Policy update

The second phase of China’s new energy vehicle mandate policy for passenger cars

The second phase of China’s Parallel Management Regulation for Corporate Average Fuel Consumption and New Energy Vehicle Credits began on January 1, 2021. The policy regulates how both corporate average fuel consumption (CAFC) credits and new energy vehicle (NEV) credits are calculated and traded. This paper describes the contents of the Phase 2 policy and highlights the differences from the Phase 1 policy, which was in effect through the end of 2020. In China, NEVs include battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell electric vehicles (FCVs). Additionally, in early February 2021, China announced a revised process for accounting for credits generated in 2020, and this paper includes details of that announcement.

The general structure of the Phase 2 policy remains unchanged from Phase 1. Under Phase 2, the NEV credit percentage targets for car manufacturers increase from 14% to 18% between 2021 and 2023, and fuel-efficient conventional fuel vehicles are included as a compliance option. Additionally, the Phase 2 policy reduces the maximum per-vehicle NEV credit and tightens the technical requirements for determining the credit value. There are more multipliers in Phase 2 than there were in Phase 1, and Phase 2 includes a separate electric range multiplier; this means that electric range plays a double role in the per-vehicle NEV credit determination. The table below shows NEV credits for two models used as examples.