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EV startups are facing stricter government control in China

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【Summary】The Ministry of Industry and Information Technology (MIIT) is posing restrictions on granting licenses to new EV startups, limiting the number to 10 per year.

Original Claire    Dec 08, 2016 3:08 AM PT
EV startups are facing stricter government control in China

Where's the hottest EV market now in the world? The answer is that it's located in China.

Last year, the country of 1.3 billion surpassed the United States to become the largest market for new-energy vehicles. These include EVs, plug-in hybrids and fuel-cell cars. With 331,092 vehicles being sold by domestic automakers, China is now a lucrative market where many EV manufacturers are searching for opportunities to make a profit. Chinese authorities have anticipated that the number of EV sales in 2016 is going to double.

A report published last August estimated that over 200 companies backed by Chinese investors and billionaires are delving into the manufacturing of 4,000 new EV models. Clearly the battlefield is fierce with new competition emerging all over the place. However, these moves might be halted by the Chinese government.

The Ministry of Industry and Information Technology (MIIT) is posing restrictions on granting licenses to new EV startups, limiting the number to 10 per year. This doesn't include traditional automakers such as SAIC Motor Corp. and BYD Co. that are developing new-energy vehicles. New models under development are covered by these car manufacturers' existing manufacturing licenses.

"It's true we're emphasizing support to develop new-energy vehicles, but should we allow everyone to go ahead?," Dong Yang, executive vice-chairman of China Association of Automobile Manufacturers, said of the stricter policy, according to Bloomberg.

However, the government doesn't intend to put obstacles in front of the EV market. It's actually offering subsidies that can total 60 percent of an electric-car's sticker price. They have a sales target of 3 million new-energy vehicles a year by 2025.

The reason behind the stricter policy is to better control the Chinese new-energy automobile market. As more and more EV startups are established, some of them are not technologically capable of competing in the market. There are even frauds coming upon the scene in order to get the EV subsidies. This past October, the Chinese Ministry of Finance released a blacklist of 72 companies that are involved in fraudulent acts in getting subsidies. Among them are quite a few major car companies.

Now the government plans to phase out subsidies by 2020, and in a drafted document, MIIT listed 17 technologies that EV companies must possess to ensure "healthy" development of the industry. Those include a control system that determines the performance and stability of the new energy vehicle, an information system that tracks the sources and conditions of key parts, and a process for recycling or reusing batteries.

By lifting up these higher standards, the Chinese government wants the stronger competitors to prosper the market.

That said, five new EV production licenses have been granted by China's National Development and Reform Commission (NDRC). They are Beijing Electric Vehicle Co., which is under BAIC, a major state-owned automaker, Hangzhou Changjiang Passenger Vehicle Co, with Hong Kong-traded FDG Electric Vehicles Ltd. as a major shareholder, Chery New Energy, CH Auto and Minth Group.

Some well-known companies that are conducting new-energy vehicle R&D haven't applied for the license yet. They include LeEco, Foxconn and Tencent. There's a possibility that some small EV startups might cooperate with other major automakers with old licenses to continue their production plans. 

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