China to Grant Low-Speed Electric Car Producers Legal Status

(Bloomberg) -- China plans to plug a regulatory gap and begin overseeing low-speed electric vehicles used mainly in the country’s rural areas, legitimizing a market segment that dwarfs sales of regular battery-electric cars made by the likes of BYD Co. and Tesla Motors Inc.

Under the current regulatory framework, there are no rules governing the production and sale of electric vehicles with top speeds below 100 kilometers per hour (62 miles per hour). The result has been a proliferation of cheap, poorly made EVs powered by polluting lead batteries that pose a threat to road safety and the environment, the Ministry of Industry and Information Technology said in a statement on its website.

The government will legalize manufacturers that meet the standards governing EV startups and regulate them under those requirements, while enacting technical specifications for the rest, the ministry said. Those that don’t meet the new benchmarks, which are under discussion, will be closed down, according to the statement.

“The move will force existing electric vehicle makers to speed up product development and compete for consumers,” said Cui Dongshu, secretary general of the China Passenger Car Association. “It is great news for low-speed electric car makers as they can finally make cars legally.”

Tianneng Power International Ltd., a supplier of batteries, rose 1.3 percent to HK$6.91 as of 10:52 a.m. in Hong Kong.

Tianneng’s Chairman Zhang Tianren expects the policy to spur development of the industry. The company, which accounts for 55 percent of the battery market for low-speed electric vehicles, said in a statement it’ll boost production to meet market demand.

Growing Demand

In China’s Shandong province alone, more than 330,000 of these unregulated low-speed EVs were sold in the first eight months of this year, more than the 245,000 officially approved new-energy vehicles delivered across the country in the same period, according to auto association data.

In taking steps to legalize an industry that’s been growing rapidly despite regulatory ambiguity, the government will boost market leaders such as Shandong Shifeng Group Co., as well as startups like Chehejia, whose founder Li Xiang started China’s leading car-buying portal Autohome Inc.

“On one hand, low-speed electric cars meet certain short-distance travel demand, while on the other hand products made by the companies that have been producing without permission have poor quality and low safety performance,” the ministry said. “We will continue to work with other government agencies to speed up introduction of relevant regulatory measures and push forward development of the low-speed electric vehicles.”

China has been issuing production licenses to newcomers to the auto-making industry as part of its push to encourage innovation. Companies from Internet video billionaire Jia Yueting’s Le Holdings Co. to startup WM Motor, founded by a former top executive of Zhejiang Geely Holding Group Co., have raised billions of dollars in a bid to enter the world’s biggest auto market, including for electric vehicles.

Beijing CH-Auto Technology Co., which started designing cars in 2003, became the latest startup to win an electric car production license this month, following Beijing Electric Vehicle Co. and Hangzhou Changjiang Passenger Vehicle Co. China’s government is considering limiting the number of startup EV makers to a maximum of 10.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net. To contact the editors responsible for this story: Chua Kong Ho at kchua6@bloomberg.net, Subramaniam Sharma, Craig Trudell

With assistance from Tian Ying