Strict EU environmental regulations could pose challenges for auto manufacturers
Chinese manufacturers of electric vehicles are well positioned to take advantage of a rapidly growing global market.
According to the Organization for Economic Cooperation and Development, 3.1 million new electric vehicles were registered worldwide in 2017. This represents an increase of 57 percent from 2016 and is similar to the growth rate of 60 percent in 2015 and 2016. Currently, China accounts for around 40 percent of the global EV fleet, while the European Union and the United States each has around 25 percent of the worldwide total.
The Chinese government has devised ambitious plans for the adoption of EVs. In February, it raised the Chinese federal subsidy for EVs with a range of at least 400 km from 40,000 yuan ($5,750; 5,100 euros; ￡4,400) to 50,000 yuan.
Chinese EV manufacturers such as BAIC, BYD, Byton, Changjiang EV, Chongqing Sokon Industry Group, GAC Motors, Great Wall Motors, Kandi, Lifan Motors, NIO and Zhidou are expanding rapidly, and a number of them, including BAIC and GAC Motors, have clear ambitions to enter the European market.
The European Union is a very attractive market for Chinese EV manufacturers. It is the world’s largest economy and trading bloc, with 500 million consumers. Moreover, the EU’s steadily increasing emissions standards and the EV subsidy programs put in place by most EU member states have created a strong demand for electric vehicles.
However, entering the EU market will present Chinese manufacturers with a significant number of challenges that are due to differences between Chinese and European regulations.
For instance, Europe has strict legal requirements for batteries, such as market authorizations (including registration and labeling), take-back and proper handling, and second-life usage. Furthermore, battery manufacturers need to vet the accuracy of customer-facing materials (in particular in relation to battery degradation, range, horsepower and acceleration).
Europe not only has very high safety requirements, but also particularly demanding environmental laws and standards. Chemical products, including body paint or refrigerants, need to comply with the EU’s REACH Regulation (Registration, Evaluation, Authorization and Restriction of Chemical Substances) and RoHS rules (Restriction of use of Hazardous Substances); electrical and electronic equipment is subject to the WEEE Regulation (Waste Electrical and Electronic Equipment), and there are specific rules on the handling of end-of-life vehicles and the labeling and use of tires.
Connected EVs generate huge volumes of data. Chinese EV manufacturers therefore need to take into account the European General Data Protection Regulation, which regulates the processing of personal data and is much broader than Chinese legislation in this area.
Furthermore, the use of communications technologies in the car can require EV manufacturers to comply with European telecommunications legislation. For example, if a manufacturer offers vehicles with music and navigation services communicating via mobile networks and embedded SIM cards, these could be considered to be mobile virtual network operators and therefore subject to national and European telecom rules.
Europe also has stringent and far-reaching consumer protection rules that Chinese EV manufacturers must take into account when selling their products in Europe. For instance, there are strict rules for the display of a vehicle’s energy consumption, and customer-facing materials for vehicles with driver assistance technology must clarify the limits of the technology. EV manufacturers selling directly to consumers have to comply with an even wider range of rules regarding the information to be provided to consumers, cancellation rights or the recently introduced prohibition of “geoblocking” in online sales.
However, European legislation also offers interesting opportunities for Chinese EV manufacturers. For instance, Chinese EV manufacturers that offer new vehicles for sale on the European market can apply for vehicle subsidies, which can benefit vehicle buyers.
Chinese EV manufacturers can also benefit from the EU Emissions Trading System, which allows vehicle manufacturers to group together to jointly meet their EU emissions targets. This gives an opportunity to EV manufacturers to sell zero-emissions credits to the pool. In doing so, they should, however, bear in mind the competition-law rules relating to the exchange of confidential information with competitors.
In view of the ongoing negotiations between the UK and the EU over Brexit, it is important for EV manufacturers to make contingency plans for different Brexit scenarios and their impact on tariffs, quotas, rules of origin, import and regulatory formalities and the process for whole vehicle type approval.
In conclusion, thorough preparation is key to ensuring that the demanding rules and regulations in Europe do not hamper the successful market entry of Chinese EV manufacturers.
The author is a senior counsel at the Brussels office of Bird& Bird LLP, an international law firm based in London. The views do not necessarily reflect those of China Daily.
( China Daily European Weekly 11/16/2018 page11)