"Double Integral" New Deal: Can The New Energy Vehicle Market Hit Bottom?

In June 22nd, the 5 departments of the Ministry of industry, the Ministry of Finance and the Ministry of Commerce jointly issued a revised "parallel management method of average fuel consumption and new energy vehicle integration" for passenger car enterprises (hereinafter referred to as the "double integral" new deal).

The "double integral" policy introduced in September 2017 is an important measure to promote the development of new energy vehicles in China. It attempts to establish a market mechanism for promoting the coordinated development of energy saving and new energy vehicles through the establishment of integral trading mechanism.

To put it simply, according to the "double integral" policy, the average fuel consumption of all cars sold by car companies must reach a certain standard of energy saving. If the standard exceeds the standard, enterprises must use new energy sources to offset the average fuel consumption negative points by producing new energy vehicles. If it is not enough to offset, the need to buy new energy integration from other enterprises is offset by trading. At the same time, the integration of new energy vehicles needs to meet a certain percentage of assessment. If the new energy fails to meet the target, the negative integral will be generated.

The Ministry of industry and Commerce said that in the implementation of the "integration method", there are many problems such as the urgent need to update the technical standards, the insufficient investment in the energy saving technology of fuel vehicles, the imbalance between supply and demand in the integral trading market. In early 2019, the Ministry of industry and Commerce launched the revision of the "integration method".

Specifically, the revised "double integral" new policy has increased the measures to guide the traditional passenger cars to save energy, and has improved the integral flexibility measures of new energy vehicles.

"The new deal has improved the fuel consumption guidance measures for traditional energy passenger vehicles and the integrated flexibility measures for new energy vehicles. New energy vehicles will have sustainable high growth opportunities in the second half of this year and next year." Cui Dongshu, Secretary General of the National Federation of the Hong Kong Federation of trade unions, said.

Energy saving and new energy vehicles

The new policy of "double integration" has made many amendments to the existing methods.

The double integral New Deal clearly pointed out that the proportion of new energy vehicles in 2021, 2022 and 2023 were 14%, 16% and 18% respectively. According to the Ministry of industry and commerce, the integral ratio is based on comprehensive consideration of the balance between the positive and negative integral of the industry, the fifth stage fuel consumption standards and the development goals of the established industry. According to this requirement, we can basically achieve the goal of achieving the goal of "average fuel consumption per passenger vehicle up to 4 litres / 100 km by 2025, and 20% of the total production and sales of new energy vehicles".

At the same time, the "double integral" new policy revised the new energy passenger vehicle integral calculation method, demanding stricter.

Previously, the integration of pure electric vehicles (BEV) was mainly determined according to the mileage of the mileage, while the new deal considered the factors such as vehicle endurance level, vehicle power consumption level and battery energy density. BEV's bike score has also been greatly reduced, with a reduction of more than 50%.

The plug-in hybrid electric vehicle (PHEV)'s bike score is 20% to 1.6 points from the previous 2 points. Cui Dongshu believes that the reduction of PHEV score is smaller, reflecting the reasonable support for PHEV, so that PHEV can get more reasonable development.

It is worth noting that the "double integration" new policy encourages the increase of R & D investment in the field of traditional fuel energy, so as to achieve the coordinated development of energy conservation and new energy vehicles. The "double integral" new policy points out that the enterprises that produce / supply low fuel consumption models will give preferential treatment when calculating the integral value of new energy vehicles.

The so-called "low fuel consumption passenger vehicle" refers to the traditional fuel passenger vehicle whose comprehensive fuel consumption does not exceed the average fuel consumption required by the enterprise in the accounting year.

According to this policy, the development of hybrid vehicles with high price but more energy saving will play a certain role. In terms of mixing technology, leading TOYOTA, Nissan and other Japanese car companies will benefit from this.

"This policy explicitly encourages the support of traditional fuel vehicles for energy conservation, which is to prevent excessive emphasis on developing pure electric vehicles while ignoring the traditional vehicle fuel consumption problem. This has been outstanding in the past two years. " Cui Dongshu said.

In 2019, the "double integration" policy was the first time for all passenger vehicle enterprises to implement the new energy vehicle integration ratio of 10%. Therefore, the integration of new energy vehicles is negative for the first time. According to the "double integral" in 2019 published by the Ministry of industry and commerce, in 2019, the number of new energy vehicles in the domestic passenger vehicle production enterprises was 383.09 points and the negative integral was 80.69 ten thousand points. Among them, the top ten of the new energy vehicles are the independent brands, while the top ten of the new energy vehicles of the passenger car enterprises are almost large joint ventures.

As the joint venture launched new energy vehicles in China, the rhythm of the new energy vehicles is relatively slow, and most of the pure electric vehicles launched are mainly "oil to electricity" models, and the market performance is general. The introduction of the "double integral" new policy will urge joint venture car companies to speed up the layout of electric vehicles in China. On the other hand, the encouragement of traditional fuel cars can reduce the integral pressure of joint venture car enterprises to a certain extent.

Of course, the reason why some car companies are not enthusiastic about new energy vehicles is that over the past two years there has been a combination of oversupply and low price. However, with the "double integration" new policy, the proportion of new energy vehicles will be further improved, and the reduction of bicycle scores will be improved. The situation of oversupply will be significantly improved in the integral market, and the price of integral trading will probably rise, and the transaction price will also fully reflect the market value.

This is undoubtedly good for new energy vehicles, such as BYD and Beiqi new energy companies, which are conducive to easing the financial pressure due to the new energy subsidies.

New energy vehicles hit bottom rebound?

A more stringent "double integration" policy will no doubt force enterprises to increase the R & D and production of new energy vehicles. However, the trend of China's new energy vehicle market is not optimistic at present.

Thanks to the improvement of domestic epidemic situation and the promotion of consumption policies by local governments, the passenger car market in the 4 and May has been noticeably warmer, but the new energy vehicle market is still lingering in the trough.

China Automotive Industry Association data show that in the first half of May this year, China's total sales of new energy vehicles were only 289 thousand, down 38.7% compared to the same period last year. Among them, the decline rate of pure electric passenger car is as high as 41.3%, and the total sales volume is only 195 thousand.

Cui Dongshu believes that the introduction of the "double integral" new policy will stimulate car companies' enthusiasm for new energy vehicles in the second half of the year. With more competitive products coming to the market and consumers' recognition of new energy vehicles, the market is expected to return to high growth.

However, the production of more new energy vehicles by car companies does not mean that they can sell more new energy vehicles. The key is to boost market demand.

Ye Shengji, chief engineer and Deputy Secretary General of the China Automobile Industry Association, believes that the integral proportion of the new "double integral" policy is based on the calculation of production volume. There may be some hidden dangers or improvement of space. It is not excluded that some enterprises blindly produce new energy vehicles without market demand in order to meet the requirements of integral proportion, resulting in social cost waste.

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