Analysis of Typical Automakers’ Strategies for Meeting the Dual-Credit Regulations Regarding CAFC and NEVs

Abstract

The parallel corporate average fuel consumption (CAFC) and new energy vehicle (NEV) credit schemes that have been introduced by the Ministry of Industry and Information Technology of China is an innovative attempt to simultaneously regulate conventional gasoline vehicles (CGVs) and NEVs in the passenger vehicle sector that is expected to function as a long-term management mechanism for CGVs to be more energy-efficient and NEVs to be well-promoted. This will have a significant impact on trends in China’s automotive industry and automakers’ business decisions. Taking the cases of four typical automakers with different levels of average fuel economy in their CGVs and advanced NEV production, scenario analysis has been applied to generate these automakers’ alternatives in relation to compliance with the dual-credit regulations in force from 2017 to 2020 based on the Interim Measures on the Joint Management of CAFC and NEV Credits (Draft). These automakers’ alternative approaches to compliance are compared. Further, in view of the financial losses as a result of halted production if they fail to comply, the values of CAFC and NEV credits and corresponding influencing factors are analyzed from the automakers’ perspective. Finally, the most cost-effective compliance strategies for these automakers are summarized and suggested improvements in the regulations are proposed for the government.