China considers dialing back or delaying electric car quota

China is considering dialing back or delaying proposed measures aimed at pushing automakers to produce more electric vehicles, after industry feedback that the targets are overly ambitious.

Under draft rules released in September for public consultation, automakers will be required to obtain a new-energy vehicle credit score of 8 percent next year, derived from different weightings assigned to various types of zero- and low-emission vehicles. Companies that fail to meet the requirement face fines or have to buy credits from those that exceeded the minimum.

Average production of new-energy vehicles last year may have contributed only about 3 percent of the score required, 5 percentage points short of the proposed 2018 target, according to the China Association of Automobile Manufacturers. German Economy Minister Sigmar Gabriel told German media in November that he expressed the view to his Chinese counterpart that the 2018 targets were not attainable.

Miao Wei, China’s minister of industry and information technology, told Bloomberg News in an interview in Beijing on Sunday that his ministry is considering either lowering the credit requirement in percentage terms or delaying the implementation date.

“We are still working on the regulation,” Miao said on the sidelines of the opening of the annual session of the National People’s Congress. “It may be finalized around May or June.”

Government Subsidies

Electric vehicle sales plunged in China in January after the government cut subsidies by more than a fifth starting this year, raising the question of whether the country can sustain demand for green cars without generous grants.

Sales of new-energy vehicles, the term China uses to refer to battery-electric vehicles, plug-in hybrids and fuel-cell cars, dropped 74 percent in January from a year earlier to 5,682 units, according to data released by the auto association.

“The current proposed NEV quota is indeed too ambitious and early for the industry,” said Robin Zhu, an autos analyst with Sanford C. Bernstein in Hong Kong. “Firstly, most of the NEV models are still in the process of development and secondly, the market has not developed that big demand for NEVs. It is not realistic to ask carmakers to suspend their sales of combustion vehicles so as to be compliant for the NEV quota.”

A lowering of the credit requirement or delay in implementation could buy more time for automakers including Volkswagen AG and General Motors Co. to expand production of such vehicles.

A 40-member index of global automakers compiled by Bloomberg slid 0.3 percent as of 9:41 a.m. in Hong Kong.

“We are glad to hear that our proposal is under consideration by Minister Miao,” said Xu Yanhua, deputy secretary-general of CAAM. “But that does not mean it will be finalized in this way. This is a good development to know, at least it is being considered.”

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