China

Major Developments in 2022

Driven by a series of effective policies, the Chinese automobile market recovered and achieved positive growth in 2022, despite the impact of many adverse factors, such as the fluctuating COVID-19 pandemic, structural shortage of chips, high prices of raw materials for power batteries, and local geopolitical conflicts. Notably, new energy vehicles (NEVs) still maintained explosive growth, with production and sales increasing by 96.9% and 93.4%, respectively, compared with 2021. The market share increased to 25.6%, 12.1 percentage points higher than in 2021, achieving the target of 20% penetration three years ahead of schedule. New energy vehicles are rapidly replacing traditional fuel vehicles, which forms an alternative relationship between them.

Macro Industry Planning

To implement the “Development Plan for New Energy Automobile Industry (2021-2035),” on March 29, 2022, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of Transport, the Ministry of Emergency Management and the State Administration for Market Regulation jointly issued the “Guiding Opinions on Further Strengthening the Construction of the Safety System for New Energy Automobile Enterprises.” This document put forward the requirements for establishing and perfecting a product quality and safety responsibility system; rationally distributing an after-sales service network and power battery recycling service network; and establishing and perfecting the data safety management system of the whole process

Credits Compliance Policies

On July 7, 2022, the Ministry of Industry and Information Technology issued the “Decision on Revising the ‘Parallel Management Measures for Corporate Average Fuel Consumption and New Energy Vehicles Credits for Passenger Vehicles’ (Draft for Comments)” which tightened the requirements for the assessment of new energy credits again. The NEV credit percentage targets for automakers have been increased from 16% in 2022 to 18% in 2023.

Fiscal and Tax Policies

Overall, subsidies for the purchase of new energy vehicles (non-public sector) in 2022 declined by 30% compared with 2021. In order to accelerate the electrification of public transport and other sectors, such as urban buses, road passenger transport, taxis (including online car-hailing), sanitation, urban logistics and distribution, postal express delivery, civil aviation airports, as well as government and party organs' official business, the subsidy standard has been reduced by 20% compared with 2021.

Outlook

With the improvement of charging supporting facilities, the iterative progress of product technology, and the diversified supply of products, consumers' recognition and acceptance of NEVs have been further improved. The penetration rate of NEVs, especially in the middle-end product markets, will increase rapidly. Second and third-tier cities, and even rural areas, have huge development potential and will be the main source of NEVs sales. BEVs are expected to remain the main driver of NEVs increment in 2023. PHEVs that can better meet the demand across multi-scenario usage will accelerate the replacement of traditional fuel vehicles. The share of PHEVs and E-REVs in new energy vehicles (especially mainstream household models and high-end large SUVs) will further increase.