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Thursday, October 23, 2014 2:29:13 PM
China's tough fuel economy goal will punish foreign imports
SHANGHAI -- For many years in China, vehicle imports have soared as rising incomes whetted consumers' appetite for luxurious cars that proclaimed their status.
But foreign automakers -- especially producers of big, gas-guzzling sedans -- soon will have difficulty sustaining that growth as Beijing gets serious about its fuel economy targets.
In 2012, the central government ordered automakers to meet a fleetwide corporate average target of 6.9 liters per 100 km in 2015 and 5.0 liters in 2020.
Now that 2015 is just a few months away, Beijing announced punitive measures last week for automakers that fail to meet their target.
At first glance, the new sanctions look draconian: Offending automakers would not be allowed to expand local production or increase exports to China.
Currently, 111 companies sell passenger vehicles in China. Eighty-five of those companies -- both domestic and foreign -- produce vehicles in China, and they do not appear to have a big problem.
Last year, domestically produced vehicles averaged 7.23 liters per 100 kilometers, according to the Ministry of Industry and Information Technology.
Automakers that sell those vehicles can easily reach their target of 6.9 liters next year by diversifying their product mix with more small vehicles, electric cars and plug-in hybrids.
But the importers face a more daunting task. Last year, the average imported vehicle consumed 9.1 liters per 100 km, significantly above the government's 6.9-liter target.
Last year, 13 of China's 26 importers failed to meet their fuel economy targets. Two are joint ventures: Shanghai General Motors Co. and Dongfeng Nissan Passenger Vehicle Co.
The rest are import companies wholly owned by foreign automakers: Aston Martin, Porsche, Ferrari, Maserati, Honda, Chrysler, Renault, Suzuki, Nissan, General Motors and Hyundai.
Aston Martin had the highest fleet fuel consumption at 14.4 liters. Vehicles imported by Porsche, Ferrari, Maserati, Nissan and GM all topped 10.5 liters.
How can these companies meet their targets within two years? Like other automakers, they could introduce smaller models or add EVs and plug-ins to their lineups.
But car buyers may not be so malleable. In China, prosperous middle-class consumers prize a vehicle's size and performance more than its fuel economy. They want their cars to make a statement.
Nearly 70 percent of China's imports are SUVs and MPVs, and 40 percent of imports have engine displacements of 2.5 liters or more.
Electric cars aren't a likely alternative, either. Due to a nationwide lack of public charging stations, foreign automakers have sold only a handful of electric vehicles and plug-ins.
So the only feasible solution is for foreign automakers to reduce their imports of all those gas guzzlers.
In the first eight months of the year, imports surged 28 percent to 940,000 vehicles, according to China's trade data. It's hard to see how imports can maintain such a rapid growth rate, now that China is getting tough on fuel economy.
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