Category: Policy

China will implement the China 6b emissions standard on July 1, although some models will be given a six-month sales transition period.

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Chinese authorities confirmed in an official document that a new emissions standard will go into effect on July 1 as scheduled, but provided an additional six-month sales period for some internal combustion engines (ICE) vehicles based on the existing standard.

In a joint announcement issued today, five ministries, including China's Ministry of Industry and Information Technology and Ministry of Ecology and Environment, said that China will implement the China 6b emissions standard nationwide starting July 1, when the production, import and sales of vehicles that do not meet the standard will be banned.

For some of the models with "monitoring only" results in the Real Driving Emissions (RDE) test report, they will be given a six-month sales transition period until December 31, 2023, according to the announcement.

The move is to implement the requirements of the China 6 emissions standard, as well as China's policy to stabilize and expand vehicle consumption, the announcement said.

China released the final rule for Stage 6 light-duty vehicle emission limits and measurement methods (China 6 standard) in December 2016, a new standard that combines best practices from European and US regulatory requirements.

The standard is being implemented in two phases, with the 6a standard already taking effect on July 1, 2020, and the 6b standard coming into effect on July 1, 2023.

In March, price wars were the most talked about topic in China's auto industry, and the impending entry into force of the 6b standard was seen as an important factor.

On March 23, China's Auto Dealers Chamber of Commerce (CADCC) called on regulators to delay the start of implementation of the China 6b emissions standard.

Since the beginning of the year, the CADCC has received feedback from many auto dealer groups that they are under significant pressure to survive the impending full implementation of the China 6b emissions standard.

A study covering nearly 100 dealership groups showed that nearly 98.89 percent of them strongly recommended that China delay implementation of the China 6b emissions standard until January 1, 2024, the CADCC said at the time.

Notably, following the release of the latest announcement, the China Association of Automobile Manufacturers (CAAM) said in an article on its website that the new policy would help the Chinese auto market recover steadily.

Since the release of the China 6 standard, most car companies have been developing and producing products in accordance with the standard, which amounts to an early implementation of the China 6b standard, the CAAM said, adding that to date, more than 95 percent of light-duty vehicles have met the China 6b standard.

As of the end of January, there were more than 1.89 million vehicles in stock in China that did not meet the RDE requirements, and if purchased parts are included, then there are more than 2 million such vehicles in stock, the CAAM said.

The CAAM submitted a proposal for a six-month sales transition period for light-duty vehicles with "monitoring only" RDE test results to ease the difficulties faced by China's auto industry, according to the article.

"We hope that after the release of the policy, companies will uphold the principle of fair market competition, plan their layout rationally and complete the switchover and sale of their products as soon as possible," the CAAM said.

China's transition to new emission standard: How will this affect auto market?

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Analysts believe the impact of the transition will not last long and will have less of an impact than the last switch in standards in 2019.

The recent price war in China's auto market has put a new emission standard that will come into effect in a few months' time in the spotlight.

CnEVPost obtained the views of several local analysts, which provide references on what impact that new emission standard will have on the auto industry.

As background, China released its final rule for stage 6 light-duty vehicle emission limits and measurement methods (China 6 standard) in December 2016, a new standard that combines best practices from European and US regulatory requirements.

The standard is being implemented in two phases, with the 6a standard already taking effect on July 1, 2020, and the 6b standard coming into effect on July 1, 2023.

CITIC Securities: Impact will not last long

From July 1, the China 6b standard will be fully implemented, which is more stringent in terms of emission standards and testing criteria compared with China 6a, especially the new RDE test that detects the actual driving emissions of the car, said Yin Xinchi, chief analyst of the auto industry at CITIC Securities, in a research note today.

There are still some old models on the market that do not meet China 6b emission regulations, and the de-stocking of these models may have an impact on the production, sales and prices of the auto industry, according to the note.

However, CITIC Securities also pointed out that the duration of the impact of the transition will not be too long, and the degree of impact will be significantly smaller than the switch of China's auto industry emission standard from China 5 to China 6a in 2019.

China Securities: Essence is the weakening competitiveness of JV brands

China's passenger car market will begin implementing the stricter China 6b emissions standard on July 1, which could exacerbate the pressure to de-stock older models, China Securities automotive industry chief analyst Cheng Siqi's team said in a research report today.

This may intensify the profitability pressure among car companies in the short term, but behind it reflects the further erosion of the competitiveness of second- and third-tier joint venture brands, according to the team.

Against the backdrop of rising market share of local Chinese brands and the ongoing electrification transformation of China's auto market, these joint venture brands have been forced to start cutting prices and de-stocking, the team said.

Huaxi Securities: Several regions have already completed the standard switch

The China 6b emissions standard will go into effect on July 1, and overall, this will have limited material impact on the auto industry, Huaxi Securities analyst Cui Yan's team said in a research note today.

The window for that transition is long, and several regions have already completed the transition ahead of schedule, such as Beijing, Shanghai, Guangzhou and Tianjin, according to the team.

Car companies previously experienced the pain of the transition from China 5 to the China 6a standard and this time are expected to prepare beforehand, the team said.

Inventories in the Chinese auto industry are currently at an above-average level, but the vast majority of inventories have been accrued since April 2022, according to the team.

The team believes the recent wave of price cuts in the Chinese auto industry is largely due to the penetration of new energy vehicles (NEVs) reaching about 30 percent and the willingness and ability of some leading car companies to grab market share.

The China automobile dealers VIA (Vehicle Inventory Alert Index) stood at 58.1 percent in February, up 2.0 percentage points from a year ago but down 3.7 percentage points from January, still sitting above the 50 percent mark, according to China Automobile Dealers Association data released earlier this month The data.

For the VIA, a value below 50 percent is a reasonable range, and a higher reading means lower market demand and greater inventory pressure, according to the index's description.

If you'd like to learn more about the China 6 standard, here's a report from the International Council on Clean Transportation, a nonprofit organization.

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Authorities in Hubei province have joined forces with local automakers this month to offer subsidies for car purchases of up to RMB 90,000 yuan ($13,000) for some models.

The post Automakers in central China's Hubei offer hefty subsidies as sales pressure mounts appeared first on CnEVPost.

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