In the past five months, the National Development and Reform Commission (NDRC) has not approved any new projects for pure electric vehicle passenger cars. This marks a significant shift in policy, as the Chinese government is now focusing on reviewing and regulating the growing new energy vehicle (NEV) industry.
Recently, the Ministry of Industry, Ministry of Finance, and other key departments held a meeting to promote the "Advance Vehicle Company Average Fuel Consumption and New Energy Vehicle Integral Management Measures." The event emphasized the government's intention to investigate and manage the capacity of new energy vehicles, ensuring that overcapacity does not become a problem.
According to an executive from a new car company currently applying for qualifications, approvals were effectively halted in June this year. A joint notice from the NDRC and the Ministry of Industry and Information Technology instructed local investment departments to suspend the approval of projects for pure electric passenger vehicles.
Industry sources close to the NDRC suggest that new energy project approvals are unlikely to resume before mid-2024. The government aims to revise future access conditions and conduct stricter inspections of production and sales capabilities, potentially eliminating weaker players from the market.
This tightening of policies poses a major challenge for fast-growing new car companies. If they fail to complete their manufacturing layouts now, they may struggle to catch up during the two-year window period.
The issue of overcapacity is becoming increasingly apparent. According to data from the China Automobile Association, new energy vehicles sold 398,000 units in the first nine months of the year, a 37.7% increase compared to the previous year. However, if this growth rate continues, the annual target of 700,000 units may not be met.
The "Energy-saving and New Energy Vehicle Technology Roadmap" predicts that by 2020, NEVs should account for more than 7% of total car sales, which would require at least 2.1 million NEVs sold that year. Yet, with over 696,000 units of production capacity planned by 2020, the supply could far exceed demand.
This imbalance has raised concerns about wasted resources and inefficient allocation. In the past, traditional automakers also faced similar issues, with some struggling companies obtaining production licenses despite poor performance. To prevent a repeat, the government has already revoked some companies' qualifications.
Industry insiders suggest that the NDRC may soon implement a phase-out system, possibly setting thresholds such as requiring at least 500 units sold in the first year, or risking qualification revocation in the second year.
New energy vehicle production qualification approvals have been suspended, and it’s unlikely they will restart before mid-2024. The NDRC is reportedly considering stricter review criteria, including R&D capabilities, factory standards, talent, and financial stability.
For new car companies, the next three years represent a critical development window. With nearly 20 new entrants currently applying for qualifications, many have already begun site selection or construction. However, the auto industry is capital-intensive, with initial investments often exceeding 20 billion yuan. If these companies fail to secure production rights, their investments could be lost.
To navigate the current situation, some companies are adopting alternative strategies. One approach is OEM (Original Equipment Manufacturer) production. For example, Weilai and Xiaopeng have partnered with established manufacturers like Jianghuai and Haima to launch their first models quickly.
Another strategy involves acquiring existing production licenses, or "shells." Weimar Motors recently acquired Dalian Huanghai Automobile Co., Ltd. for 1.18 billion yuan, gaining access to production facilities and vehicle types. Other new car companies are also seeking similar opportunities, though suitable targets are becoming increasingly scarce.
With time running out, new car companies must act swiftly to secure their positions in the rapidly evolving NEV market. Every day counts in the race to meet the 2018–2020 development window.
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