Source: http://www.conventuslaw.com/report/china-miit-released-measures-for-parallel-point/
Timestamp: 2020-01-17 19:16:43
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﻿ China - Energy-Saving and New Energy Development Plan for the Automobile Industry | Conventus Law
China - Energy-Saving and New Energy Development Plan for the Automobile Industry
Legal News & Analysis - Asia Pacific - China - Regulatory & Compliance
On September 27, 2017, the Ministry of Industry and Information Technology (hereinafter referred to as “MIIT”) released the Measures for the Parallel Point-based Administration of Corporate Average Fuel Consumption and New-Energy Vehicle for Passenger Vehicle Enterprises (hereinafter referred to as the “Measures”), which will come into effect on April 1, 2018.
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 of passenger vehicles produced that year shall be reduced to 5.0 liters per 100 kilometers; and the accumulated production and sales volume of 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 of 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 of Corporate Average Fuel Consumption of Passenger Vehicle Enterprises, the Notice on Strengthening the Administration of the Corporate Average Fuel Consumption of Passenger Vehicle Enterprises and other rules, in order to gradually publicize and promote average fuel consumption requirements of passenger vehicles among manufacturers and importers of passenger vehicles. Beginning in 2014, the MIIT started to announce the calculated average fuel consumption volume of each manufacturer and importer of 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 of passenger vehicles and new energy vehicles.
However, considering the development status of domestic manufacturers and importers of passenger vehicles, in the past the MIIT preferred to administrate passenger vehicles’ average fuel consumption by means of 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 of public comments in 2016 and 2017 and were finally published in September 27 of this year.
II. Main Content of the Measures
The core idea of the Measures is to adopt point-based measures to administrate in parallel the corporate average fuel consumption of passenger vehicles (hereinafter referred to as “CAFC”) and the production volume of 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 of passenger vehicles and the production and import volume of NEV.
The Measures specifically contain the following:
1. Calculation of CAFC Points
CAFC refers to the average fuel consumption calculated on the basis of weight the fuel consumption of passenger vehicles produced or imported by a PV Company and the corresponding volume of produced or imported passenger vehicles in the same year. The smaller the CAFC value is, the better the fuel consumption efficiency of the vehicles produced or imported by the PV Company.
The Measures compare the CAFC actual value of a PV Company and the standard value required by the rules, and then multiplies the difference in between in the way of accumulating points:
i：the sequence number of passenger vehicle model;
Vi：the yearly production or import volume of No.i model.
i：the sequence number of passenger vehicle’s model;
FCi：the fuel consumption value of No.i model;
Vi：the yearly production or import volume of No.i model;
Wi：the corresponding multiplier to the No. model (see Chart 1 below).
Chart 1 – Valuation of Wi
Ti：the fuel consumption target value of No.i model (see Chart 2 below);
Vi： the year production or import volume of No.i model.
Chart 2 – Valuation of Ti
See Chart 3 below for the Concession Ratio :
Chart 3 – Concession Ratio of 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 of small-scale PV Companies and parallel importers, the Measures further relax the requirements for CAFC standard value of the following subjects: (a) small-scale PV Companies with a yearly production or import volume of 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 of less than 2,000 shall be temporarily exempted from the CAFC point requirement.
2. Calculation of NEV Points
NEV points are the value of the difference between the NEV actual value of 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 = NEV actual value – NEV target value
i：the sequence number of NEV model;
Vi：the yearly production or import volume of No.i NEV model.
See Chart 4 below for the Standard Vehicle Model Points:
Chart 4 – Standard Vehicle Model Points
i：the sequence number of traditional energy vehicle model;
Vi：the yearly production or import volume of No.i traditional energy vehicle model.
See Chart 5 below for the NEV Ratio:
Chart 5 - NEV Ratio in Years 2018 – 2020
YEAR NEV Ratio
2020 12%
（The NEV Ratio for 2021 and the following years
will be published by MIIT separately）
Taking into account the actual situation, the NEV Ratio for the years of 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 of 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 of 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:
Compensation methods of CAFC negative points
Compensation methods of NEV negative points
Use their own CAFC positive points carried forward；
Use CAFC positive points transferred from affiliated enterprises;
Use their own NEV positive points;
Use NEV positive points purchased from other enterprises.
(the above methods may be jointly applied)
Purchase NEV positive points from other enterprises, with only one exception that the NEV negative points generated in 2019 could be compensated with NEV positive points generated in 2020.
Uses for CAFC positive points
Uses for NEV positive points
Carry forward: Allowed to be carried forward in a certain proportion, but the valid term of CAFC positive points carried forward cannot exceed 3 years:
- 80% for CAFC positive points generated in 2018 and the preceding years when carrying forward every time;
- 90% for CAFC positive points generated in 2019 and the following years when carrying forward every time.
Carry forward: Not allowed. With only one exception that the NEV positive points generated in 2019 could be carried forward to 2020 in full proportion.
Transfer: Allowed only among affiliated enterprises. The transferred points must be used by the transferee in the same year and cannot be further transferred. Affiliated enterprises refer to:
For a domestic passenger vehicle manufacturer, the other domestic passenger vehicle manufacturers, in which the former manufacturer holds, directly or indirectly, no less than 25% equities;
Domestic passenger vehicle manufacturers whose no less than 25% equities of each are held directly or indirectly by a same domestic third party;
For an imported passenger vehicle distributor with authorization from a foreign passenger vehicle manufacturer, the domestic passenger vehicle manufacturers whose no less than 25% equities are directly or indirectly held by the foregoing foreign passenger vehicle manufacturer.
Transfer: Allowed but the transferred points must be used by the transferee in the same year and cannot be further transferred.
4. Legal Consequences of 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 of 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, of 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 of Road Motor Vehicles’ Manufacturing Enterprises And Products or grant the certificate of China Compulsory Certification to such new products. The MIIT may further impose punishment in accordance with the rules of the Automobile Industry Development Policies, Administrative Provisions on the Compulsory Product Certification, etc.
5. Points Reporting and Publication Schedule
According to the Measures, PV Companies shall follow the time schedule below to report its CAFC points and NEV points to the MIIT, and the MIIT will also publish the relevant information according to the below time schedule:
Before December 20th of the (x-1) year
Submit to MIIT the report of the projected CAFC and NEV points for the following year.
Before March 1st of the (x) year
Submit to MIIT the performance report of CAFC and NEV points of the (x-1) year.
Before April 10th of the (x) year
MIIT releases the relevant information of PV Companies’ CAFC and NEV points of the (x-1) year to the public through online information platform.
Before June 30th of the (x) year
MIIT verifies the reports and numbers of CAFC and NEV points submitted by PV Companies, and releases a general review report of CAFC and NEV points of PV Companies of the (x-1) year.
Within 60 days after the release of the points review report
PV Companies with CAFC or NEV negative points should submit a compensation report to MIIT.
Within 90 days after the release of the points review report
PV Companies shall complete the compensation of negative points.
III. Brief Comments
With the gradual reduction of subsidies from the Chinese government for the sales end of NEV, how to ensure the continuing development of NEV and control the fuel consumption of traditional energy vehicles have become the key topics of the current development and supervision of China’s automobile industry. In this context, by issuing the Measures, the MIIT apparently imposes these development pressures directly on the sources of production and sales, i.e. the manufacturers and importers of passenger vehicles.
Although the Measures compromised on several aspects compared to the draft version released in June of 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 of the Measures indeed reflects the Chinese government’s determination to reform the industry of passenger vehicles from traditional energy-oriented to new energy-oriented, which certainly will have a profound impact on all domestic and foreign PV Companies selling automobile products in the PRC market.
Considering the current production level of 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 of traditional energy vehicle models. For those enterprises with medium sales volume of 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 of positive points to continue to support their mass volume of sales of traditional energy passenger vehicles per year.
According to the latest released Catalogue of 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 of “one foreign brand with two joint ventures in the same category of automobile products”. In the market there is already a pure electric vehicle project in the form of 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.