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2017-11-01 13:05:09

AA three ministries issued a new round of "automobile planning" changes are coming

On April 25, the Ministry of Industry and Information Technology (MIIT), the National Development and Reform Commission (NDRC), and the Ministry of Science and Technology jointly issued a notification on the "Medium and Long-Term Development Plan for the Automobile Industry," aimed at implementing the strategy of building a manufacturing power and advancing the construction of an automobile power. It specifically outlines the goal of "striving to enter the ranks of the world's leading automotive nations after ten years of continuous effort."

The plan delineates 2020 and 2025 as pivotal timelines for nurturing new energy vehicle enterprises and advancing intelligent connected vehicle development. By 2025, the global influence and market share of key new energy vehicle enterprises will further increase, while intelligent connected vehicles will join the world's leading cohort.

The automotive industry has persistently explored the transition from growth in scale to achieving robustness. Luo Lei, Deputy Secretary General of the China Automobile Circulation Association, indicated that the "Plan" plays a directional role in the industry's development, offering enterprises a developmental trajectory, notably in the sphere of new energy vehicles and intelligent connected vehicles.

Minister of MIIT Miao Wei highlighted the ongoing transformation in the global automotive industry, marking China's automotive sector's entry into a period of transformation and upgrading. Since the new century, China's automotive industry has experienced rapid growth, maintaining its position at the forefront of global automobile sales for eight consecutive years.

The formulation of the "Plan" stemmed from reasons such as reforms within the automotive industry and the disparity between industry scale and strength. To address these issues, the plan focuses on the development of new energy vehicles and intelligent connected vehicles.

The "Plan" explicitly notes the global automotive industry's transitional phase. With breakthroughs in the new energy revolution, new materials, and the next generation of information technology, the automotive industry is rapidly evolving toward new energy sources, lightweighting, and intelligent networking.

The person in charge of the MIIT Equipment Industry Department emphasized that the "Plan" stands distinct from previous initiatives by focusing on the entire automotive industry. It aims to drive robust industry-wide development through a unified approach to industry development strategies.

The goal of the "Plan" is to enhance the scale and strength of Chinese brand automobiles, guiding the industry's transformation and upgrading while providing a clear direction for the next decade's development.

To address the transformation and upgrading, the plan encompasses six subdivided target plans, six key tasks, and eight key projects. It spans critical aspects such as key technologies, the entire industry chain, brand development, international influence, and sustainable development.

In response, Luo Lei, Deputy Secretary General of the China Automobile Circulation Association, summarized the plan's essence into three orientations: product planning, technology route planning, and enhancing independent brands. It emphasizes driving new energy vehicles, intelligent connected vehicles, and core technological innovations.

New energy and intelligent networking may serve as pivotal breakthroughs.

The "Plan" outlines that by 2020, several new energy vehicle enterprises will be nurtured to enter the global top ten, aligning intelligent networked vehicles with international development. By 2025, the global influence and market share of key new energy vehicle enterprises will further increase, propelling intelligent connected vehicles into the world's advanced ranks. Both new energy vehicles and intelligent connected vehicles will be pivotal focal points for the development of China's automobile industry.

Liu Ming highlighted, "The 'Plan' is grounded in the 'Made in China 2025' strategy introduced in May 2015. Within this framework, the 'Plan' explicitly delineates the forthcoming trajectory of industrial development, concentrating efforts on new energy vehicles and intelligent connected vehicles."

The 'Made in China 2025' initiative identified new energy vehicles and intelligent connected vehicles as development priorities, leading the 'Plan' to acknowledge their potential as significant breakthroughs. However, Liu Ming stressed that these breakthroughs imply opportunities for the transformation and upgrading of China's automotive industry, crucial for keeping pace with advancements in these sectors.

Industry experts believe that China's automotive industry holds a specific advantage in the two major fields of new energy vehicles and intelligent network connections, an advantage not previously held over the past decade of automotive development.

According to public data, China witnessed a positive trend in 2016 with a total new energy vehicle volume of 517,000, showcasing continual growth in production and sales. Additionally, within the realm of intelligent connected vehicles, China's automotive industry capitalizes on the rapid development of the internet industry, exhibiting certain inherent technological advantages.

The "Plan" proposes that by 2025, the sales of new energy vehicles should account for 20% of total car sales, reaching 7 million, presenting both an opportunity and a challenge for traditional and emerging enterprises.

For companies like BYD (002594.SZ), Geely Auto (00175.HK), and others increasing their investment in new energy vehicles, the 'Plan' offers significant policy support.

Tian Yongqiu emphasized, "As the nation augments its support for new energy vehicles, we foresee a gradual relaxation and acceleration in the issuance of production qualifications for these vehicles." Consequently, for emerging car manufacturers like NIO Automobile and Singularity Automobile, possessing technological advantages in intelligent network connections, accelerated issuance of production qualifications indicates the impending onset of large-scale production.

Nonetheless, challenges persist. Currently, the development of new energy vehicles in China heavily relies on government subsidies. The reduction of subsidy levels will undoubtedly impact sales.

Presently, independent brand cars lack core technologies in the traditional automotive sector, but they possess clear advantages in the realm of new energy vehicles and intelligent connected vehicles.

In recent years, China has escalated investments in new energy vehicles and intelligent connected vehicles, experiencing an ongoing technological revolution. With increasingly evident competitive advantages, China's automotive industry has the opportunity to catch up and excel in these two areas.

Restrictions on joint venture equity ratios lifted in an orderly manner.

Nian Yong, Director of the Industrial Coordination Department at the National Development and Reform Commission, mentioned during the plan's promotion teleconference that it sets the course and objectives for China's automotive industry development.

The "Plan" addresses joint venture development and hints at reforming joint venture equity ratio restrictions, proposing to "enhance internal and external investment management systems and orderly relax joint venture equity ratio restrictions."

In 1994, China introduced the "Automobile Industry Policy," imposing share ratio limitations for joint ventures in the automotive sector. The recent proposal in the "Plan" to gradually relax these restrictions marks the first acknowledgment of lifting these limitations since 1994, potentially indicating a shift in the ongoing debate over joint venture equity ratios.

Opinions on lifting joint venture equity ratio restrictions are divided. Opponents argue that considering the current state of domestic automotive industry development, conditions for lifting these restrictions aren't ripe yet, and maintaining them can safeguard the development of independent brand enterprises. Conversely, supporters contend that an orderly relaxation can stimulate market-oriented competition, fostering innovation among independent brands and driving rapid industry growth.

Some insiders suggest that the "Plan" aims to establish an internationally competitive automobile industry, and the joint venture equity ratio restrictions are intended to protect this sector. However, given the current positive trajectory of China's automotive industry, surpassing these barriers renders the joint venture equity ratio restrictions less significant. Thus, lifting these restrictions aids in fostering competitive strengths among enterprises.

Public data reveals that in 2016, China's independent brand automobiles accounted for nearly 50% of the total production and sales, signifying an escalating position for independent brands in the market.

While some independent brands have successfully entered the million-unit sales club, others remain relatively weak, relying on low-cost sales and lacking core competitiveness. The relaxation of joint venture equity ratio restrictions creates a sense of urgency for these enterprises.

Therefore, industry experts suggest that the opening of joint venture equity ratio restrictions is a result of market selection. The gradual relaxation of these restrictions underscores the urgency for independent brands to accelerate their development and compete with joint venture brands.

Shi Jianhua, Deputy Secretary-General of the China Association of Automobile Manufacturers, holds that "the orderly relaxation of joint venture equity ratios doesn't mean an immediate lift. Ultimately, the issue of joint venture equity ratios still needs to be resolved among the enterprises themselves."

Industry insiders widely regard the release of the "Plan" as a rare opportunity for domestic independent brands. This plan provides a clear direction for the development of the automotive industry, emphasizing new energy vehicles and intelligent network-connected cars, thereby serving as a guiding framework. Independent brands hold certain advantages in these areas. Moreover, the relaxation of joint venture share ratio restrictions has prompted independent brands to recognize the critical importance of bolstering their core competitiveness and fostering a sense of urgency.

2017-11-01 13:05:09