Daily Environment Report ™
Source: Daily Environment Report: All Issues > 2009 > June > 06/04/2009 > News > Fuel Efficiency: China May
Boost Fuel Economy Standards, Subsidizes Cleaner Electric, Hybrid Vehicles
105 DEN A-5
Fuel Efficiency
China May Boost Fuel Economy Standards,
Subsidizes Cleaner Electric, Hybrid Vehicles
BEIJING—Chinese officials are deliberating a draft plan that could improve the fuel economy of cars built
domestically by about 18 percent by 2015, say experts close to the planning.
The plan aims to reduce China's reliance on foreign oil and encourage more technologically advanced
automobile engines.
Those same goals have inspired increased Chinese investment in alternative energy vehicles, including
those powered by hybrid and electric systems, which have the added benefit of emitting fewer air
pollutants and greenhouse gases than standard gasoline-powered vehicles.
The draft fuel economy plan making the rounds between ministries could be released early in 2010, said
Feng An, president of the Innovation Center for Energy and Transportation, which has offices in Pasadena,
Calif., and Beijing.
China's top planning body, the National Development and Reform Commission, and the regulatory Ministry
of Information Industry are the two main agencies reviewing the draft plan, which was completed in early
May.
Feng, who worked as a consultant for the Chinese government in drafting earlier fuel economy measures,
said the standards could be implemented starting in 2012, but that full implementation would likely be
phased in through 2015.
Chinese Cars Average 35 MPG
Cars produced in China currently average about 35 miles per gallon but could achieve 40 mpg by 2012,
according to data from Feng's organization.
Feng said environmental considerations are not the main motivators for the possible change in the fuel
economy standards.
“China imports about two-thirds of its oil,” Feng said. “They'd like to be as oil-independent as possible.
Also this will help create more technically advanced engines and phase out second-rate technology.
“Cars still only produce a small amount of China's carbon dioxide emissions on average. It's really a minor
factor in any decision making.”
China measures fuel economy based on urban driving and sets standards by 16 categories of vehicle
according to weight. The goal of an 18 percent increase in fuel economy standards by 2015 is based on
the current sales mix of small, medium, and large vehicles, Feng said. That could be affected by a change
in the mix of vehicle types. For example, in the first three months of 2009 sales of cars with engines of
1.6 liters or smaller surged 70 percent over the year before, spurred by tax incentives as low as 1 percent
of the sales price.
According to David Vance Wagner, a policy adviser at the Vehicle Emission Control Center, a research
institute in Beijing under the Ministry of Environmental Protection, imported cars are not currently
required to meet China's fuel economy standards. Although China is not likely to ban imports of cars that
do not meet its new standards, Wagner said Chinese officials could adopt a system of progressive penalty
fees for purchasers of these vehicles based on how much they diverge from China's standards.
Government Fleets to Include More Hybrids
China also is looking to increase the number of alternative energy vehicles in the country.
Research and consulting firm Roland Berger Strategy Consultants released a report May 12 predicting that
by 2020, as much as 50 percent of China's domestic auto market could be made up of hybrid and electric
vehicles. Government spending, tax incentives, and subsidies are all working to encourage development
of electric vehicles, according to the report, “Powertrain 2020—China's ambition to become market leader
in e-vehicles.”
In one such initiative, the central government is helping 13 municipalities purchase 60,000 hybrid and
electric vehicles by 2012 for government fleets, including buses, postal, and sanitation vehicles. The 13
cities are Beijing, Shanghai, Chongqing, Changchun, Dalian, Hangzhou, Jinan, Wuhan, Shenzhen, Hefei,
Changsha, Kunming, and Nanchang (18 DEN A-9, 1/30/09).
For example, Beijing expects to take delivery soon of the first 50 of 860 hybrid buses it will purchase this
year, according to the state-run Xinhua news agency. Fifty electric buses also will be purchased. So far
this year, Beijing has spent about 122 million yuan ($17 million) to buy alternative energy vehicles and to
expand the capacity of its charging stations.
Industry consultant Bill Russo said “China is going to lead in these kinds of vehicles, and they're going to

do it through infrastructure investment.”
“What's different in China from other countries is that it will provide incentives, subsidies, and support to
infrastructure like plug-in terminals or battery swapping stations,” said Russo, former vice president of
Chrysler's Northeast Asia division and now head of the China-based auto industry consulting firm
Synergistics Limited. “These types of projects might flower here before they flower in places like the U.S.”
The government's pilot project supporting hybrid and electric vehicles in the 13 targeted cities was
launched in February through the joint efforts of the Ministry of Science and Technology (MOST), Ministry
of Finance, Ministry of Industry and Information Technology, and the NDRC.
The absence of the Ministry of Environmental Protection from the project indicates that the project's
motivation is more economic than environmental, some analysts said.
“Reducing greenhouse gas emissions is not China's primary goal in electrifying its transportation,” said
David Vance Wagner, a researcher at the Vehicle Emission Control Center, a research institution at the
Chinese Research Academy of Environmental Science in Beijing. “The number one goal is reducing oil
consumption. Electric vehicles are a clear winner for reducing oil consumption.”
Boosting Technology
China also sees an opportunity to leapfrog its competitors in the electric car industry, Wagner said.
According to government figures of registered licenses for alternative energy vehicles, in 2008 2,617
hybrid cars were sold in China. And the government estimates that the production capability for
alternative energy cars in China will reach 500,000 in the next three years.
State-run China Radio International recently quoted an industry study predicting a lower domestic sales
volume of hybrid and electric cars of 100,000 per year by 2015, assuming that oil remains below $150
per barrel. These numbers are still relatively small considering that in the first quarter of 2009 2.7 million
vehicles were sold in China.
A number of domestically produced hybrids and all-electric vehicles are expected to begin rolling off
China's production lines starting later this year and throughout 2010, including Great Wall Motor Co.’s all-
electric car, the GWKulla.
In addition, General Motors plans to introduce its Volt electric car to China in 2011. And an alliance of
Japan's Nissan Motor Co. and Renault of France will start selling electric vehicles in China in 2011 and has
signed a memorandum of understanding to supply vehicles and to design a battery-charging network for
Wuhan, the capital city of Hubei Province.
Public Promotion Campaign
The Chinese government is expected to begin a public promotion campaign this month to urge people to
buy hybrid and electric cars. Construction of infrastructure such as plug-in stations in the 13 cities
targeted under the economic stimulus initiative will begin in December.
Standardization of that infrastructure could be a problem though, said Thibaud Voita, an alternative
energy vehicle researcher at Asia Centre, a European research institute in Beijing.
Local governments are making up their own standards closely aligned with the companies developing
electric cars in their localities. No national standards set have been set for plugs, voltage, batteries, or
charging stations.
By Michael Standaert
More information on the Roland Berger Strategy Consultants report, Powertrain 2020—China's
ambition to become market leader in e-vehicles, is available at
http://www.rolandberger.com/expertise/publications/2009-05-12-rbsc-pub-
Powertrain_2020.html.
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