New-Energy Auto Standards Have Limited Impact

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The new standards released by the Ministry of Industry and Information Technology on June 25 will bring limited benefits for China's alternative energy auto sector, where barriers to entry remain high, auto analysts and industry executives said.

New automakers must still hurdle an approval process set by the National Development and Reform Commission (NDRC), China's economic planner, including a minimum capital requirement of 2 billion yuan. As a result, only conventional automakers are likely to be licensed, Li Chunbo, an auto analyst at CITIC Securities Co., told Caijing.

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Under the new rules, automakers are allowed to begin mass production of vehicles with developing energy technologies but vehicle sales are still subject to certain conditions. Vehicles powered by mature alternative energy technologies will now be treated as conventional vehicles.

Currently, only hybrid passenger vehicles with nickel-metal hydrogen or lead-acid batteries and electric vehicles using lead-acid batteries are classified as vehicles using mature technologies, according to the standard.

The new standards will be in effect until the end of 2010 when they will be revised further.

The new classification system brings few benefits unless they are accompanied by new subsidies, according to Shen Yang, senior business director of Beiqi Foton Motor Co. Ltd. (SSE: 600166)'s strategy and investment bank division.

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Jia Xinguang, an independent auto analyst, told Caijing that the biggest change on June 25 was that the MIIT assumed some of the NDRC's functions in managing the auto industry.

The Chinese government has set a target for alternative-energy automobiles at 5 percent of total passenger vehicle sales by 2011, with each major domestic automaker offering at least one model.
Now, among China's domestic automakers, only Chery Auto and BYD Auto have launched "new-energy" cars with electric batteries using developing technologies according to the new standards.

For all types of vehicles, the government's sales target is 10 million units in 2009, with annual growth averaging 10 percent over the next three years.