The mid- to long-term development plan of the automobile industry may become a breakthrough opportunity for domestic brands

Wu Songquan, director of the Policy Research Center of the China Automotive Technology and Research Center, said that the main background of the "Plan" is to implement the "Made in China 2025" issued in May 2015. New energy, intelligent network connection and energy-saving vehicles are the development priorities identified by "Made in China 2025". "In the period of industrial transformation, this may be an opportunity for independent brands to make breakthroughs."

"Improve the domestic and foreign investment management system and orderly relax the restrictions on the equity ratio of joint ventures." This is the first time that my country has mentioned that it will relax the restrictions on the equity ratio of joint ventures since the "Automotive Industry Policy" in 1994. Cui Dongshu, secretary-general of the National Passenger Car Market Information Joint Conference, believes that "this is mainly related to the investment agreement negotiations between China and the United States."

Yesterday (April 25), the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the Ministry of Science and Technology jointly issued the "Medium- and Long-Term Development Plan for the Automobile Industry", which clearly put forward the overall goal of "striving to become a powerful automobile country after ten years of efforts", and proposed six sub-goals, six key tasks and eight key projects for this purpose.

In this regard, China Economic Net reporters immediately interviewed industry experts and scholars to learn about the key content and background of the "Plan".

Clarify the orderly liberalization of joint venture equity ratios

It is worth noting that the "(i) Deepening of institutional and mechanism reform" in "IV. Safeguard Measures" of the "Plan" mentions "improving the domestic and foreign investment management system and orderly relaxing restrictions on joint venture equity ratios." This is the first time that my country has mentioned relaxing restrictions on joint venture equity ratios since the "Automotive Industry Industrial Policy" set restrictions in 1994, so it is of epoch-making significance.

The automotive industry has been arguing over whether the equity ratio of joint ventures should be liberalized. One side believes that the equity ratio restrictions should be lifted, which will promote more comprehensive competition in my country's auto market; the other side believes that they should not be lifted in order to protect my country's own brand auto companies. At the 2016 Summer Davos World Economic Forum, Xu Shaoshi, director of the National Development and Reform Commission, said that "the government is considering removing the 50% foreign shareholding limit", which once again triggered heated debate among all parties.

It is understood that in the China-US Investment Agreement (BIT) negotiations that began in 2008, the equity ratio of joint ventures was also considered an important negotiation topic. At the G20 Hangzhou Summit held in 2016, China and the United States confirmed that "the bilateral investment agreement negotiations have achieved significant results..."

In an interview with reporters, Cui Dongshu, secretary general of the National Passenger Car Market Information Joint Conference, said, "The 'orderly liberalization of equity ratios' in this 'Plan' is mainly related to the investment agreement negotiations between China and the United States."

Wu Songquan, director of the Policy Research Center of the China Automotive Technology and Research Center, also told China Economic Net that the Sino-US BIT negotiations last year attracted great attention from the industry. At present, major developed countries such as Europe, the United States, Japan, South Korea, as well as ASEAN, India, Brazil, etc., have not set equity ratio restrictions for foreign investment.

The restrictions on shareholding ratios are mainly to protect large state-owned enterprises. The "orderly liberalization" proposed in this "Plan" may bring pressure to the Chinese side of most joint ventures. "The government has said that it will gradually liberalize, which requires us to develop our own brands as soon as possible," Wu Songquan further said.

In December 2016, the National Development and Reform Commission and the Ministry of Commerce, together with relevant departments, revised the 2015 edition of the "Catalogue of Industries for Guiding Foreign Investment" and solicited public opinions. One of the main features and changes of the revision of this "Catalogue" is to continue to expand opening up to the outside world. In the manufacturing field, in the manufacturing of complete vehicles and special vehicles, although the original "Chinese equity ratio is not less than 50%" is still maintained, "the same foreign investor can establish two (including two) or less joint ventures in China to produce similar (passenger vehicles, commercial vehicles) complete vehicle products"; however, the equity ratio restrictions have been lifted in rail transportation equipment, automotive electronics, new energy vehicle batteries, motorcycles, etc. This also shows, to a certain extent, my country's gradually open mentality in the manufacturing field.

New energy and intelligent networking are opportunities for independent breakthroughs

The "Plan" released yesterday also highlighted the development of new energy vehicles, intelligent networked vehicles, and energy-saving vehicles, and identified them as three key breakthrough areas. The Ministry of Industry and Information Technology's interpretation of the "Plan" is that the core of the "Plan" is to expand and strengthen Chinese brand cars and cultivate internationally competitive corporate groups. In terms of route, new energy vehicles and intelligent networked vehicles should be used as breakthroughs to lead the transformation and upgrading of the entire industry; in terms of measures, they mainly include optimizing the industrial development environment, promoting collaborative innovation within and outside the industry, and promoting the global layout and internationalization of the industrial system.

Wu Songquan said that the main background of the "Plan" is to implement the "Made in China 2025" issued in May 2015. New energy, intelligent networking and energy-saving vehicles are the development priorities identified in "Made in China 2025".

Cui Dongshu also expressed a similar view. In an interview with a reporter from China Economic Net, he said, "The Plan is a trend document for the future development of the automotive industry and has a guiding role in the development of the industry; to achieve this goal, it requires the joint efforts of enterprises and the entire industry."

"In a period of industrial transformation, this may be an opportunity for domestic brands to make a breakthrough. Once significant achievements are made in these three areas, especially in the fields of new energy vehicles and intelligent connected vehicles, domestic brands may achieve an overall breakthrough," Wu Songquan continued.

It is worth noting that the “Made in China 2025” plan did not directly define the total sales target of new energy vehicles in 2020 and 2025. With the release of the “Plan”, this target was officially determined.

The plan clearly states that by 2020, the annual production and sales of new energy vehicles will reach 2 million, the specific energy of power battery cells will reach more than 300 watt-hours/kilogram, and strive to achieve 350 watt-hours/kilogram, the system specific energy will strive to reach 260 watt-hours/kilogram, and the cost will be reduced to less than 1 yuan/watt-hour. By 2025, new energy vehicles will account for more than 20% of automobile production and sales, and the specific energy of power battery systems will reach 350 watt-hours/kilogram.

In terms of intelligent networked vehicles, the Plan points out that by 2020, the rate of new car assembly with DA (driving assistance), PA (partial automatic driving), and CA (conditional automatic driving) systems will exceed 50%, and the rate of assembly with networked driving assistance systems will reach 10%, meeting the needs of smart transportation city construction. By 2025, the rate of new car assembly with DA, PA, and CA will reach 80%, of which the rate of new cars with PA and CA levels will reach 25%, and highly and fully automatic driving vehicles will begin to enter the market.

In addition, in terms of energy-saving vehicles, the "Plan" also proposes that by 2020, the average fuel consumption of new passenger cars will reach 5 liters per 100 kilometers, and the application rate of energy-saving technologies such as idle start-stop will exceed 50%; by 2025, the average fuel consumption of new passenger cars will be reduced by 20% compared with 2020, and energy-saving technologies such as idle start-stop will be widely used.

From the Ministry of Industry and Information Technology's interpretation of the "Plan", we can understand that the core of the "Plan" is to expand and strengthen Chinese brand cars and cultivate internationally competitive corporate groups. In terms of route, new energy vehicles and intelligent networked vehicles should be used as breakthroughs to lead the transformation and upgrading of the entire industry; the measures mainly include optimizing the industrial development environment, promoting collaborative innovation within and outside the industry, and promoting the global layout and internationalization of the industrial system.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.