In line with the theme of this conference, the 2020 industry vision and roadmap under the new normal, I would like to share a few views on the development situation and policy direction of the automotive industry under the new normal for discussion with you.
First, the automotive industry has now entered the new normal. Over nearly ten years of rapid growth, with an average annual growth rate of 24.3%, China has become the world's largest vehicle producer and the largest market for new vehicles.
Second, technological innovation has made clear progress and the capacity for independent innovation keeps rising, with substantial advances in policy development, platform design, testing and validation, exhaust emission control, electronic system development and other areas.
Third, energy saving and emission reduction in the automotive industry have produced positive results. In 2014 the actual industry-average fuel consumption was 7.22 L/100 km, and this year it is expected to reach the planned target of 6.9 L/100 km. For new-vehicle emission control, the China IV emission standard has been implemented and the China V standard has been published.
Fourth, the industrialization and market adoption of new-energy vehicles keep accelerating. The share of new-energy vehicles in production and sales has jumped from 0.033% in 2011 to 0.614% in the first half of this year, which is a very good trend. From January to August this year, the number counted from our new-energy vehicle conformity certificates had already reached 123,500 units.
Fifth, the product quality and service standards of domestic brands have improved markedly, and a group of local brands well liked by consumers in their market segments has emerged. In 2011, China's vehicle production and sales ended ten years of sustained high-speed growth. By 2014, production and sales reached 23.72 million and 23.49 million units, up only 7.3% and 6.9% year on year, a marked slowdown. Growth is slowing further this year: according to the latest statistics from the China Association of Automobile Manufacturers, as earlier speakers also mentioned, vehicle production and sales from January to August were in fact slightly below the level of the same period last year.
The new normal is an accurate summary of the characteristics of China's economic development since the financial crisis and for some time to come. As an important pillar of the national economy, the automotive industry in our view shows similar characteristics. In the new normal, the most visible features are that industry growth shifts from high speed to medium-low speed, the industry's structure is adjusted more frequently, development relies more on innovation, and the interaction between the industry and its social environment becomes more pronounced.
The new normal will last for a considerable time, and the development stage of the automotive industry has changed fundamentally. Amid the worldwide wave of the information revolution, the new round of technological revolution is having an ever deeper effect on the automotive industry, and major national initiatives such as intelligent manufacturing, Internet Plus and big data will be implemented one by one. At the same time, in the face of increasingly serious energy and environmental problems and with the industry entering the new normal, the development situation of the automotive industry has changed significantly. As I understand it, this shows in the following respects.
First, the market has entered the new normal. While competition intensifies, this also holds important opportunities to adjust and optimize the industry's structure and improve the development environment. As the market moves from high-speed to medium-low-speed growth, competition will become increasingly fierce and industry profitability will be seriously affected. The entrepreneurs here have probably all felt this: we understand that profits across the automotive industry this year are indeed not what they used to be, and I think this situation may intensify further for quite some time. Some Chinese companies may face difficulties in production and operation, but we also believe this brings companies an opportunity for mergers and reorganization and for adjusting the organizational structure of the industry, which favors survival of the fittest and the long-term healthy development of the industry.
Second, a new round of technological and industrial revolution has begun worldwide, posing a greater challenge to independent R&D and innovation capability. It also brings an opportunity for the automotive industry to accelerate its transformation and upgrading. In recent years the global automotive industry has undergone profound change: new technologies such as information technology, manufacturing technology and materials technology are merging with the automotive industry ever faster, new business forms and models keep emerging, Internet companies are actively entering the automotive sector, and autonomous driving technology is reshaping the automobile.
Advanced technologies are being renewed and applied in the automotive industry at an ever faster pace, which places higher demands on the R&D level and innovation capability of China's automotive industry. But it should also be recognized that the core of this profound change in the global automotive industry is the integration of emerging technologies such as new energy and the Internet with vehicle manufacturing. In new energy and the Internet, China has the advantages of an early start, many opportunities, rapid development and a small gap, which gives China's automotive industry an opportunity to use new-energy and Internet technologies to accelerate its transformation and upgrading.
Third, the energy-saving and environmental situation is becoming more severe. The state keeps tightening standards and regulations and technological competition is fiercer, which also brings both pressure and impetus for the industry's low-carbon, green transformation. China must meet its international low-carbon commitment to reduce emissions per unit of GDP by 40% to 45% from the 2005 level by 2020, and lay the foundation for the medium- and long-term low-carbon goals set out in the China–US Joint Announcement on Climate Change: reaching peak carbon emissions around 2030 and raising the share of non-fossil energy in primary energy to 20% by 2030. All of these goals pose a severe challenge for energy saving and environmental protection in the automotive industry.
The energy-saving and environmental standards and regulations for the automotive industry are therefore being tightened continuously. For example, the Phase IV fuel consumption standard we have published sets 5.0 L/100 km for 2020, and we expect average passenger-car fuel consumption to fall further to about 4 L/100 km by 2025. Our Phase V motor vehicle emission standard may also be implemented nationwide ahead of schedule. Yet this continuous tightening brings China's automotive industry both pressure and impetus for its low-carbon, green transformation. This can be seen in the accelerating scrappage and replacement of yellow-label vehicles and old vehicles, the gradual establishment of a circular-economy system for the automotive industry and the gradual improvement of green manufacturing.
Fourth, opening up to the outside world must continue to expand. Although this intensifies competition in the domestic market, it also helps local companies use both domestic and foreign resources to become more competitive. The Third Plenary Session of the 18th CPC Central Committee proposed making opening up a new driver of long-term economic development, continually quickening the pace of opening up and creating a policy and market environment favorable to foreign investment. Competition in the domestic automotive market will certainly become increasingly fierce.
It should be said that opening up also helps our domestic automotive companies to use both domestic and foreign resources, in R&D, technology, talent, markets and supply chains, to improve their competitiveness. In recent years the technology, brands and management of Chinese automotive companies have grown steadily stronger, and they are now capable of going global. I believe that as China actively implements the Belt and Road strategy and speeds up the construction of free trade zones, Chinese automotive companies will gradually quicken their pace of going global, strengthen production-capacity cooperation with countries along the routes, locate production on a global scale, allocate market resources more efficiently and integrate faster into the global division of labor in the automotive industry.
Fifth, comprehensively deepening reform and building a society under the rule of law will help to optimize the administrative system of the automotive industry and create a fairer environment for market competition.
The Third Plenary Session of the 18th CPC Central Committee made important arrangements for comprehensively deepening reform and set new requirements for building the market environment. We must speed up the building of a strong manufacturing country, and the automotive industry must also change its mode of development and work tirelessly to make China a strong automotive country.
The Fourth Plenary Session of the 18th Central Committee proposed building a society under the rule of law and modernizing the national governance system and governance capacity. It requires administrative bodies to "perform their statutory duties and do nothing the law does not provide for" and promotes a system of lists of government powers. I believe this will greatly improve the rule-of-law management system of the automotive industry and the efficiency of industry administration. While industry approvals are steadily relaxed, the government will pay more attention to in-process and after-the-fact supervision of energy saving, environmental protection and safety.
To sum up, the situation facing the transformation of the automotive industry is changing significantly, and the effects are gradually becoming apparent. These changes hold both challenges and opportunities. I think we should adapt to the new normal with a more active attitude, seize the opportunities and achieve breakthroughs in energy-saving and new-energy vehicles, in intelligent manufacturing and intelligent connected vehicles, in independent innovation and brand building, and in rule-of-law management of the industry.
Next I will give only my personal views on the national-level direction for strengthening the administration of the automotive industry; please correct me where I am wrong.
The automotive industry is a signature industry in building a strong manufacturing country. China's automotive industry has gained an initial command of key technologies, formed a complete industrial chain, and developed a group of corporate groups with an international outlook and a large pool of automotive professionals; it also has a huge vehicle market. We therefore have the foundation, the conditions and the ability to build a strong automotive country. To respond better to the changing situation and seize the opportunities, we must follow the important arrangements of the Third and Fourth Plenary Sessions of the 18th Central Committee, speed up the reform of the industry's administrative system, let the market play the decisive role in allocating resources, and make moving the automotive industry from large to strong the core objective of industrial policy for years to come.
Specifically, on the one hand we must uphold the principles of innovation-driven development, intelligent transformation, stronger foundations and green development, earnestly implement Made in China 2025, speed up the building of the innovation system across the board, promote the development of new-energy vehicles and intelligent connected vehicles, and help vehicles meet their energy-saving targets. On the other hand, in industry administration we must streamline administration and delegate power, optimize the access system for companies and products, have each department strengthen in-process and after-the-fact supervision according to its responsibilities, and establish a scientific and efficient industry supervision system in line with international practice. In summary, I see five directions. The first is innovation. We must keep innovation as the basic means of transformation and upgrading and raise independent innovation capability across the board. We must quickly improve an efficient system of industrial technology innovation that is market-based, combines government, industry, universities and research institutes, and emphasizes integrated and collaborative innovation. We must make full use of industry alliances to promote coordinated development, establish platforms for the industry's generic technologies, draw on and integrate existing industry resources to set up innovation centers for the automotive industry, break through the key and generic technologies that constrain the industry, support automakers' independent R&D, overcome the barriers in key components, and build shared platforms for component R&D and industrialization.
Of course, we will continue as always to support companies in our industry in seizing opportunities and taking the commanding heights of future automotive development. While developing the energy-saving and new-energy vehicle industry, we should also plan ahead for intelligent manufacturing and promote the intelligent transformation of the automotive industry: strengthen the top-level design and planning for intelligent connected vehicles, speed up the building of a technical standards system and an independent R&D system for their key technologies, carry out pilot and demonstration operation of intelligent connected vehicles, speed up the formulation and implementation of an intelligent manufacturing strategy for the automotive industry, raise the level of digitalization, servitization, collaboration and intelligence in vehicle manufacturing, and encourage and foster new business forms and new cross-sector models in the automotive field.
The second direction is the rule of law: promoting law-based administration and building a market environment of fair competition. We will actively push for the Regulations on the Administration of Vehicle Production, revise the relevant laws and regulations, draw up a system of supporting implementation rules and technical regulations, and establish lasting and effective law-based administration of the automotive industry. In accordance with the Administrative Licensing Law, we will draw up administrative measures for the access of vehicle manufacturers and products, to further regulate company and product access.
I must also stress here that local governments should follow the requirements of the central government, break down local protectionism and establish a unified national market. We have found that, particularly in the promotion of energy-saving and new-energy vehicles, local protectionism still exists to some degree, so that our strongest companies cannot stand out as they should. This does not help our companies to become bigger and stronger and to compete worldwide.
The third direction is reducing burdens: further streamlining administration and delegating power, speeding up the reform of the administrative approval system and lightening the burden on companies.
First, the management system for automotive investment projects must be reformed according to the principles that the market plays the decisive role in resource allocation and that companies are the principal investors. Second, a unified and efficient access system for vehicle manufacturers and products must be established: the existing product access procedures should be consolidated, the method for determining that vehicle products are of the same type improved, and unnecessary test items reduced, to lighten the burden on companies. At the same time, in-process and after-the-fact supervision must be strengthened, order in vehicle production maintained, the public interest protected and the mechanism for company exit improved. This, I think, is the main responsibility of our ministry. In our subsequent work we will follow the unified rules of the central government and the requirement to streamline administration and delegate power, and will do our best to move in this direction.
The fourth direction is energy saving: strengthening standards and regulations, improving supporting policies and promoting energy saving and emission reduction across the board. We must actively implement the Phase IV passenger-car fuel consumption standard; promptly draw up and issue measures for credit trading, rewards and penalties based on corporate average fuel consumption; guide and encourage companies to speed up the independent development and production of energy-saving and new-energy vehicles; speed up the building of an energy-saving standards system suited to China's conditions; speed up the development of a Chinese driving cycle that reflects the characteristics of driving on China's roads; and start the revision of major standards such as the Phase V passenger-car fuel consumption standard and the Phase III standard for heavy commercial vehicles.
The fifth direction is going global: guiding the international development of the industry and supporting companies in using international resources to improve their competitiveness. We must actively adapt to the overall national requirements of promoting international production-capacity cooperation and building a new open economic system; use the dedicated intergovernmental funds for capacity cooperation, such as those supporting China–Latin America cooperation projects; and strengthen cooperation and exchange with the countries and regions concerned on industrial standards, policy and technology. In particular, we will take the lead in further coordinating international standards and regulations, to create a better environment for companies to export their products and to carry out international capacity cooperation.
These are some of our preliminary ideas. Going forward, we will strengthen communication with the departments concerned and with companies in the industry and work together to build the automotive market environment, advance the transformation and upgrading of the automotive industry and promote its healthy and sustainable development.
