Daily Management Review

Chinese Regulators Need To Be Clearer On New Rules, Say Global Automakers


Chinese Regulators Need To Be Clearer On New Rules, Say Global Automakers
Regulatory issues in China, the largest car market in the world and a market that is amongst the fastest in terms of adopting electric cars, are a headache for selling cars in the market for foreign car brands.
In a European Union Chamber of Commerce assessment, main criticisms regarding Chinese car regulation included a lack of transparency, inadequate lead time for new rules, and uneven "access to policy and standards drafting processes" were key complaints about Chinese auto regulation listed in a European Union Chamber of Commerce report.
Even through specific examples of the above issue were not mentioned in the September survey-based research, sources in the auto industry said that the report underscores simmering dissatisfaction among foreign car makers with China's regulatory process, as well as mounting difficulties as manufacturers adjust to the burgeoning regulatory clout of the country - notably in EVs.
It was not very difficult earlier for cars that met up with auto standards and regulations in the EU and in the United States to meet regulations in China since the standards in the country were modeled on Western standards.
Currently, however, China has become a leader in the area of EV legislation which flows from the massive size of the Chinese market which sold nearly 40 per cent of all-electric cars that were purchased globally last year. Additionally, Chinese authorities have also been trying to become the leader in terms of setting international standards in a number of industries which has also included the auto industry.
The regulatory issue being faced by foreign car brands in China is demonstrated by last year’s costly efforts by Germany’s Volkswagen AG of redesigning a battery pack used in its ID.4 electric SUV. The battery pack was rejected as ineffective in tests for managing heat according to Chinese standards even though it had easily passed the tests in Germany. The heating standards are implemented to ensure that EVs do not catch fire in the first five minutes after a crash.
One of the issues was a lack of information from Chinese regulators and authorities about the time when the new standards would become effective, said reports quoting sources. However, another issue was a dogged attitude on the part of the Volkswagen headquarters since it had not realized that unlike in the past, Chinese authorities were not open to giving heed to the perspective of the German car maker.
According to reports quoting executives from foreign car makers, it is important for Chinese authorities to be much more transparent about the regulatory process and not to put forward sudden and unexpected regulations that shock auto companies.
Once a new regulation comes into effect, car makers are generally not given enough time to comply, said Mercedes-Benz China's head of research and development, Hans Georg Engel, while talking to reporters last month.
According to reports quoting top executives at international automakers, other issues that foreign auto companies face in China include authorities there often only invite Chinese manufacturers for initial talks and discussions on new laws after drafting, while foreign automakers are not invited until much at a later stage.