Following last year's policy change that plug-in hybrid vehicles no longer qualify for green license plates in Shanghai, the green license plate policy in Shanghai has tightened again this year.Although the adjustment of Shanghai's new energy vehicle license plate policy did not reach the extreme rumors in the market of &#34;Shanghai merging blue and green license plates&#34; or &#34;directly canceling green license plates,&#34; the latest tightening trend does indicate that the Shanghai green license plate system may be approaching its countdown to the end.Recently, the Shanghai Development and Reform Commission, the Municipal Economic and Information Commission, the Municipal Commerce Commission, the Municipal Transportation Commission, and the Municipal Public Security Bureau jointly formulated and officially released the &#34;Implementation Measures for Encouraging the Purchase and Use of New Energy Vehicles in Shanghai&#34; version 2024. Three revisions have been made to the qualifications for individual and corporate users to purchase new energy vehicles and enjoy the free dedicated green license plate quota. This time, it is not just plug-in hybrid vehicles that are affected. As the city with the highest penetration rate of new energy vehicles in China, Shanghai has comprehensively tightened the qualifications for obtaining green license plates for new energy vehicles.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c1744fa6-7e12-4770-82c7-030f2ccd7722.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c1744fa6-7e12-4770-82c7-030f2ccd7722.png"/><h2>1. Increased difficulty for individuals and organizations to obtain green license plates in Shanghai</h2>Specifically, the difficulty of obtaining free green license plates for new energy vehicles has increased for both individuals and organizations.(1) Individual buyersFor individuals, the policy has changed from not having a new energy vehicle under their name to not having both a new energy vehicle and a fuel vehicle under their name in order to obtain a green license plate in Shanghai.This undoubtedly increases the difficulty for many consumers who already own fuel vehicles. Currently, many fuel vehicle owners hope to add a new energy vehicle as their second car. This allows them to enjoy the low cost of electricity for daily driving in the city, as well as the convenience of unrestricted driving based on license plate number and dedicated parking spaces for new energy vehicles, without having to pay for highway maintenance and expensive fuel vehicle license plate auctions.In other words, after 6 years of using new energy green license plates in China, most Shanghai vehicle owners would choose new energy vehicles for their second car due to the preferential policies, purchase tax policies, cost of use, and convenience during the usage period. With the revision, new energy vehicles and fuel vehicles will return to market balance, and only owners of the first car can continue to enjoy policy benefits.In addition, even if the requirements for the first car are met, buyers must have continuously paid social insurance or personal income tax in the city for 36 months prior to the application date. Previously, it only required a cumulative payment of social insurance for 24 months or personal income tax for 12 months.The extension of the social insurance requirement for car purchases also demonstrates the weakening of Shanghai's protection policy for new energy vehicles. It is now consistent with the purchase qualification requirements for fuel vehicles (which require continuous payment of social security or personal income tax in Shanghai for three years). This also slows down the growth rate of certain groups in Shanghai choosing to purchase new energy vehicles for the first time.(2) Corporate buyersIn the recently adjusted new energy vehicle license plate policy in Shanghai, the requirements for corporate users to apply for new energy vehicle license plates have been raised. Now, corporate users must have continuously paid employee social insurance in the city with a workforce of more than 5 people, or have continuously paid taxes in the city in the past year. This change shows stricter control over corporate car purchases.The unit's car purchases have long been an important part of the Shanghai new energy vehicle market. From 2021 to 2023, the unit's car purchases will remain at 40,000 to 50,000 vehicles per year, accounting for about 15% of the total sales of new energy vehicles in Shanghai. This proportion is much higher than other major cities such as Guangzhou, Shenzhen, and Beijing. Therefore, raising the threshold for unit car purchases will undoubtedly shrink the space for corporate car purchases and may lead to a decline in the overall sales of new energy vehicles in Shanghai.<h2>2. How big is the impact?</h2>As the city with the highest sales of new energy vehicles in the country, Shanghai's sales in the first 11 months of 2023 reached 308,000 vehicles, a year-on-year increase of over 25%, with a penetration rate of 47%, significantly higher than Guangzhou and Shenzhen.After Shanghai canceled the green license plate qualification for plug-in hybrid models last year, the sales of plug-in hybrid models dropped significantly, from 100,000 vehicles in 2022 to 23,000 vehicles in 2023. Although plug-in hybrid models still enjoy purchase tax incentives, the lack of green license plate qualification (Shanghai blue license plate auction price is about 90,000 yuan) has led to a significant decrease in sales.Recently, Shanghai has implemented the second round of green license plate tightening policies, which, although less impactful than the first round, have a wider scope. In the first 11 months of this year, the sales of fuel vehicles and new energy vehicles in Shanghai remained basically flat. In the short term, this may promote the sales of new energy vehicles in December, as some consumers may make early purchases. In the long run, the sales of new energy vehicles may decline, while the sales of fuel vehicles may rebound.The reduction in Shanghai's support for new energy vehicles, from policy-oriented to market-oriented, may reduce the attractiveness and competitiveness of new energy vehicles and affect the car choices of some consumers, especially for many second car buyers, the possibility of choosing fuel vehicles may increase significantly. However, in the long run, the new energy vehicle market still has internal driving forces and is expected to maintain its momentum of development.In summary, although the second round of green license plate tightening policies in Shanghai may not have as severe an impact on plug-in hybrid models as the first round, the expansion of its scope means that more types of new energy vehicles will be affected. In the long run, Shanghai's new energy vehicles will gradually shift from policy-oriented to market-oriented, and fuel vehicles and new energy vehicles will compete more directly and fairly based on their respective internal driving forces.

The new energy market is gradually shifting from policy-driven to market-driven.

Shanghai's green license plate policy is tightening again. How big is the impact? | Insight Research