Potential Chinese EV buyers could get a boost of confidence after China’s State Administration for Market Regulation announced new regulations. The regulations will allow customers to return purchased EV for a refund or exchange if they prove to be faulty in major components such as batteries and electric motors. The announcement was made by a government official on Friday in Shanghai.
Why it matters: The Chinese government is trying its best to restore faith in electric vehicles. This comes after several incidents where cars made by Tesla, Nio, and WM Motor self-ignited over the past few months.
- China’s Ministry of Industry and Information Technology (MIIT) in June urged EV makers for a comprehensive safety check over their vehicles including those already sold to avoid further incidents. It also required companies for 24-hour crisis hotlines to address incidents for customers.
Details: The update will include battery packs and electric motors under national consumer rights regulations, allowing for refund and replacement. He Xing, a director in the State Administration for Market Regulation, made the announcement on Friday at a conference in Shanghai.
- The current regulations, which came into force in October 2013, only address consumer refunds for combustion vehicles. A car owner could return a purchased fuel-powered vehicle for a refund within two years after purchase, if major components such as engine and transmission get replaced twice and still have “severe safety problems.”
- The rules also offer customers rights for an exchange of their vehicles within two years, if the time of repairs exceeds a total of 35 days or five total times. He Xing said that that item will be revised in favor of consumers to 30 days or four times.
- Beijing is also planning to raise the penalty for rule-breakers more than tenfold to RMB 500,000 ($71,320), He Xing said, adding that the rules are under revision, without revealing a timeframe.
Context: So far, Nio has been the only EV maker forced to make a recall, costing the company RMB 340 million.
- The company’s sales expenditure increased by 8.8% sequentially to RMB 2 billion in the second quarter of this year.
- Battery, electrical motor and control take up to 60% of the cost of an EV, consulting firm Deloitte said in its recent studies.