Regulations cement foundation for e-mobility

China to reduce the models eligible for purchase tax exemption and introduce stronger oversight to bolster long-term viability.

Standards and regulations are being introduced in China's new energy vehicle sector to provide a strong bedrock for future growth and speed up the popularity of electric cars.

To start, the world's largest car market is removing purchase tax exemptions on new energy vehicles that fail to be put into mass production or achieve import sales within one year, according to an announcement made earlier this month by the Ministry of Industry and Information Technology.

The Ministry of Industry and Information Technology said that it will also enforce stricter supervision and inspection on new energy vehicle manufacturers, as well as penalize companies that do not comply with the new regulations.

These regulations have been seen by industrial experts as a move to clean up zombie companies and those that are not mass manufacturing vehicles for the market.

It is believed that China is laying down these fundamentals in order to attract domestic and foreign investment into the new energy vehicle sector as well as ensuring better development in the future.

Zhang Junyi, a partner at Nio Capital, a Wuhan-based new energy industrial investment enterprise, said that the stricter regulations are welcome and that obsolete production in the sector needs to be dropped.

"The country is encouraging the application of the latest technologies and techniques in producing green vehicles," Zhang said.

"The obsolete production is based on out-of-date facilities and many of them cost much more to be upgraded or rejuvenated, than to build a brand new plant."

China has been the world's largest market for fully-electric and plug-in electric vehicles since 2015.

More than 770,000 new energy vehicles were sold in China last year, up 53.3 percent year-on-year, according to the China Association of Automobile Manufacturers.

Miao Wei, the minister for Industry and Information Technology, called for the strengthening of policy and regulation systems for new energy vehicles, as well as an improved development environment in a speech made in January this year.

At the end of March, the ministry issued the Key Working Points of New Energy Vehicle Standardization for 2018. The working points are aimed at promoting and facilitating the development standards for batteries, charging interfaces, recycling and reuse, as well as standards internationalization.

It is the ministry's first integrated guideline looking after the entire value chain of the new energy vehicle industry, despite related policies and regulations having been issued before. The industrial standards are essential for the country's auto making industry to develop towards a strong enough industry to compete internationally, according to the ministry.

"China took the lead for its early start in fully electric vehicle development," Zhang said.

"The top level competition is the competition of standards, and it is decided by the popularity of the vehicles applying the standards."

The popularity of new energy vehicles, in terms of sales volume, will in turn be boosted by the standardization work, according to Zhu Lin, project manager at consultancy firm Roland Berger.

Zhu said that the sales volume of electric vehicles will receive a boost when the standards are implemented.

"The future customer will make their electric car purchase decision more easily, for won't have to face the current concerns that hurdled the possible purchase," she said.

For example, the standards will unify the plug-in positions for charging interfaces so that all new energy vehicles can recharge easily at charging poles, just as conventional cars are refilled at service stations.

Research by Roland Berger has found a low satisfaction level among current users of electric vehicles, caused in part by a lack of charging compatibility. "Without considering installing a private facility, the users will find their demands are more satisfied when everything is standardized," Zhu said.