This article is from WeChat public account: travel a passenger (ID: carcaijing) , author: Chen Liang, from the title figure: vision China

Falling and falling has become the main theme of China’s new energy automobile industry since July.

The latest data from China Automobile Industry Association shows that in October this year, China’s new energy vehicle sales ushered in the fourth drop. In October, China’s new energy vehicle output was 83,000, a year-on-year decrease of 34.5%; sales volume was 75,000, a year-on-year decrease of 45.6%. The rapid decline in sales has put pressure on companies in the Chinese new energy vehicle industry chain.

When China’s new energy vehicle sales encountered Waterloo, the European and American governments continued to invest a lot of policy support for their new energy vehicles.

U.S. Democratic Senator Leader Schumer (Chuck Schumer) proposed up to 454 billion to encourage car owners to change cars, build charging stations and remodel factories US dollar subsidy plan. The proposal has been supported by unions, carmakers and the largest environmental group in the United States. Germany will increase subsidies for the purchase of new energy vehicles, up to a maximum of 6,000 euros, a 50% increase. Supported by the policies of European countries, the sales of new energy vehicles in Europe in the third quarter exceeded 330,000, while the sales of new energy vehicles in China in the third quarter were less than 250,000. European new energy vehicle sales surpass China, which is less in recent yearsSome phenomena.

At the time of the transformation and upgrading of the automotive industry, the Chinese government has introduced a series of industrial policies through top-level design to improve the new energy vehicle industry chain and achieve strategic leadership. Europe and the United States and other countries have also begun to follow China’s early successes.

As the world’s largest new energy vehicle market, it is imminent how China can maintain its first-mover advantage and how to survive the era of no subsidies.

As Chen Qingtai, chairman of the China Electric Vehicles Hundred Talents Association, said, after the subsidy is fully withdrawn, industrial policies cannot be completely withdrawn, and a smooth transition must be guaranteed.

For the new energy automobile industry that is still in its growth stage, the government should give different policies to different development periods to support the ecological strengthening of China’s automobile industry, rather than simply cutting it across the board. Even a century-old automobile powerhouse like Germany is still relying on various policies to promote the healthy development of automobile ecology.

Europe and the United States prepare to surpass China with subsidies

Industrial policy is not Chinese original. Its origin is the United States, which advocates liberalism and a market economy.

Markets sometimes fail due to externalities or natural monopolies. This means that in some cases the market equilibrium may not be the socially optimal equilibrium, in which case a well-designed industrial policy is desirable. Alexander Hamilton, the first Treasury secretary after the founding of the United States, graduated from Columbia UniversityOn officially put forward the need to support the development of the manufacturing industry through government action.

In the early stage of industrial development, a certain degree of subsidy provided by the government is necessary to reduce the cost of entry for enterprises. Many countries have similar practices.

For example, the initial return on investment of the new energy automobile industry is low, and entrepreneurs refuse to enter. At this time, the government must be the first impetus for the transformation of automotive power technology. In the United States and Europe, countries are the first driving force of the new energy vehicle industry.

Electrification has strong positive externalities, one is to reduce carbon emissions; the other is to change the energy structure; the third is informationization and automation based on electricity to achieve docking with the future.

These externalities cannot be converted into direct benefits for the enterprise, but society has an urgent need for this. Therefore, in order to obtain these positive externalities, the government must be the first impetus.

If it develops according to the market, it may be done in 20 or 30 years. Such a long time is not conducive to environmental protection.

At present, the Paris Agreement alone cannot promote the willingness of all enterprises and consumers to do it. They must be carrots + sticks together. At this time, giving subsidies is the easiest way to achieve industrial development and achieve ambitious goals. The easiest way to grow any industry is to provide funding. For example, the German government is taking steps to increase policy support for new energy vehicles. Latest documents revealed that Germany plans toIncrease new energy vehicle subsidies from 021 to 2025. The subsidy for new energy vehicles with a sales price of not more than 40,000 Euros increased by 50%, and the subsidy for new energy vehicles with a price not more than 65,000 Euros increased by 25%.

In order to achieve the goal of 10 million new energy vehicles and 1 million charging piles in Germany in 2030, the Merkel government has to increase subsidies to promote industrial development.

Giving subsidies for the purchase of new energy vehicles is just one type of industrial policy. The German government also provides new energy vehicle buyers with industrial policy support such as vehicle tax exemption and free parking for a certain period of time.

Apart from Germany, more than 20 European countries have introduced tax incentives and subsidies. For example, in France, electric cars and vehicles with carbon dioxide emissions below 60g / km are not required to pay the company car tax, and electric and hybrid vehicles with carbon dioxide emissions of 20g / km and below can enjoy a reward plan of 6,000 Euros.

At the same time as subsidies for new energy vehicles downstream, Germany is also very powerful for upstream subsidies. Because only the combination of production, education and research can shape the next new energy automobile powerhouse.

In the research and development of battery technology for electric vehicle core components, Germany plans to provide 1 billion euros to support European battery research and development and production by 2022, hoping to use it to combat Asian battery manufacturers.

At the same time, led by Germany, European companies are forming three major battery alliances. In March of this year, Volkswagen Group and Swedish battery maker Northvolt formed the European Battery Union, and research institutions and companies in the seven member states of the European Union will join it. PSA Group and its German subsidiary Opel and French battery maker Saft are also forming the European Battery Alliance. In addition, there is German battery manufacturer Varta.

More than 30 companies in the above alliances have applied for funding support from the German government. Northvolt will build battery factories in Sweden and Germany. In addition, the German government also allocated 1.2 billion euros to support German solid-state battery research and development.

With the support of money and talents from European countries, seemingly backward European companies on electrification have started a catch-up mode, and old car companies led by Volkswagen have quickly launched electric vehicles. If we don’t squarely face the above situation, we may have a major impact on China’s new energy vehicle companies, which are just getting better.

Policy Double-edged Sword

For a country like China, which has always played a catch-up role in the automotive industry, industrial policy is a must.

Without the subsidy policy of the time, there would not have been excessive entry by a large number of companies. After entering the industrial integration period, problems such as overcapacity and corporate bankruptcy will occur. On the other hand, it is precisely because of over-entry that the industry-specific human capital, skills accumulation and learning ability are left.

In 2018, China’s new energy vehicle sales have reached 1.256 million units, accounting for about 4.5% of annual vehicle sales. In addition, in 2018, China’s new energy passenger car sales reached 1.053 million units, and global new energy passenger car sales were only 2.001 million, accounting for half of the world.

Behind these sales figures also represent a group of new energy automobile industry chain companies with certain core technologies are on the rise. For example, Ningde Times, BYD, Shanshan, Dangsheng Technology and other upstream component and raw material suppliers such as Weilai and Weimar have benefited from this.

WTO rules do not say that member states cannot implement industrial policies, but any industrial policy cannot treat domestic enterprises and foreign enterprises differently. When the government supports it, it needs to support this industry. As long as the companies doing business in China support it, this will not violate the WTO rules.

In the early years, the crude subsidy policy nurtured the market and ecology. As time passed, the subsidy policy was no longer suitable for the complex international environment. Right now, only domestic companies are preferentially protected, and protectionism from other countries is no longer feasible.

If advance subsidies to domestic companies continueIndustry policies will not only make companies inert, lose their ability to innovate, but also be pinched by foreign governments.

So, with the cost-effectiveness of electric vehicles still lower than fuel-fueled vehicles and the cooperation of government companies in Europe and the United States, China cannot rashly withdraw all industrial policies. Otherwise, the market that will be nurtured will be handed out.

As a result, the government should still provide policy support in line with the current development of the Chinese new energy vehicle market during its growth period. The government should choose some industrial policies that reflect fairness to support the development of new energy vehicles.

It is also investing funds to support enterprises. The government can turn ex ante subsidies into ex post rewards. In the case of market failure, to increase the expected return of entrepreneurs, we must not simply spread a large sum of money, which is inefficient for the industry that is integrated into a long-term.

If the funds are turned into rewards for companies that succeed in researching and developing a project, it will not only reduce the pressure on the enterprise, but also promote industrial innovation.

For another example, entrepreneurial projects can apply for subsidies and funds from national ministries and commissions. The central government sets up a national industrial fund, and the local government also has corresponding supporting funds. However, the central ministries and commissions and local governments do not manage these funds. Instead, they entrust industrial funds to fund management companies in the market.

In addition, government procurement is actually a good industrial policy. For example, to support the new energy vehicle industry, the government requires that the public sector can only purchase locally produced new energy vehicles. This approach is a less controversial industrial policy. Because Western governments will also purchase domestic or local products.

At the same time, China can imitate Europe and the United States and other countries to help reduce consumer load. For example, the policy of reducing purchase tax exemption will continue to be maintained, so that new energy vehicles will have a certain price / performance ratio in the short term, and consumers will be encouraged to buy.

Whether to give certain preferential treatment to new energy vehicles in terms of parking, charging, right of way, and whether there is sufficient charging infrastructure is also important. Only by setting up a convenient usage scenario can individual consumers be encouraged to buy a car.

Therefore, no matter what kind of system and national conditions, an industrial policy that is in line with the actual conditions of the industry is the most desirable.

This article is from WeChat public account: a travel passenger (ID: carcaijing) , author: Liang