EV star­tups face wipe­out by new rules

China Daily (USA) - - BUSINESS - By BLOOMBERG

China’s elec­tric-ve­hi­cle in­dus­try, with 200-plus com­pa­nies backed by a raft of bil­lion­aires, verges on a mas­sive shake­out as the govern­ment im­poses stricter tech­nol­ogy stan­dards on fledg­ling man­u­fac­tur­ers and con­sid­ers lim­it­ing their num­ber to only 10.

Any curbs would be aimed at weed­ing out the weak, said a se­nior ex­ec­u­tive with the State-backed auto man­u­fac­tur­ers’ as­so­ci­a­tion, and they may push as many as 90 per­cent of EV star­tups to­ward ex­tinc­tion, a gov­ern­mentlinked news­pa­per said. So far, only two ven­tures have ob­tained ap­proval to build cars, based on a re­view of Na­tional De­vel­op­ment and Re­form Com­mis­sion doc­u­ments. Three others say they plan to ap­ply for per­mits.

Jack Ma, Terry Gou, Li Ka-shing and Jia Yuet­ing are among the in­vestors who’ve poured at least $2 bil­lion into build­ing al­ter­na­tive-en­ergy ve­hi­cles asChina tries to com­bat the smog chok­ing its cities. Gen­er­ous sub­si­dies helped to cul­ti­vate a gol­drush men­tal­ity, prompt­ing con­cerns the in­dus­try is plagued by too many com­pa­nies lack­ing the tech­ni­cal know-how to make elec­tric or hy­brid cars that mea­sure up to those from Tesla Mo­tors Inc or Gen­er­alMo­tors Co.

“There are too many en­trants in the sec­tor, and some of them are just spec­u­la­tors,” said Yin Chengliang, a pro­fes­sor in the in­sti­tute of au­to­mo­tive en­gi­neer­ing at Shang­hai Jiao Tong Univer­sity. “The govern­ment has to raise the thresh­old. It’s bad to see ir­ra­tional in­vest­ments in projects with low tech­nol­ogy lev­els.”

The po­ten­tial cap on EV star­tups comes as the world’s big­gest auto in­dus­try grap­ples with over­ca­pac­ity and high in­ven­to­ries. Car­mak­ers are see­ing pres­sure on their profit mar­gins with the spread of cheap mod­els, while strin­gent fuel-econ­omy and emis­sions tar­gets are set to raise costs.

China sur­passed the US last year to be­come the world’s big­gest mar­ket for new-en­ergy ve­hi­cles — com­pris­ing elec­tric ve­hi­cles, plugin hy­brids and fuel-cell cars. Do­mes­tic au­tomak­ers sold Yin Chengliang, 331,092 units in 2015, ac­cord­ing to the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers.

The govern­ment’s sales tar­get is 3 mil­lion units a year by 2025 — a 10-fold in­crease — and it’s of­fer­ing sub­si­dies that can to­tal 60 per­cent of an elec­tric-car’s sticker price. There cur­rently are about 4,000 new-en­ergy ve­hi­cle, or NEV, mod­els in de­vel­op­ment.

“It’s truewe’re em­pha­siz­ing sup­port to de­velop new-en­ergy ve­hi­cles, but should we al­low ev­ery­one to go ahead?” said Dong Yang, ex­ec­u­tive vice-chair­man of the man­u­fac­tur­ers’ as­so­ci­a­tion.

In a draft pol­icy doc­u­ment posted for pub­lic feed­back this month, the Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy listed 17 tech­nolo­gies that com­pa­nies in­tend­ing to sell elec­tric cars must pos­sess in order to en­sure “healthy” de­vel­op­ment of the in­dus­try. Th­ese in­clude a con­trol sys­tem that de­ter­mines the per­for­mance and sta­bil­ity of the NEV, an in­for­ma­tion sys­tem that tracks the sources and con­di­tions of key parts, and a process for re­cy­cling or reusing bat­ter­ies.

The Eco­nomic Daily, an official news­pa­per run by the State Coun­cil, said 90 per­cent of the com­pa­nies cur­rently de­vel­op­ing EV plat­forms still won’t meet the stan­dards in two years.

One suc­cess­ful ap­pli­cant is Beijing Elec­tric Ve­hi­cle Co, which is con­trolled by BAIC Group, the State-owned man­u­fac­turer for Hyundai Mo­tor Co and Daim­ler AG’s MercedesIt will build a fac­tory in the cap­i­tal city that’s ca­pa­ble of mak­ing 70,000EVs a year.

a pro­fes­sor in the in­sti­tute of au­to­mo­tive en­gi­neer­ing at Shang­hai Jiao Tong Univer­sity

SHI YAN / FOR CHINA DAILY

charges an elec­tric car at an auto expo in Haikou, cap­i­tal of Hainan province.

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