Tri-national JV as automakers pursue NEV

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Legal counsel involved in a new joint venture between Nissan (China) Investment and its parent company Nissan Motor, Renault and Dongfeng Motor Group Company said changing industrial policies posed a big challenge with the deal.

The joint venture, with registered capital of RMB140 million (US$21.5 million), was named eGT New Energy Automotive. King & Wood Mallesons (KWM) acted as legal counsel for Nissan, providing full services for the project ranging across investment, corporate governance, intellectual property and compliance.

Established in Shiyan City, Hubei province, the joint venture will develop new purely electric vehicles based on Renault-Nissan Alliance’s electric vehicle technology. The vehicles will be sold to the Chinese market via distribution channels of the alliance and Dongfeng.

刘新宇 LIU XINYU 张运帷 MARK ZHANG

The KWM team was led by Beijing partner Liu Xinyu and Shanghai partner Mark Zhang. Zhang told China Business Law Journal that “the toughest challenge with establishing the joint venture arose from a changing policy environment in the new energy vehicle (NEV) sector. The KWM team had to assist its client to make the most favourable business decision by taking into account the new policies introduced, along with the many modifications to the existing policies.”

For example, since the project was initiated, two consultation drafts about a dual credit system for the automobile industry, and later a finalized version were published by the authority.

“In the absence of precedents in the country, counsel’s understanding and interpretation of the new regulations is especially important; this is also where the value of counsel lies,” said Liu. Helping the client conduct rounds of simulation and analysis regarding calculation, allocation and related steps of the dual credit system, the KWM team constantly adjusted the deal structure until the business interests of the client were best met.

Zhang said the dual credit system would apply to all China-based passenger car companies. Manufacturers producing passenger cars in China, and suppliers that sell imported passenger cars in the domestic market, must meet credit requirements relating to “passenger car corporate average fuel consumption” and “new energy vehicles”.

“As a principle, each passenger car company has to ensure that it achieves positive annual cumulative credits in these two aspects for each settlement year, whether by utilizing its own
capacity or through purchasing from other qualified companies,” he said.
“Negative annual score will result in corresponding penalties.”

Liu said that a pure electric vehicle is a category of NEV. “Pursuant to the dual credit approach, NEV-related credits can be earned through manufacturing or importing NEVs,” he said.

“As a measure to promote development of the NEV sector, NEVs are assigned more weight in the calculation of credits for passenger car corporate average fuel consumption so that companies can have a stronger motivation to produce or import more NEVs.”

Renault-Nissan Alliance, one of the world’s largest automobile manufacturers, is heavily involved in the manufacture of electric vehicles and possesses cutting-edge technologies. Dongfeng is a leading Chinese automobile manufacturer with strong production and R&D capacity. The two parties have a long-term partnership in China.