The Ministry of Industry and Information Technology Issued Several Policies, Offering Major Development Opportunities for Automobile Industry
The Central Economic Working Conference proposed that the economic work this year should be stabilized in the top priority and progress could be sought while the stability is maintained. Industry is the main component of the national economy. A stable industry leads to a stable economy. In order to implement the decision and deployment of the Party Central Committee, the National Development and Reform Commission, the Ministry of Industry and Information Technology together with relevant departments, jointly issued the Several Policies on Promoting the Steady Growth of the Industrial Economy (hereinafter referred to as Several Policies), proposing 18 policies and measures to stabilize industrial growth are of great significance for boosting market confidence and stabilizing industrial growth, and many of these policies and measures will play an important supporting role in the development of the automobile industry.
I. The automobile industry is an important component of China’s national economy
The automobile industry is always a pillar industry of China’s national economy. From the perspective of production, the automobile industry has a high degree of correlation and a strong driving effect. It is is closely related to industries such as steel, non-ferrous metals, rubber, petrochemicals, plastics and glass in the upstream raw material link, accompanied with industries such as machinery and electronics, CNC machine tools and automatic production lines in the midstream manufacturing link and also closely associated with service industries such as logistics, finance, insurance, sales and advertisement in the down-stream link. Particularly in recent years, with the advancement of science and technology, the automobile has been deeply integrated with emerging fields such as new materials, big data, new energy and chips, driving the rapid development of high-tech industries. From the perspective of consumption, the total retail sales of automotive consumer goods account for about 10% of the national total retail sales of consumer goods. Promoting the consumption of automotive products plays an important role in expanding domestic demand and building an internal economic cycle in China. From the comprehensive realization of a well-off society to the construction of a powerful modern socialist country, the expansion of automobile consumption and the construction of an automobile society are both important signs and the goals that people yearn for a better life. The generalization of cars on a large scale has improved the life quality of residents, met people's growing needs for a better life, promoted China's urbanization development process, and brought more impetus and vitality to China's economic development.
In 2021, in the face of unfavorable factors such as the shortage of chips and the continued high price of raw materials, the entire industry overcame the difficulties and took the initiative. The annual automobile production and sales showed a trend of steady growth. The completed annual automobile production and sales reached 26.082 million and 26.275 million vehicles respectively, with a year-on-year increase rate of 3.4% and 3.8% respectively, ending the situation of decline in three consecutive years since 2018. While the production and sales of automobiles returned to the growth, the optimization and upgrading of the market structure also showed new highlights: The new energy vehicle market showed the explosive growth, and the product quality and market recognition have been improved in an all-round way; the market share of Chinese brand passenger vehicles increased significantly, and the market share was close to the best level in history; the trend of consumption upgrading was obvious, and the proportion of high-end brand passenger car sales increased significantly; automobile exports showed a rapid growth on the year-on-year basis, and the export volume exceeded 2 million for the first time. China's automobile industry showed strong development resilience and development momentum, achieving a good start in the "14th Five-Year Plan", and contributed an important force to the stable growth of China's industry.
II. Important supporting role of Several Policies for the development of China's automobile industry
The Several Policies puts forward 18 supporting policies in five aspects: financial taxes, financial credit, supply assurance and price stability, investment, foreign trade and foreign investment, land use, energy use and environment, which will actively promote the steady growth of the industrial economy and strongly support the stable and sound development of the automobile industry in China.
(I)The extension of related preference policy further promotes the rapid development of new energy vehicles in China
At present, under the trend of "electrification, networking, intelligence" and "low carbonization", the automobile industry is actively embracing a new round of technological revolution, and new energy vehicles will become the key development direction of China’s automobile industry. In recent years, China has implemented a number of policies and measures to support the development of new energy vehicles. Since September 1, 2014, China has implemented the new energy vehicle purchase tax exemption policy, which has been implemented for more than seven years. This policy reduces the purchase costs of new energy vehicles, and has played an important role in promoting new energy vehicles that are still at the early stage of development, have high battery costs, and have insufficient competitive advantages compared with traditional vehicles. In addition, since 2018, China has implemented a vehicle and vessel tax reduction policy for some energy-saving and emission-reduction vehicles: For passenger vehicles with a displacement of less than 1.6 liters, the vehicle and vessel tax to be charged will be halved. For pure electric commercial vehicles, plug-in hybrid vehicles, and fuel cell commercial vehicles, the vehicle and vessel tax will be exempted, further reducing the costs of using new energy vehicles. Meanwhile, China subsidizes and rewards the construction and operation of charging infrastructure, encourages the development of charging facilities and provides a basic guarantee for the development of new energy vehicles. The Several Policies proposes that the subsidies for the purchase of new energy vehicles, subsidies for charging facilities, and preferential policies for vehicle and vessel tax reduction and exemption will be continuously implemented in 2022. The continuous implementation of these policies will effectively ensure the stable development of China's new energy vehicle industry.
(II) Promoting the transformation and upgrading of the automobile industry and ensuring the smooth operation of the industry
Up to now, remarkable achievements have been made in China’s automobile industry development, but the production capacity is still mainly concentrated at the low end, and the high-end supply is insufficient. It is difficult to truly meet the escalating consumption needs of domestic consumers. The large but non-strong production and supply capacity has not been fundamentally resolved. At present, China's automobile industry is going through a stage from the low end to the high end. The "14th Five-Year Plan" period is a critical period for the transformation, upgrading and high-quality development of China's automobile industry. It will be the only way to obtain the momentum of sustainable development in the future by accelerating the completion of adjustment and transformation, providing more high-quality products and continuously meeting the new requirements of consumption upgrading. The Several Policies proposes continuously leading the financial system to surrender part of the profits to the real economy based on the difficulty and high cost of financing in the manufacturing industry, strengthening the assessment and restraint of banks to support the development of the manufacturing industry and promote the continuous rapid growth of medium and long-term loans in the manufacturing industry. The implementation of these policies will effectively guarantee the financing needs for the transformation and upgrading of the manufacturing industry, including the automobile industry, and boost the high-quality development of the automobile industry.
(III) Smooth international logistics guarantees the automobile exports
For nearly a decade, China's automobile exports have hovered around 1 million units. In 2021, thanks to the continuous recovery of the global economy and the continuous improvement of the competitiveness of Chinese-brand automobiles, the Chinese automobile manufacturers exported a total of 2.015 million vehicles, exceeding 2 million for the first time, with a year-on-year increase rate of 100%. A historic leap has been achieved in the export of China's automobile industry and China's automobile industry is ushering in a new stage of global development. However, due to factors such as the pandemic, the freight rates in the international market have skyrocketed since 2020. The high export logistics costs and insufficient transportation capacity of complete vehicle manufacturers have greatly increased the overseas operating costs of enterprises and brought huge operating pressure to the complete vehicle exporters. High freight rates have also led to delayed delivery of orders, loss of customers, and shutdown of overseas factories for complete vehicle manufacturers, which in turn affects their market share in these regions, resulting in the failure of automobile companies to fully release their export growth potential and hindering Chinese brand automobiles from entering the international market. The Several Policies proposes to further unblock international transportation, strengthen the supervision of the charging behavior of relevant entities in the shipping market, encourage foreign trade enterprises to sign long-term agreements with shipping companies, increase the frequency of China-Europe trains, and guide enterprises to expand westward exports through China-Europe trains. This series of safeguard measures will facilitate the smooth international logistics, ease pressure on the automobile exporters, and provide policy assistance at the critical moment when Chinese brand automobile products are expanding into the international market.
(IV) Attracting high-quality foreign capital to help the automotive industry strengthen and supplement the chain
automobile industry has always been an industry open to the outside world. Since the 1980s, joint venture cooperation with foreign capital have been opened. At present, the joint venture brands represented by German, Japanese, and American brands have been basically formed on the domestic automobile market. Chinese brand automobiles are also at a sound development stage. In recent years, the opening up pace of China's manufacturing industry has been accelerated. On January 1, 2022, the relevant restrictions on the joint venture shareholding ratio of complete vehicles in China have all been removed, and the automobile industry has achieved a full opening to the outside world. Now Chinese automobile enterprises are completely competing with the foreign brands at the global automobile stage. At the same time, China currently has basically formed the development direction of "strictly controlling the production capacity of newly added traditional fuel vehicles, actively promoting the sound and orderly development of new energy vehicles and focusing on building a smart vehicle innovation and development system". Therefore, in reasonable utilization of foreign capital, we shall also pay attention to guiding foreign capital to invest more in the fields of new energy, intelligent network connection and automotive-grade chips, etc. and constantly improve China's automobile industry chain. In the foreign capital utilization, Several Policies proposes to take multiple measure at the same time to support the introduction of foreign investment in the manufacturing industry, strengthen the guarantee for major foreign funded projects of manufacturing, expedite the revision of Catalogue of Industries Encouraged for Foreign Investment, and guide more foreign capital to be invested in high-end manufacturing fields. The document will play an important role in promoting foreign investment attraction and reasonable utilization of foreign capital in China's automobile industry.
The sound and orderly development of the automobile industry is inseparable from the support of national policies. The promulgation and implementation of the Several Policies will form a policy synergy for all localities and departments to promote the steady growth of the industrial economy, and convoy the sound development of the industry and automotive industries. The association will give full play to the role of the bridge connecting government departments and industrial enterprises, strengthen policy publicity, promote effective implementation, boost enterprise expectations, promote the steady improvement of the automobile industry, and make greater contributions to supporting the steady growth of the industrial economy. (Source: Operation Monitoring and Coordination Bureau of the Ministry of Industry and Information Technology)