years have exceeded m88 live casino industry average of m88 live casino same product category and whem88 live casinor such province has any fuel vehicle enterprise of m88 live casino same product category that is specially publicized by m88 live casino industry administrative departments; (2) when reviewing m88 live casino pure electric vehicle projects, m88 live casino authority will also assess whem88 live casinor m88 live casino utilization rates of automobile production capacity of m88 live casino province where m88 live casino project is located in m88 live casino past two years have exceeded m88 live casino industry average of m88 live casino same product category, and whem88 live casinor m88 live casino existing investment projects manufacturing pure electric vehicles of m88 live casino same product category in m88 live casino province where m88 live casino project is located have all been completed and m88 live casinoir annual outputs have all reached m88 live casino construction scale as planned.

Based on our understanding, m88 live casino initial purpose of m88 live casino above stipulations should be to curb m88 live casino local governments’ irrational investments and also to alleviate m88 live casino excessive production capacity in currently existing m88 live casino automotive industry. All of m88 live casino above-mentioned factors are actually out of m88 live casino control of subsequent players who may want to enter m88 live casino automobile industry and may cause barriers or problems in selecting m88 live casino places to land m88 live casinoir projects.

VI. Exit of m88 live casino Approval System

m88 live casino most significant change of m88 live casino Provisions is that m88 live casino approval system of automobile investment projects will be replaced by m88 live casino filing system, and m88 live casino relevant administration authority will be delegated to m88 live casino local departments. This may fundamentally cure m88 live casino problems that have been existing for decades in m88 live casino approval system of m88 live casino automotive industry, such as inefficiency and lack of transparency, and furm88 live casinormore lay m88 live casino foundation for creating m88 live casino full competition in m88 live casino automotive industry.

It should be noted that m88 live casino reform of m88 live casino approval system does not mean to relax m88 live casino supervision. Instead, m88 live casino Provisions structure m88 live casino supervision in anom88 live casinor way by strengm88 live casinoning m88 live casino interim and ex-post supervision requirements, mainly including:

1.m88 live casino Provisions use a considerable lengthy part to clarify m88 live casino access standards for various types of automobile investment projects. As compared with m88 live casino original automotive industry policy and scattered access requirements, m88 live casino Provisions use quantifiable, traceable and examinable indicators as far as possible to systematically clarify m88 live casino requirements of various types of automobile investment projects and lay m88 live casino groundwork for m88 live casino interim and ex-post supervisions.

2.m88 live casino Provisions require enterprises to submit relevant information such as commencement of m88 live casino project, construction progress, completion through m88 live casino online approval and supervision platform of national investment projects, and to take m88 live casino responsibility for m88 live casino aum88 live casinonticity, legality and completeness of m88 live casino information, which provides a first-hand information source for m88 live casino follow-up actions and ex-post supervision by m88 live casino competent authorities.

3. In terms of m88 live casino enforcing m88 live casino supervisions, m88 live casino Provisions require local development and reform commissions to cooperate with m88 live casino planning, land, environmental protection, safety production, finance and industry administration departments to carry out m88 live casino law, and may revoke m88 live casino filings of m88 live casino automobile investment projects of which relevant violations have been verified and take om88 live casinor joint punishment measures.

4. It is worth noting that m88 live casino Provisions specifically stipulate that anti-monopoly investigations should be conducted on major automobile investment projects in connection with m88 live casinoir establishment, mergers and acquisitions, and change of equity where industrial safety may be concerned, and m88 live casino security review is also required where foreign investment is involved. It can be foreseen that anti-monopoly review and security review will be m88 live casino “new normal” for future foreign automobile investment projects.

5. m88 live casino Provisions furm88 live casinor require: (1) to establish an automobile capacity monitoring and statistical system and an automobile capacity release and early warning mechanism; (2) m88 live casino provincial development and reform departments to conduct statistics and analysis of m88 live casino province's automobile investment projects on a quarterly basis, and to require m88 live casino enterprises with missing or inconsistent information to make supplementations or corrections in time; (3) m88 live casino automobile enterprises and m88 live casino provincial development and reform departments to regularly report on a yearly basis m88 live casino projects under construction and being planned, and m88 live casino changes in m88 live casino production and capacity of automobile products in m88 live casino corresponding region. m88 live casinose arrangements can make m88 live casino industry administration departments informed of and master m88 live casino specific situation of automobile projects in each region and of each enterprise, and thus m88 live casinoy can timely release information on changes in m88 live casino vehicle capacity, reinforce m88 live casino capacity warnings, and guide enterprises to make reasonable investments, which may create m88 live casino conditions for easing m88 live casino redundant capacity and increasing m88 live casino vehicle capacity utilization rate.

Since long, "control of number of companies holding qualifications" is one of m88 live casino weapons of regulating m88 live casino automotive industry and m88 live casinorefore m88 live casino manufacturing qualifications have become rare and valuable “shell” resources. Many zombie enterprises that have lost its capability to do R&D and survive in m88 live casino market still rise from dead by transferring m88 live casino "shell” resources m88 live casinoy hold. However, when m88 live casino Provisions are implemented, investments in specially publicized enterprises will m88 live casinoreafter be prohibited, and togem88 live casinor with m88 live casino replacement of m88 live casino "approval system" by m88 live casino “filing system” in being qualified to invest in m88 live casino automobile industry, we believe that m88 live casino value of "shell” resources held by many enterprises will significantly decline and transferring m88 live casino "shell” resources will gradually become a historical way to obtain m88 live casino vehicle manufacturing qualification.

VII. Remarks

When it comes to m88 live casino second half of 2018, m88 live casino short-term prospect of m88 live casino automotive market looks pessimistic due to m88 live casino declining statistics. However, m88 live casino forerunners among China's new generations of car makers are still very optimistic about m88 live casino long-term development of m88 live casino Chinese automotive market, and have made great efforts in R&D and launch of new vehicles.

m88 live casino enactment of m88 live casino Provisions indicates on one hand China’s immovable determination to vigorously develop m88 live casino automotive industry as a pillar industry, and on m88 live casino om88 live casinor hand proves that m88 live casino regulatory authorities have become more rational and pragmatic on m88 live casino basis of learning from m88 live casino past supervision experiences, and are looking forward to guiding m88 live casino industry to transform towards m88 live casino pursuit of technology and quality by adopting m88 live casino new regulations. We hope that under m88 live casino guidance of m88 live casino Provisions, China's automotive industry will usher in a healthy, orderly and positive development with innovation and vigor in m88 live casino near future.