The New Energy Vehicle (NEV) industry has been rapidly developing thanks to their significant contributions towards alleviating the energy crisis and environmental governance issues, which are becoming more important as the world works towards achieving the Dual-Carbon targets. NEVs utilize newer drive systems where the power to move the vehicle is generated completely or primarily from new energies. Definitions of NEVs in various Chinese policies and plans include pure electric vehicles, plug-in hybrid vehicles, and Fuel Cell Electric Vehicles (FCEVs).
Research into electric vehicles, FCEVs, hydrogen energy and similar began in the 1990s in China. The first domestic electric vehicle was approved for sale in November 2008 and entered production, causing the NEV industry in China to blossom. In June 2012 the State Council issued the Plan for Energy Conservation and NEV Industry Development (2012-2020). The Plan declares that major strategies for NEV development and the transformation of the automobile industry must focus on pure EVs, clarifies the technology roadmap required to achieve this, and sets out industrialization targets to be met by 2020.
Numerous policies encouraging and supporting NEV development have sparked a rapidly developing NEV industry in China. According to statistics from the CMIF, 7.058 million NEVs were manufactured and 6.887 million NEVs were sold in China in 2022, which is a YoY growth of more than 90%. Data published by the General Administration of Customs, 6.79 million NEVs were exported from China in 2022, up 120% YoY. In recent years, the Chinese government has acted consistently to safely steer the industry’s growth in a stable, healthy direction with a range of supportive policies designed to achieve goals such as increasing proactiveness in the NEV market, expanding the range of use of NEVs, and improving NEV support services.
1. Major NEV Industry Policies, Regulations and Standards released for the 14th Five-Year Plan
A summary of all major new NEV industry policies, regulations and standards issued by the Chinese Government during the 14th Five-Year Plan can be found below.
Table 1 Major 14th Five-Year Plan NEV Industry Policies at a Glance
1.1 The 14th Five-Year Plan: Major Targets and Tasks
In October 2020 the General Office of the State Council issued the Plan for NEV Industry Development (2021-2035), which gave a comprehensive overview of NEV development pathways from the 13th Five-Year Plan through to the 15th Five-Year Plan. The Ministry of Industry and Information Technology, NDRC and Ministry of Ecology and Environment then jointly issued the Implementation Plan for Peak Carbon Emissions in the Industrial Domain in July 2022, declaring the NEV industry a key developing carbon emissions industry and setting out key tasks necessary to achieve 2030 Peak Carbon Emissions targets.
Major Targets
By 2025:
- Reduce average energy consumption for new pure EV passenger vehicles to 12kWh/100km
- NEV sales volume for new cars to reach approx. 20% of the sales volume for new conventional cars
- Create commercial applications for self-driving vehicles in restricted areas and specific scenarios
- Improve the convenience of vehicle charging and battery swapping services
By 2030:
- New and clean energy vehicles to comprise approx. 40% of all transport vehicles
- Decrease carbon emissions intensity for passengers and commercial vehicles by 25% and 20% of 2020 levels
By 2035:
- Pure EV new car sales volume to comprise the largest market share
- All public domain vehicles to be fully electric
- Have commercial applications for FCEVs
- Have successfully scaled up self-driving vehicle applications
- The vehicle charging and battery swapping service network should be more efficient
- Have achieved stable progression in the field of hydrogen fuel supply system
Major Tasks
Increase Technological Innovation.
- Speed up the construction of generic technological innovation platforms;
- Increase industry capacity for public services.
Construct a New Industry Ecosystem.
- Create a supportive ecosystem to guide business development;
- Drive the innovative application of key systems;
- Increase the level of smart production;
- Strengthen quality safety guarantees.
Drive Cross-Industry Development.
- Drive cross-industry development between the NEV, energy, transportation, and information and telecommunication industries.
Improve Infrastructure Systems.
- Vigorously promote vehicle charging and battery swapping network construction;
- Assist in promoting the construction of a smart road network;
- Steadily proceed with the construction of the hydrogen fuel supply system network.
1.2 Mobilize the Main NEV Market Players
In recent years, the government has used constant policy adjustments to maintain a quality level of constant growth in the NEV market. 2016 saw the introduction of a mechanism to reduce government financial subsidies. Certain subsidies for pure EV passenger vehicles with low range were gradually reduced to zero beginning in 2018, and subsidies offered for the remaining subsidized models of pure EV passenger vehicles with ranges under 300Km were completely removed in 2022.
- Ministry of Finance, Ministry of Industry and Information Technology, Ministry of Science and Technology, NDRC Notice on 2022 Policy for the Extended Application of NEV Financial Subsidies (31 December, 2021)
The Notice requires that the standard NEV subsidy be 30% lower in 2022 than 2021; and that standard subsidies provided to eligible vehicles in the fields of public transport, long-distance buses, car rentals (including ridesharing), sanitation, urban logistics, postal and courier deliveries, civil airports and official party organizations be 20% lower than 2021. The Notice also clarifies that NEV vehicles registered after 31 December, 2022 will no longer be subsidized. - Ministry of Commerce Notice on Measures to Invigorate Automobile Circulation and Boost Automobile Consumption (July 5, 2022)
The Notice demands that the purchase and use of NEVs is supported, that free intra-regional circulation of NEVs is facilitated, that regional NEV market protections are removed, that regions be prohibited from establishing NEV model catalogs, and that unreasonable vehicle parameters and indices must not be applied to NEV product sales and consumer subsidies. - Ministry of Finance, State Taxation Administration, Ministry of Industry and Information Technology Announcement on the Continuation of the Vehicle Purchase Tax Exemption Policy for New Energy Vehicles (September 18, 2022)
As per the Announcement, all NEVs added to the Catalog of Models of New Energy Vehicles Exempt from Vehicle Purchase Tax before December 31, 2022 and all NEVs purchased between January 1, 2023 and December 31, 2023 are exempt from Vehicle Purchase Tax.
The Catalog of Vehicle Models recommended for New Energy Vehicle Promotion and Application (10th Ed., 2022) was released in November 2022 by the Ministry of Industry and Information Technology together with the State Taxation Administration-approved Catalog of NEV Models to Save Energy and Enjoy Preferential Vehicle and Vessel Tax Reductions (44th Ed.) and the Catalog of NEV Models Exempt from Vehicle Purchase Tax (60th Ed.). - Ministry of Finance Notice on Revisions to the Interim Measures for the Management of Energy Conservation and Emissions Reduction Subsidy Funds (April 7, 2023)
The Notice makes several revisions to the provisions of the Interim Measures for the Management of Energy Conservation and Emissions Reduction Subsidy Funds (FSDC (2020) No. 10), including the revision of ‘implementation deadline of 2022’ to ‘by 2025’, and
‘Key Support Scope for Energy Conservation and Emissions Reduction Subsidy Funds’ to ‘(1) Liquidation of NEV Promotion and Application Subsidy Fund; (2) Liquidation of Charging Infrastructure Reimbursement; (3) Demonstration Application of Fuel Cell Electric Vehicles; (4) Liquidation of Circular Economy Pilot Demonstration Items; (5) Provincial Energy Conservation and Carbon Reduction Pilots; (6) Relevant Payments requiring State Council Approval’. - NDRC, National Energy Administration Implementation Opinions on Accelerating Charging Infrastructure Construction to better support the Introduction of NEVs in and Revitalizing Rural Areas (May 14, 2023)
The Opinions propose measures to encourage the purchase in NEVs by registered local residents in certain rural areas such as the provision of consumer vouchers. Automobile companies and certain areas are encouraged to provide trade-in deals on obsolete low-speed electric vehicles when purchasing NEVs. Regional governments should strengthen co-operation between government and enterprise to develop and launch promotions such as free charging vouchers provided when purchasing a vehicle. Increase support for the provision of consumer car loans in rural areas. - Ministry of Industry and Information Technology and 7 other departments Notice on Organizing and Executing Pilot Zone Tasks for the Comprehensive Electrification of Public Domain Vehicles (January 3, 2023)
In addition to the implementation of the above policies, China has also introduced policy to facilitate the electrification of public domain vehicles.
The Notice clarifies pilot areas for the comprehensive electrification of public domain vehicles (inc. official vehicles, urban public transport, rental cars, sanitation vehicles, postal and courier vehicles, urban logistics vehicles, airport vehicles, etc.) nationwide between 2023 and 2025. Participating pilot cities must begin work to increase the level of vehicle electrification, facilitate the innovative application of new technology, improve battery swapping and charging infrastructure, and complete legislative and management systems.
1.3 Improve NEV Support Services
There were 13.1 million NEVs in China at the end of 2022, comprising 4.10% of all cars in the nation. The volume of scrapped and written-off vehicles increased by 5.26 million cars, a 67.13% growth compared to 2021. 10 45 million of these cars are pure electric vehicles, comprising 79.78% of all NEVs. This means that demand for NEV support services is growing by the day.
- General Office of the Ministry of Industry and Information Technology, General Office of the Ministry of Public Security, General Office of the Ministry of Transport, General Office of the Ministry of Emergency Management, General Office of the State Administration for Market Regulation Guiding Opinions on the Further Strengthening of Safety System Construction for New Energy Vehicle Enterprises (March 29, 2022)
The Opinions provides guidance for NEV enterprises on the accelerated construction of systematic, scientific, and standardized safety systems in order to comprehensively strengthen safety management, product quality, operation monitoring, after-sales service, accident response, and network security safety assurances. - Ministry of Transport, National Energy Administration, State Grid Corporation of China, China Southern Power Grid Company Limited Action Plan to Accelerate Expressway Charging Infrastructure Construction (August 1, 2022)
The Plan proposes the provision of basic charging services at expressway rest and service areas nationwide by the end of 2022 (with the exception of high-altitude regions); the provision of basic charging services at specific rest and service areas/stops along ordinary national highways by the end of 2023; and the increased provision and optimization of charging infrastructure at rest and service areas/stops along expressways and ordinary national highways with coverage for rural roadways by the end of 2025.
Tangible implementation steps are also laid out in the Plan: Create Implementation Plan (August 15, 2022); Organize construction and improvements (from August 15, 2022 to end December 2023); Stage Summary Assessment (December 2022 and December 2023); Expansion and Optimization Improvements (January 2024 to December 2025). - National Railway Administration, Ministry of Industry and Information Technology, China State Railway Group Company, Ltd. Opinions on Supporting Railway Transportation Services for New Energy Vehicle Products to Support New Energy Vehicle Manufacturing (January 3, 2023)
The Opinions require that lithium-ion battery powered plug-in hybrid or pure electric NEVs covered by the scope of the Ministry of Industry and Information Technology Announcement on Road Motor Vehicle Production Enterprises and Products (exempting NEV products for export) are not treated as hazardous cargo when being transported by rail. - NDRC, National Energy Administration Implementation Opinions on Accelerating Charging Infrastructure Construction to better support the Introduction of NEVs in and Revitalizing Rural Areas (May 14, 2023)
The Opinions propose the innovation of the construction, operation, and maintenance of charging infrastructure in rural areas, and the launching of work across five aspects: improving operations and maintenance services for charging infrastructure, improving the distribution of public charging infrastructure, promoting the construction and sharing of community charging infrastructure, increasing power grid capacity, and expanding new models like smart and managed charging.
2. Future Direction
NEVs in China boasted a production volume of 1.65 million vehicles (up 27.7% YoY) and a sales volume of 1.586 million (up 26.2% YoY) in the first quarter of 2023 and enjoyed 26.1% of the market share. In order to sustainably and efficiently develop the NEV industry, China will continue to launch relevant work with a real focus on: continued development of urban and rural sales of pure electric vehicles, applications in the public domain, improvements to supporting systems, infrastructure construction, etc., constructing the FCEV R&D-Industry chain, and rapid new-era multi-industry development driven by NEVs.
(1) Continued development of urban and rural sales of pure electric vehicles, applications in the public domain, improvements to supporting systems, infrastructure construction, etc.
The NEV market is full of vitality and ownership is rapidly growing. Pure electric vehicles are currently the primary contributors to NEV ownership numbers in China. Market vitality is expected to decline as the pure EV industry slowly matures.
Growth and development has slowly highlighted demand for improved pure EV support services such as convenient charging, improved safety, and better after-sales service. Proper NEV support services need to both meet the demands of current owners and stimulate demand in the NEV market. China is also working hard to increase the usage of pure EVs in the public domain.
(2) The FCEV R&D-Industry chain
September 2020 saw the release of the Notice on Launching Demonstration FCEV Projects by the Ministry of Finance, Ministry of Industry and Information Technology, Ministry of Science and Technology, and 2 other departments. The Notice clarified that implementation should take four years from when an urban area has been approved to participate in the demonstration. Rewards (rather than subsidies) should be used in the urban area to encourage the construction of FCEV industry chainlinks, launch new FCEV tech, demonstrate the application of new models, and explore efficient commercial operating models in an improved policy environment.
(3) Rapid new-era multi-industry development driven by NEVs
NEVs are the basis on which the pace of development is accelerating for smart networks, green low-carbon industries, and smart cities. An investment of 400 million yuan was made in September 2022 for the official use of the China ICV, which boasts 22 world-class experimental vehicles.
To date, China has opened over 9,000Km of smart network vehicle testing roads, and renovated over 3,900Km of roads into smart roads. The Ministry of Industry and Information Technology has indicated that the Chinese Solution for integrated development of smart network vehicles and smart cities currently taking shape in China is responsible for the deep-level joint development being shared between three trillion-dollar industries (automobiles, information technology, and transport), adding a new chapter of growth to the legacy of China’s economic development.
