In China, global automakers seek clarification from more ambitious regulator

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BEIJING – For overseas automakers, selling to China – the world’s largest auto market and by far the leader in electric vehicle adoption – can yield big rewards. But regulatory headaches can also be very painful.

Lack of transparency, insufficient turnaround time for new rules as well as “unequal access to the processes of drafting policies and standards” were the main complaints about Chinese automobile regulations listed in a Chamber of Commerce report. of the European Union.

Although the report based on a survey released in September did not cite specific examples, auto industry sources say it highlights growing frustration with China’s regulatory process as well as growing difficulties as car manufacturers adapt to the country’s growing regulatory weight, particularly in electric vehicles.

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In the past, cars that met EU and US automotive standards didn’t have too much trouble satisfying Chinese regulators who had based their own regulations on Western equivalents.

But China is now at the forefront of electric vehicle regulation. This is a natural consequence of the size of its market – it accounted for around 40% of all electric vehicles sold globally in 2020 – as well as conscious efforts by Chinese authorities to start taking the lead in international standards in a wide range of industries.

THE VW SCRAMBLE

Last year, the costly race of engineers at Volkswagen AG to redesign a battery for its ID.4 electric SUV illustrates the tensions at play in the Chinese automotive sector.

The battery pack had passed both Volkswagen and German government heat management tests, but it did not meet planned Chinese requirements to make electric vehicles very unlikely to catch fire in the first five minutes after an accident. said two sources with direct knowledge of the matter.

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No information from the Chinese government on when the new standards came into effect has contributed to the problem, the sources said. But they added that Volkswagen’s head office stubbornness was also to blame as Wolfsburg failed to realize Chinese regulators were unwilling to hear the German automaker’s point of view as they had been in the past. .

In addition to sending officials to China’s Ministry of Industry and the China Automotive Technology and Research Center (CATARC) auto testing agency to seek clarification on when the rule could come into effect, Volkswagen has assembled a team of engineers who spent about six months finding fixes, the sources said.

Ultimately, the initially planned lightweight aluminum battery pack was replaced with a heavier aluminum-steel battery pack with a different structural design. The mechanical design of the car’s chassis has also been changed.

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“Sometimes it’s more difficult to modify key components in an existing model than it is to create a new one and ID.4 is a good example of that,” a source said.

The sources declined to be identified while discussing internal issues. Volkswagen said in a statement to Reuters that the ID.4 had gotten regulatory approval smoothly, its regional teams were getting the support needed to meet local legal requirements, and that it had zero tolerance for non-compliance. compliance.

SEEK MORE TIME, CLARITY

Hans Georg Engel, head of research and development at Mercedes-Benz in China, told reporters last month that a challenge for vehicle development and testing in China is that the time lag between when a new regulation is clearly known and its entry into force is “short. . “

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“We have to be faster here in China,” he said.

Chinese authorities could do more to make the regulatory process clearer and less likely to create unpleasant surprises, according to other executives of foreign automakers.

Complaints include that sometimes only Chinese automakers are invited to initial meetings on proposed new regulations, while foreign automakers can only attend later, according to senior officials at foreign automakers. They were not allowed to speak on the matter and refused to be identified.

China’s Ministry of Industry and CATARC did not respond to Reuters requests for comment.

BECOME A GLOBAL

Last year, Beijing introduced “China Standards 2035” – an ever-evolving industrial strategy it took two years to develop that aims to make China a major voice, if not take the driver’s seat, when international standards are defined.

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His plans to promote better standards span a wide range of industries – from technology to packaging to biotechnology – as well as the automotive industry.

In line with these goals, the state-owned CATARC, which is supported by the Chinese Ministry of Industry, is increasing its international reach.

In June, CATARC opened an office in Geneva, the headquarters of the United Nations transport regulatory bodies. He has also worked with the Indonesian government on electric vehicle policies and has had routine talks with countries such as Uzbekistan and Belarus. In September, he said in an article that some of China’s auto regulations had been adopted by markets like the European Union, Israel and Chile.

The increased global impact of China’s auto emissions rules will also help exports of Chinese-made engines, components and testing machines, said Wu Xianfeng, an official with the Ministry of Ecology and Environment. ‘Environment, at the CATARC annual meeting in September.

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To reduce the risk of regulatory surprises, foreign automakers are investing more in Chinese research and development centers, as this will give them an ear closer to the field and more expertise on the technical requirements that matter most to Chinese regulators. .

Volkswagen is building a new research center in the eastern Chinese city of Hefei, where it is increasing production of electric vehicles, and last month Tesla Inc announced that it had built a new R&D center in Shanghai – its first outside the United States, while Daimler AG has opened a new research center in Beijing.

“This world is changing so fast that we are getting into the electric and software-driven vehicles that all governments around the world are rushing to regulate,” Hubertus Troska, Daimler chief for China, said at the opening.

“Considering the importance of China… it is our company’s intention to ensure that Chinese requirements are never forgotten.”

(Reporting by Yilei Sun in Beijing and Brenda Goh in Shanghai; editing by Edwina Gibbs)