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China limits production of gasoline, diesel cars

Nissan displayed its Sylphy electric car at the Beijing Motor Show. Photo: Reuters

The National Development and Reform Commission, China's top economic planner, has issued a new automobile industry policy to limit the production capacity of gasoline and diesel-powered vehicles and standardize the operation of electric car makers.

According to the Management Regulation for Investment in the Automobile Industry, which will take effect in January 2019, China will ban the establishment of new, independently run automobile enterprises manufacturing gasoline and diesel-fueled cars and order the existing automakers which want to expand production capacity to meet the national standards for average fuel consumption.

The move is seen as a major step in the Chinese government's efforts to curb the production capacity of fossil-fuel vehicles and combat the chronic pollution problems.

Earlier this year, the Chinese government said that it was studying a timetable for the suspension of production and sales of gasoline-powered cars in the country, as part of its plan to increase the share of non-fossil fuels as part of its primary energy consumption to about 20 percent and peak greenhouse gas emissions by 2030.

The new industrial policy also sets higher requirements for new energy car producers, who are barred from blindly expanding production capacity and are encouraged to develop advanced manufacturing technologies like battery technology.

The policy shift comes as the Chinese government phases out the cumbrous subsidies for new energy cars. The existing system of subsidies for new energy cars has created a situation in which some automakers have cheated on the government's program to subsidize electric and plug-in hybrid vehicles without focusing on producing high-quality new energy cars.

For automakers wanting to establish new electric car projects, the new policy requires that the rate of capacity utilization in the last two years should be higher than the industry average and the new project should achieve a certain scale. The new policy also sets technological maturity as a top priority, only allowing enterprises which have professional R&D teams and verified patents to set up new electric car project.

Industry experts predict that the Chinese government would end the subsidies for new energy cars in 2020 and raise the technological threshold for new energy car producers.

Just weeks ago, the Ministry of Industry and Information Technology released a regulation allowing car designers to cooperate with car manufacturers. It means that subcontracting between automotive startups and traditional car manufacturers is possible in the near future.

Currently, many automotive startups in China are suffering from insufficient production capacity, and subcontracting can solve this problem. Such cooperation can also guarantee the quality of cars designed by those startups.

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