China's Vehicle Makers Anxiously Wait For New
Fuel Mileage Standards
The Chinese government is set to announce new environmentally
friendly fuel requirements for vehicles, which will take
effect in July 2005. Major makers in China, which are
now raking huge sales growth, are preparing their strategy
to take advantage of the new regulations, while at the
same time, not sacrificing sales.
The Chinese government, in an effort to show its commitment
to clean growth and strong stand against air pollution,
is expected to announce fuel standards which are more
stringent than those required in the US. Unlike the US
standards, which apply to fleet sales, and allow the maker
to average out fuel mileage standards across its models,
the Chinese standards apply to each individual make of
vehicle. The standards are mainly driven and drafted by
government ministries, and do not allow makers much opportunity
to lobby for escape clauses.
The need for the new fuel requirements is urgent. This
year, China has had an unprecedented demand for consumer
vehicles, and has already become the third largest automobile
market in the world, surpassing Germany, and will surpass
Japan, the second largest, in four to five years. All
plants of the major manufacturers are now running at three
shifts daily, but the demand is so great that Chinese
buyers have to wait six months to one year before they
can pick up their cars. In some instances, Chinese buyers
have even resorted to picking their cars based not on
which make they want, or which offers the best value,
but on which model has the shortest waiting list. In addition,
the demand for gasoline has become so great that gas stations
in east China have had to resort to rationing gas for
their customers. The government, in an effort to meet
infrastructural needs, has quickly concluded deals
to build gas stations in major population areas, but these
will require three years to complete.
While GM, Toyota, Honda and Volkswagen generally introduce
recent models for manufacture in China in their joint
venture factories, the engine models are comparatively
older and less fuel-efficient. This has created a major
air pollution problem in China's larger cities. The Chinese
government wants to discourage the image that it is a
developing market which turns a blind eye to pollution,
and wants to introduce new pollution standards which put
China on the same level with developed countries.
In a major effort to show China its commitment to cleaner
technology, Toyota
has transferred its hybrid engine technology to China.
This is the technology used in the Toyota Prius in the
US, which has become the first hybrid technology car to
be commercially viable and win widespread acceptance in
the US market.
GM has recently shown it is anxious to introduce fuel
cell driven automobiles in China, ahead of the US market.
For GM, this strategy offers several advantages. Since
China is in the early stages of a major growth phase for
the automobile industry and associated infrastructure,
it is easier to introduce new technology than in the US,
which is already locked in to gas and petroleum. Costs
would also be much lower than in the US. And, in China,
introduction of new technologies and major projects can
be rolled out much more quickly if the Chinese government
and its powerful ministries give it their backing.
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