— An Industry Hits Hyper-Speed in Hybrid Mode
Just two short decades ago, if a sedan
was seen negotiating through the throngs of bicycles swarming
Beijing’s streets, that car was likely the property of the state,
and an official mode of transport.
After the founding of the PRC in
1949, it was nearly a half century before Beijing registered 1
million cars and trucks. Now, just seven years later, there are more
than 2.6 million vehicles traversing the hazy roads of the nation’s
capital. In 2005 about 1,000 more were being added each day, reports
Liu Xiaoming, of the Beijing Transportation Committee. And according
to Beijing University's China Center for Economic Research, in this
city of 14 million people about 40 percent of households plan to buy
a car within the next five years.
Nationwide, at the close of 2005
there were 23.65 million private cars on the road, up 22 percent
from 2004, according to the National Bureau of Statistics. And in
2005 China’s volume of new car production hit 5.7 million units, and
sales came in at 5.75 million units, an annual supply and demand
increase of 12.56 and 13.54 percent, respectively, according to the
China Automotive Industry Association (CAIA).
Adding in the 160,000 vehicles that
were imported pushes the nation’s total 2005 sales to 5.92 million
units, comprising a total market dynamic surpassing Japan to become
second only to the United States. In 2006, CAIA projects that market
growth will average out at 10 to 15 percent and hit about 6.4 to 6.6
And so the story is pretty much the
same in all of China’s major metropolises: traffic is bad and smog
is worse. Certainly the government is pouring everything it’s got
into increasing fuel efficiency, developing new technology and
reducing pollution. But the simple fact is: This advancing nation of
1.3 billion is the world’s fastest growing automotive market. And
there is enormous demand to satisfy.
Strategic Short Cut
To answer increasing demand for more
efficient and more sophisticated engines, and to become a
full-fledged player on the world stage of automakers, an alliance of
government and private industry is set to acquire a state-of-the-art
engine production plant. (That’s acquire, not construct.)
If the deal is finalized as expected,
China’s Lifan Group will disassemble the plant, ship the pieces
8,300 miles from its current location, Brazil, and reassemble the
parts in Chongqing, in China’s southwest. If operations commence as
expected in 2008, China will have leapfrogged perhaps decades ahead
in the production of advanced automotive technology.
At a development cost of $500
million, in the late 1990s the cutting-edge plant was built in the
south of Brazil as part of a now soon-to-expire joint venture by and
between Chrysler and BMW. Its product is the 16-valve, 1.6-liter
Tritec, one of the most advanced and fuel efficient engines in the
Once up and running, after focusing
on the Asia market, in 2008 Lifan’s founder and CEO, Yin Mingshan,
expects to export to the EU, branching to the US market in 2009.
Quoted in the
New York Times, Yin said, "Chairman Mao taught us: if you can
win then fight the war, if you cannot win, then run away," he said.
"I want to train my army in these smaller markets, and when we are
ready, we will move on to bigger markets."
Yin faces some competition on the
home front. At the close of February 2006 Dongfeng Honda Automobile
Co., Ltd., a joint venture of Honda and China’s Dongfeng Motor Group
Co., Ltd., celebrated the completion of a 2.8 billion yuan expansion
of its factory in Wuhan, Hubei Province. Annual production capacity
was quadrupled from 30,000 to 120,000 units.
Indicative of another national trend,
greater concern for the environment, the plant will operate under
the "Green Factory" principal, with care for both the natural
environment surrounding the plant and the work environment inside
the plant, according to company officials. Efforts include the
introduction of a new water-based paint system to limit emission of
hazardous substances; promotion of purification and recycling of
wastewater; and reduction of electricity, gas and water use through
improved efficiency in the manufacturing processes.
In coming months Dongfeng Honda will
begin production of the Civic, the famously fuel-efficient vehicle
that has realized cumulative worldwide sales of 16 million units.
Already, sales of CR-Vs rolling off the production line reached
26,244 units in 2005.
Mandating More Miles
China has in place some of the
world's strictest fuel-efficiency requirements.
As of July 2005, all new model
passenger cars and SUVs weighing less than 3.5 tons that are
manufactured or imported to China were required to meet more
stringent minimum fuel efficiency requirements. An SUV weighing up
to 2,400 kilograms (5,300 pounds) must meet or exceed 100 kilometers
per 15.5 liters of gas (15.5 miles per gallon). In 2008, the
requirement rises to 100 kilometers per 14 liters (17 mpg). A
one-ton car is today required to meet or exceed 100 kilometers per
8.2 liters (29 mpg), and in 2008 that requirement rises to 100
kilometers per seven liters (33 mpg).
Energy efficient transportation is a
key part of China's 11th Five-Year Program (2006 to 2010) and a
large part of the overall goal is transitioning government
logistical operations, mass transit and Chinese families into energy
The government has invested more than
1 billion yuan ($120 million) into “green vehicle” research, with 22
technical standards established for the production of electric
passenger cars. Already on the nation’s roads are more than 200,000
alternative fuel vehicles, and more are coming.
The market is evolving and evolving
fast, according to He Dongquan, an authority on transportation with
the Energy Foundation in Beijing. "There's a controversy about
'Green GDP' and how to grow … China is in a transition where
everyone's mind is changing."
High Gear Hybrids
Perhaps most promising for the near
future, offering a way to cut pollution and fuel consumption both by
about 30 percent, hybrid technology is coming on strong and seems
poised to appreciably impact the market.
At the start of 2006, one player
already in the game, Hangzhou-based GEELY Automobile Holding Corp,
began constructing its hybrid plant in Xiangtan, Hunan Province. The
company expects to roll its first car off the assembly line by early
next year. Initial annual capacity is projected at 50,000, reaching
100,000 hybrid vehicles by the end of 2010.
Meanwhile, Sichuan FAW Toyota Motor
Co, a joint-venture between Toyota and FAW, began assembling the
Prius hybrid in China in December 2005. The company seems confident
that a strong market demand awaited their relatively pricier
product. The market price per Prius will be about 288,000 to 302,000
yuan (about $36,000-$38,000), and they expect to sell about 3,000
units in 2006.
Other major players are either
planning to get into the hybrid game or have production lines
already in the works. In addition to the aforementioned, these
include Chery Automobile Corp, Chang'an Automobile Group, Shanghai
Maple Automobile Corp, Shanghai General Motors, and Shanghai
According to Wan Gang, head of a team
of government-sponsored experts that focus on advancing hybrid
automobile technology, China’s makers of cars, trucks and buses will
turn increasingly to hybrid technology. And those already in the
game are paving the way. "These firms have formed China's first
hybrid automobile production base," Wan said.
And yet, while the car market seems
to roll on at hyper speed, Beijing is sending signals that things
may be getting a bit out of hand. The leadership’s long term plan
leans more to moving the nation’s commuters into mass
transit—cleaner mass transit.
In advance of the 2008 Olympic Games,
Beijing’s city managers plan to ditch thousands of older buses in
their municipal transit fleet and replace them with greener
vehicles, some of which will run on clean-burning compressed natural
gas. Beijing’s Vice Mayor, Ji Lin, told China Daily that
there will be 5,000 of the natural gas buses on the city’s street by
And already on the streets of Wuhan,
the capital city of Hubei Province, is a trial fleet of 20
hybrid-electric buses, designed and manufactured by DFM. China’s FAW
Group Corporation (FAW) is also producing hybrid buses.
And in the coastal city of Yantai,
Shandong Province, a high-capacity electric bus plant is now under
construction. After a phase-1 capital outlay of 250 million yuan
($30.9 million), the factory is expected to be fully operational in
2006, according to the higher-ups at China-Rising Motors Tech Zone
Co Ltd. Annual production capacity is projected at 12,000 units,
with a gross revenue estimate of 15 billion yuan ($1.9 billion).
The sooner fuel-frugal cleaner cars,
cleaner buses, and pollution-free vehicles can hit the roads of
China, the better. One does need not be an expert to realize the
obvious: The world’s supply of crude is dwindling and oil-addicted
nations will become increasingly testy about grabbing their share.
Meanwhile (according to the experts),
on the hazy big-city streets of “The Bicycle Kingdom,” it is
estimated that standard internal combustion vehicles belch out at
least 60 percent of the vaporized brew that is this nation’s smog.