Automotive and Automotive Components Working Groups

Transcription

1 Automotive and Automotive Components Working Groups Key s 1. Limitations to Investment Allow foreign majority investment and eliminate the 2+2 regulation 2. Type Approval/Homologation Standards Adhere to the United Nations/Economic Commission for Europe (UN/ECE) 1958 Geneva Agreement as soon as possible. Avoid multiple homologations and set up a unified homologation system in China for both locally-produced and imported vehicles and components 3. Fuel Quality Achieve the objectives of environmental legislation. Emissions standards and fuel quality (gasoline as well as diesel) should be matched and relevant government departments should therefore promote the concerted development of the automotive and the oil industry, and further set up a monitoring system to check fuel quality at gas stations 4. Fuel Economy implementation of phase III regulation Allow Original Equipment Manufacturers (OEMs) to calculate their Corporate Average Fuel Consumption (CAFC) by pooling together all vehicles sold in China (whether locally manufactured or imported) by the same auto group. At the same time, small-volume exemptions should be introduced and concerted efforts made by the authorities to deliver high quality fuels that will foster maximum fuel efficiency 5. Vehicle taxation & CO 2 balance taxation Replace the currently applied consumption tax and vehicle purchase tax by a CO 2 -based tax scheme attaching a single value to each gram of CO 2. The taxation should encourage manufacturers and customers to introduce or to buy fuel efficient vehicles 6. Safety standards for passenger vehicles Harmonise Chinese and Economic Commission for Europe (ECE) safety standards with respect to crash testing, so as to promote the development of safer passenger cars 7. Publishing vehicle licensing data Establish the availability of online and real-time information about vehicle registration nationwide Introduction to the Working Group The members of the Automotive Working Group are also members of the European Automobile Manufacturers Association (ACEA), which is composed of 15 major European car, truck and bus manufacturers. The Automotive Components Working Group consists of approximately 20 European companies involved in the manufacture of auto components, machine tools for production of auto components and automotive assembly lines. They also import and distribute auto components and provide after-sales service. Recent Developments In 2009, car sales in China rose 53% to 10.3m units while total vehicle sales rose 46.2% to 13.6m units: a result no less impressive for being due, in part, to the government s stimulus measures launched in January last year. In 194 Automotive and Automotive Components Working Groups

2 European Business in China Position Paper 欧盟企业在中国建议书 2010 / 2011 particular, these measures lifted the sales of passenger cars with 1.6 L engine displacement (= 70% of all cars sold in 2009), and boosted sales of small commercial vans in the countryside (a 70% increase over 2008). China is now the world s leading (national) auto market. Thus the Chinese government proofed that it can maintain even in a global downturn a key industry in a healthy position. The tax adjustments and stimulus for trade-in vehicles are only two examples of effective measures. in which China has rapidly established itself as a leader. Although, the vehicles involved in the programme are limited to the locally produced hybrid, electric and fuel cell, vehicles only, members of the Automotive and Automotive Components Working Groups are keen to play a role in the technical developments, and support globally harmonised electric vehicle-related standards wherever possible. The Working Groups would caution, however, that the current state of the technology and the high cost of electrically charged vehicles will possibly delay any significant market penetration by such new vehicles beyond the ambitious targets set by the authorities (10% by 2020). Meanwhile, in order to reduce average fuel Source:Roland Berger Supporting this growth, European auto companies have seen a large number of improvements in doing business in China, including, increased seizures of counterfeit goods, and improved frameworks for Intellectual Property Rights (IPR) protection. The Chinese government has proven that it is closely monitoring the auto industry, thus ensuring the continuing mobilization of its population. China s increasing dependency on imported oil as well as environmental concerns has driven towards more stringent fuel efficiency standards for passenger cars and commercial vehicles alike (the Phase III fuel consumption limits ), and will thus support the introduction of new technology to China and a new paradigm for the Chinese auto industry, driving investment and innovation forward. The electrification of the auto industry is being watched with great interest by the European automotive industry. Led by the Ministry of Science and Technology (MOST), a pilot programme has been put in place since the beginning of December 2009 to test-use a range of new-energy vehicles in 13 demo cities, soon to be expanded to 20. This programme will last from 2009 to It includes the roll-out of recharging infrastructure for electric vehicles, and this in turn necessitates standardisation efforts for vehicles and their batteries, electric charging equipment and the interface between the car and the power grid, consumption and mitigate global warming by reducing CO 2 emissions, the European automotive industry is ready to share further improvements in internal combustion engine technology including diesel engines with partners and customers, in a multipronged approach to the sustainability challenge that by no means excludes, indeed welcomes, the zero-emission cars of the future. Key s 1. Limitations to Investment For a foreign automobile manufacturer wanting to invest in China, the only permissible business structure is a joint venture (JV) with a Chinese partner, where the maximum share is limited to 50%. In addition, a foreign investor is limited to setting up no more than two such Sino-foreign JVs for the production of passenger cars, and two for commercial vehicles ( 2+2 ). Successive editions of the Position Paper have raised the long-standing limitations to foreign investment in the automotive industry as a major issue. To reach decisions in a 50/50 JV, consensus between the partners is required; reaching a consensus is no easy matter when the partners interests diverge. Unfortunately, such divergence leads to management inefficiency in a competitive landscape that demands efficient decision-making. If occasional managerial deadlock were the only price to pay to have long-term benefits accrue by participating in China s automotive industry, a less than optimal business performance by Sino-foreign automotive JVs could be condoned. But compared to these JVs, the fastest-growing domestic carmakers are those who simply buy, and then Automotive and Automotive Components Working Groups 195

3 successfully assimilate, technological know-how in the open market, and who neither need nor want a foreign partner. This argument is fast being superseded by the reality unfolding before any impartial observer. As the Automotive Working Group has long argued, investors in the automotive industry (foreign or otherwise) should be allowed to hold stakes in an automobile-producing venture proportional to the business risk they are prepared to take. Mandatory 50/50 partnerships are counterproductive and are an anomaly in a market economy. In addition, with a view to furthering the consolidation of the automotive industry, mergers and acquisitions should not be hampered by the corollary regulation that foreign investors are limited to a total of two JVs for the production of passenger cars and two for commercial vehicles. Allow foreign majority investment and eliminate the 2+2 regulation 2. Type Approval/Homologation Standards The China Compulsory Certification (CCC) system in effect since 2002 has become more onerous for manufacturers over the years. Accretions to the CCC homologation procedure may reduce the chances that China may soon adhere to globally harmonised standards and testing methods under the Geneva Agreement. Presently, the CCC system negatively affects the European automotive industry in some ways. For example, imported vehicles and certain components, already type-approved under UN/ECE-derived EU Directives, have to be re-tested in Chinese testing laboratories. Manufacturing plants in Europe are further subject to quality audits conducted by Chinese inspectors. Previous issues of the Position Paper have highlighted that this procedure is repetitive, costly, and time-consuming. From the initial three components that required CCC certification, the list has grown to cover, at present, thirteen types of components that must be marked with the CCC label for importation into China. Since the National Standards to which these components need to conform are generally in line with international standards, the Components Working Groups believe that the certification process could be greatly simplified if the Chinese authorities accepted overseas test reports, instead of duplicating tests and plant audits by Chinese authorities. As the CCC system becomes more comprehensive, it also becomes more entrenched. The Working Groups continue to call upon China to adhere to the UN/ECE 1958 Geneva Agreement. Adhesion would mean that China should readily recognise type-approvals obtained for their products by foreign manufacturers in Europe. It would simultaneously mean that automotive components produced and type-approved in China need no further testing when exported to the contracting parties of the Geneva Agreement, which include all of Europe. As the domestic automotive industry increasingly looks at export opportunities, avoiding repetitive testing is surely in China s own interest. Adhere to the UN/ECE 1958 Geneva Agreement as soon as possible. Avoid multiple homologations and set up a unified homologation system in China for both locally-produced and imported vehicles and components 3. Fuel Quality Fuel quality (gasoline and diesel) and emission standards are below the European standards. Improvements in fuel quality lag behind the introduction of emission standards for cars and trucks. Gasoline adapted to the National Phase 3 emission standard became available nationwide as of 31 December 2009, which is two and a half years after this emission standard became a mandatory type-approval requirement for all new car models. The National Phase 4 emission standard comes into force for new car type-approvals on 1 July 2010; but it is only in Beijing and Shanghai municipalities, where the corresponding grade of gasoline will be available. So far, no date has been announced for the introduction of Phase 4-gasoline throughout the country. As for diesel, the situation is worse. The GB/T-Standard (GB/T ) on EU3 diesel fuel quality (sulfur 350ppm) was released only on 12 June 2009, but this standard is not mandatory. In Europe, Euro 3/IV and 4/IV grade fuels were introduced before vehicles were upgraded to include Euro 3/III and 4/ IV emission technology, since the technology requires the appropriate fuel quality in order to achieve the legislators aim, i.e. to reduce exhaust pollutants by a given and precise percentage. 196 Automotive and Automotive Components Working Groups

4 European Business in China Position Paper 欧盟企业在中国建议书 2010 / 2011 If the fuel itself does not comply with fuel standards, it is then difficult for vehicles to fully meet emissions standards. Indeed, implementing EU3 would reduce sulphur content in the fuel, and per se, decrease emissions. It would also be easier for Chinese car makers to export as they would upgrade the vehicles with the appropriate technology. The government control over the actual compliance of heavy vehicles is poorly monitored and difficult to achieve regarding the diesel standards that are applied. It should be better enforced for truck manufactures, both for heavy vehicles at the end of the assembly line and in operation. The government should implement controls to ensure compliance with emission standards before the vehicle is commercialised and while the vehicle is in operation, monitoring that the system is maturing at a reasonable pace. In addition, the supply of diesel quality should be secured since it would facilitate the compliance with diesel standards of truck manufacturers. Achieve the objectives of environmental legislation. Emissions standards and fuel quality (gasoline as well as diesel) should be matched and relevant government departments should therefore promote the concerted development of the automotive and the oil industry, and further set up a monitoring system to check fuel quality at gas stations 4. Fuel Economy implementation of phase III regulation The phase III fuel consumption standard requires the different legal entities e.g. vehicles imported into China and those manufactured locally to calculate CAFC separately. In this context, exceeding one s targets in one fleet of vehicles does not compensate for underperformance in the other since debits are penalised but credits are not rewarded. In many cases, higher volume products which cover the larger part of the demand in China are manufactured locally in Sino-European JVs whereas products sold in lower numbers are imported. In case both fleets meet their specific target exactly in terms of CAFC, no issue arises. However, in reality, locally manufactured products may often outperform their targets and thus generate a credit for the relevant legal entity, i.e. the JV. On the other hand, imported volumes are lower, and in some cases imports are higher emitting products. They may not fully meet their targets, resulting in a debit for the importing company Without the option to offset one fleet against the other, no incentive for outperforming one s targets exists, meaning that investment in fuel-saving technology is not encouraged beyond the requirements set for each individual fleet, since debits are penalised but credits are not rewarded. Allow OEMs to calculate their CAFC by pooling together all vehicles sold in China (whether locally manufactured or imported) by the same auto group. At the same time, small-volume exemptions should be introduced and concerted efforts made by the authorities to deliver high quality fuels that will foster maximum fuel efficiency 5. Vehicle taxation & CO 2 balance taxation The currently applied consumption tax and purchase tax for vehicles are based on engine size rather than fuel efficiency. Moreover, as the vehicle purchase tax is an equal percentage tax on each vehicle, it does not address fuel efficiency or encourage the demand for low emitting vehicles. Providing fiscal incentives for the consumer to choose a fuel efficient vehicle is an effective mechanism to provide a market pull that supports the push generated by the fuel economy regulations addressed to the manufacturers. Therefore the industry supports the use of these instruments in China as it does in Europe, where by now the majority of member states have implemented CO 2 - based vehicle taxes. By putting a price tag on each gram of CO 2 emitted per kilometre the consumer receives a clear and unambiguous signal to compare the efficiency of competing products. Furthermore, it supports a sound investment in cutting edge technologies and cars with a higher residual value. In this context, China should reconsider their current engine-size related taxation. Protecting the environment by reducing the total amount of CO 2 emissions per car has become a major target. However, evidence shows that some bigger engines have less CO 2 emissions than smaller ones. The Working Groups are willing to help develop rules that better cater to the need to protect the environment. Automotive and Automotive Components Working Groups 197

5 Replace the currently applied consumption tax and vehicle purchase tax by a CO 2 -based tax scheme that attaches a single value to each gram of CO 2. The taxation policy should encourage manufacturers to introduce, and customers to buy, fuel efficient vehicles 6. Safety standards for passenger vehicles The existing legislation for vehicle safety is lagging behind international standards. China's automobile frontal impact standard GB1155l-2003, "The protection of the occupants in the event of a frontal collision for passenger car", is not equivalent to the ECE R94, and it is different regarding the collision angle and speed as compared with the EU regulations ECE R94. China's current regulations require frontal impact tests against a rigid barrier with 100% overlapping with an impact velocity of 50 km/h, while the European standard requires a Frontal impact test against a deformable barrier with 40% overlapping with an impact velocity of 56 km/h. The test methods of the European regulations better reflect what happens in reality in case of a crash, as only in a few accidents would a car hit a barrier with 100% overlap. (Most accidents are between car and car and not between car and wall). Therefore, the European test methods are meant to better protect the passengers by simulating the reality on the streets. China s automobile side impact and post impact standards GB / GB are based on the European ECE R95 / ECE R34 regulations. China s automobile side impact and post impact standards are based on the European ECE R95 regulations. Side impact standard requires all M1 ( below 9-seat and over 4-wheel passenger motor vehicles) and N1 (with a maximum design total mass 3.5 tonnes over 4-wheel laden motor vehicles), must meet the side impact mandatory ; while the post impact standard requires all M1 category vehicles to meet the post impact mandatory requirement. Harmonise Chinese and ECE safety standards with respect to crash testing, so as to promote the development of safer passenger cars 7. Publishing vehicle licensing data As of now, the vehicle industry is only able to publish and analyse market data through the China Association of Automobile Manufacturers and the National Union of Passenger Vehicles. Moreover, manufacturers may only purchase the publication of the data through various agencies, the vehicle licensing data not being publicly available. Vehicle licensing data presents the most dependable information for the industry to understand market demand and consumer trends. The Working Groups believe that publishing this data is essential for both the implementation of government policies and for vehicle industry development. Firstly, since the implementation of the government s Information Disclosure Bill on 1 May 2008, national economic statistics and social development statistics have been two major areas for which the data has been made public by the government. It is therefore understood that vehicle licensing data also belongs in the public domain. According to the bill, publishing data on vehicle licensing is not only the government s right, but its duty. Secondly, in Europe, North America, and Japan, all vehicles licensing data is entirely public. China that ascended to the WTO in 2001 should be following this international practice to accommodate developmental requirements. At present, the various agencies offering the data have no official mandate for doing so. Therefore, detailed data purchased from each enterprise differs, causing the industry to doubt the data produced by the Ministry of Public Security (MPS). Moreover, the vehicle registration data is the only reliable source to assess whether, in accounting terms, a vehicle s ownership has been effectively transferred to the customer. This is of immense importance to whoever supported the financing of the wholesaled vehicle to the dealer, whether it is a bank, an auto finance company (AFC) or the manufacturer. As the car itself is the only controllable collateral, the Vehicle Qualification Certificate does not suffice to secure the risk. Thus, the owner of the car needs to know when his/her vehicle changes hands after being sold on. From this point onwards, the financing support should cease and the vehicle price be 198 Automotive and Automotive Components Working Groups

6 European Business in China Position Paper 欧盟企业在中国建议书 2010 / 2011 repaid fully. If the bank, the AFC or the manufacturer is not immediately informed of the sale, the dealer can use this to his advantage and receive prolonged financing. The current practice clearly shows this (e.g., the sales data of Shanghai Volkswagen and that of three dealers in the Zhongyida Group are being investigated by CBRC and the court). The use of online registration information systems could have helped prevent the loss of more than 1000 cars being sold in this manner. Establish the availability of online and real time information about vehicle registration nationwide Abbreviations ACEA AFC CAFC CBRC CCC CO 2 ECE Association des Constructeurs Européens d Automobiles Auto Finance Company Corporate Average Fuel Consumption China Regulatory Commission China Compulsory Certification Carbon Dioxide Economic Commission for Europe EU JV MPS MOST OEM ppm UN/ECE European Union Joint Venture Ministry of Public Security Ministry of Science and Technology Original Equipment Manufacturer parts per million United Nations/Economic Commission for Europe Automotive and Automotive Components Working Groups 199