Car manufacturers left hanging by EPD

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The relationship between the Environment Protection Department (EPD) and automotive trade industry players has been strained recently, after the EPD unilaterally deferred annual consultation meetings.

Every year, once the EPD completes reviews to update the qualifying standards for the Environment Friendly Vehicle (EFV) Scheme, meetings are held to consult local stakeholders in the motors trading industry. While Air Policy Unit Assistant Director, W. C. Mok and the Motors Trade Association (MTA) played down the situation, HT uncovered an internal e-mail circulated within the MTA has shown frustration towards the delay.

The scheme offers first registration tax breaks for petrol private cars that qualify as EFVs. The threshold to qualify for tax breaks under the scheme is updated annually and has been announced every April since its introduction in 2007. Mok told HT earlier that consultations with the motor trade industry is usually done between October and November. Industry members explained that this is done around six months prior to the announcement so as to give them ample time to plan productions and sales.

Why the delay?

According to Mok, the delays have been due to many technical aspects that still require review, saying, “It is purely because there are still things we need to analyse and work on. We prefer to complete the whole review, instead of handing it to them piecemeal which may lead to more misunderstandings.”

They have to make orders for their vehicles every month anyway, with or without the EFV scheme.

Mok was not particularly concerned about the delay, “It isn’t surprising, situations where it has been early or late have happened before.  We need to think it through and complete the entire standard review, and when we’ve decided it’s feasible, we’ll talk to the industry. There has never been a precise timeline for its completion and it has always been done the same way.”

Production Times

Thorsten Jaede, from Volkswagen HK, did not think the delay was as trivial as Mok made it out to be. “Any policy change should be announced latest in November to give the industry some lead time to adjust production. This is especially important for the European Brands with the longer transportation times,” he said. “We talk of arrival dates of March and April 2015 for those vehicles that we order today. So whatever the new regulation on EFV will bring, we will have no time left to adjust production quota or specification of vehicles. Therefore, the delay from the EPD might negatively impact our business.”

This sentiment is echoed by European commercial vehicle giant Scania’s Regional Director Nick Leach, “Due to the lead times to import vehicles from overseas, the industry has been asking for earlier consultation on proposed changes to the EFV Scheme with a longer notice period for implementation,” he said. “It is therefore disappointing to have delays.”

When Mok was asked to comment on the issue, he simply said, “They have to make orders for their vehicles every month anyway, with or without the EFV scheme.”

Internal affairs

The MTA seemed adamant to play down the situation when speaking to HT. “EFV is a relative(ly) minor issue and affects much smaller number of vehicle models with only some tax concession,” said Johnson Li, Secretary General for the MTA.  “We expect EPD to announce soon, and sales will continue with or without the concession. To announce earlier could only give members more time on planning and ordering of vehicles, which is still not too late for most by today.”

It not only affects our business but will also disrupt vehicle supply to the market.

Perhaps to ensure a good relationship with the EPD, this stance was quite different from what was written in an internal MTA memo signed by Li just two days after the initial inquiry. He wrote to members saying, “I have stressed (to the EPD) that the situation will be detrimental to members with EFV models. The order deadline for both European and non-European brands had lapsed and members are unable to make appropriate forecast and placing orders accordingly. It not only affects our business but will also disrupt vehicle supply to the market.”

No clarity

In the internal e-mail circulated to MTA members, Li expressed that the EPD was unable to provide a precise timeline for talks to resume, saying “I have just spoken with EPD and they are still unable to give a date on the announcement of 2015 Environmental Friendly Vehicle qualifying criteria. They cannot even offer a foreseeable date.”

Mr Jaede commented, “We do not know what they are doing and when they would talk to the industry again. With the Christmas break approaching soon, there is a risk that a new policy will be announced in January and go live in April. This does not give us any time to adjust production.”

Along with concerns about production time, Jaede hopes that the delay may be due to the EPD seriously considering the proposals of the European Chamber of Commerce (Eurocham). As revealed in HT’s article on the EFV scheme for commercial vehicles (Subscribers only), the Eurocham published a position paper, expressing their belief that the EFV scheme is flawed at best. He said, “if such a change is taking into account Eurocham’s input, then the sooner the better. However, if EPD are coming with a new variation for which we need adapted products then a long period to introduce it is needed.”

If such a change is taking into account Eurocham’s input, then the sooner the better.

To resolve the impact the delay will potentially have on production orders, the MTA e-mail indicated that it was proposed to the EPD that the implementation date of the new qualifying standard should be postponed so as to guarantee a 6-month lead time relative to the announcement. The EPD reportedly agreed to “consider the proposal.”

Mr Mok has apparently gotten the message, reiterating that “Our principle is, we understand the industry wants us to make the announcement ASAP and that is our target, but at the moment we haven’t completed it.”

“We will surely consult them,” said Mok. “They need not worry.”

As of December 16th, they were still worrying.