MIIT proposes punitive new ICE energy efficiency standards
Regulators are hiking up auto fuel efficiency standards.
On August 21, the industry regulator (MIIT) released draft mandatory fuel efficiency standards for internal combustion engine (ICE) and battery electric vehicles (EVs).
Some context: MIIT has gradually ramped up ICE fuel efficiency requirements to reduce pollution and dependence on oil imports.
But the new proposed standards mark an unexpected escalation in these efforts.
- Mini and heavy passenger ICE vehicles (<1.09 metric tons and >2.5 metric tons, respectively) would require ultra-stringent fuel efficiency levels of 2.57L and 4.7L/100km, respectively.
- Rates for other vehicles would be determined depending on weight.
- Most models on the market wouldn't be able to meet such standards.
This doesn’t constitute an outright ban on ICEs that fail to meet the standards.
- Instead, manufacturers must purchase carbon credits under China’s “dual credit” system – a mechanism designed to promote auto electrification.
Efficiency standards will also extend to EVs – with specific rates based on vehicle weight.
- Industry estimates suggest that 40% of existing EV models would need upgrades to meet these requirements.
Get smart: EVs are rapidly eroding ICE market share. If passed in their current form, these punitive new standards will tilt the scales further in EVs' favor and hurt ICE-dependent legacy automakers.
What happens next: The draft regs are open for public comment until October 20.
- MIIT will then publish an updated version of the regulations – which could take several months.
Get smarter: The next ~8 weeks is prime time for concerned MNCs and investors to utilize advocacy channels and try to water down the strict efficiency requirements.
- However, car makers will continue with fierce lobbying efforts behind the scenes even after the public commenting window closes.