China May Help Hard-Hit Carmakers by Relaxing Emission Curbs
China May Help Hard-Hit Carmakers by Relaxing Emission Curbs
(Bloomberg) --
China is exploring relaxing some emissions standards to provide relief for automakers battling an unprecedented slump in the world’s largest car market, according to people familiar with the matter.
The discussions involve a key aspect of the China VI rules that are scheduled to go into effect nationwide on July 1, the people said, asking not to be identified because the deliberations aren’t public. Specifically, Chinese authorities are debating whether to ease restrictions on the amount of harmful particles that vehicles emit from their tailpipes — a measure known as particle number, or PN — the people said.
The move shows how pressure is rising for countries to sacrifice longer-term environmental goals to salvage their economies in the wake of the coronavirus pandemic. China’s growth was already slowing before the outbreak paralyzed its industries, with carmakers being particularly hard hit, and now economists at Goldman Sachs Group Inc. estimate the world’s second-largest economy will shrink 9% in the first quarter.
“With automakers and dealers being under unprecedented pressure, it is necessary for policy makers to relax the emission rules and save the industry,” said Cui Dongshu, secretary general of China Passenger Car Association, a trade body. “It is especially crucial for dealers, as they would face bankruptcy if they can’t lower their inventories.”
A delay would give automakers more time to sell older models that don’t qualify for the new rules from their inventories, which have ballooned amid a prolonged downturn that’s been exacerbated by the spread of the virus. The industry has been calling for a delay because without it, carmakers risk having to scrap or refit millions of vehicles that couldn’t be sold in China under the new rules.
China VI, which has been adopted in parts of the country already but not nationwide, is similar to the Euro 6 standard that’s currently in place in Europe. One of the key changes in the new rules is reducing the maximum permissible PN count, which measures pollutants such as dust, to a 10th of current levels. As things stand now, China would move from a standard known as PN12 to PN11 in July.
But government branches are now discussing postponing the switch to PN11 to a date that’s yet to be determined, the people said. No decision has been made, they said.
The Ministry of Ecology and Environment, which has been promoting stricter emission rules to curb pollution, wasn’t available for comment and the Ministry of Industry and Information Technology, which would need to agree to any changes in the China VI policy, didn’t have an immediate comment. China’s National Development and Reform Commission, the nation’s main economic planner, didn’t respond to a query.
A delay would also give carmakers more time to reconfigure their production lines and testing processes. Besides emptying dealerships, the coronavirus pandemic has forced carmakers across China to shut down operations, leaving them behind schedule in preparations for PN11 and other expected rule changes.
Emission rules were most recently tightened in much of China last year, a move that was seen as contributing to waning car demand because it prompted consumers to wait for vehicles that met the new criteria. Automakers’ profitability also took a hit as they sold older vehicles that didn’t meet the new standards at heavy discounts to clear inventory before the rule changes took effect.
The industry has pleaded for help from the government as it attempts to reverse a sales decline that is in its third year and showing no signs of ending. State-backed China Association of Automobile Manufacturers sent a proposal to regulators last month, urging them to postpone the move to PN11. The government is looking into the request and there is no further information to share on the matter, the industry group said on Thursday.
©2020 Bloomberg L.P.
With assistance from Bloomberg