News I iCET releases the 2011 China Automotive Corporate Average Fuel Consumption (CAFE) report
Beijing – The Innovation Center for Energy and Transportation (iCET) has
released the 2011 China Automotive Corporate Average Fuel Consumption (CAFE)
report, detailing the trends in automotive efficiency in the Chinese market. The
report has found that domestic manufacturers have a long way to go to achieve
2015 targets, and that auto importers are going to have to revamp their entire
approach to the Chinese market to avoid steep penalties.
Domestic
Automakers Face a Steep Learning Curve
China’s 2015 automotive fuel
consumption target of 6.9 L/100 km is posing a challenge for many automakers. In
2011, the average fuel consumption of vehicles made in China was 7.5L/100km,
meaning that in three short years, manufacturers will have to decrease the
average fuel consumption of their vehicles by 8%, or 2.67% per year. Since 2006,
average fuel consumption of new Chinese cars has only dropped an average of
1.36% per year, indicating significantly greater efforts needed by Chinese
companies to improve the energy efficiency of their new vehicles.
New
Fuel Consumption Regulations Create New Market Influence
Starting in
2012, the Ministry of Industry and Information Technology (MIIT) made a dramatic
change to the way the fuel consumption of vehicles is regulated. Instead of
limiting the fuel consumption of every vehicle based on its weight, MIIT now
allows each manufacturer to achieve an average fuel consumption based on the
sales of all its vehicles, otherwise known as Corporate Average Fuel Consumption
(CAFC). However, the policy also demands that vehicles in every weight class
improve their efficiency: smaller cars must improve their efficiency as much as
larger cars do.
Therefore, automakers cannot simply opt to manufacture
smaller cars. They must also improve the performance of the smaller cars that
they manufacture.
The Chinese independent manufacturer with the lowest
CAFC this year was Tianjin First Autoworkers (Tianjin-FAW), with a rate of 6.2
L/100 km. The rating is very low because the automaker’s vehicles are all small.
However, in order to help China achieve its national target of 6.9 L/100 km by
2015, Tianjin-FAW’s vehicles must achieve an average fuel consumption of 5.7
L/100km, likely requiring the use of newer, expensive technologies and advanced
vehicle designs. Although Tianjin FAW had the lowest CAFE of independent
automakers in China, it ranked 28 out of 38 in terms of progress on achieving
its 2015 target.
On average, joint-venture brands were closer to
achieving their targets in China, as seen in the chart below.
Joint-venture brands, despite having a higher CAFC than the independent
brands, also have higher 2015 targets because their vehicles are larger and
heavier. At this time, joint-venture brands are better able to control the
efficiency of their vehicles than independent Chinese brands, thus bringing them
closer to the 2015 targets. The best performing JV manufacturer in 2011 CAFC was
FAW-Volkswagen, at which is currently meeting it’s 2015 target value at 7.6
L/100 km. The joint venture manufacturer with the lowest CAFC in 2011 was
Chang’an-Suzuki, with a CAFC of 6.6 L/100km, currently at 5% above it’s 2015
target.
Automotive Importers Face Stark
Choices
Imported vehicles, with a 2011 CAFC of 10.1 L/100 km, exceed
their 2015 targets by 9%. Representing about 7% of sales in the Chinese market,
these vehicles are typically large, sporty, fuel-hungry luxury vehicles that are
not known for their fuel economy. Because import vehicles are managed separately
from domestic vehicles, importers will not have the option to merge their
numbers with domestic companies in order to adjust their values, leaving them
with stark choices.
Chinese consumers purchase these vehicles because
they are high-performance sportscars or high-end luxury vehicles, so it will be
difficult for manufacturers to change their vehicles significantly and still
meet market expectations. However, in order to meet their CAFC targets, auto
importers – including luxury brands – will need to successfully market smaller,
very efficient vehicles in the Chinese market, or introduce
zero-tailpipe-emissions electric vehicles onto the market in large numbers.
Yet these brands will face competition in the small-vehicle segment in
China. Domestic manufacturers, particularly joint-venture manufacturers are
manufacturing high-quality vehicles that likely already meet the needs of the
market in China. Automotive importers, subject to high import taxes, will have
little means of competing in this market.
Without adjusting the
structure of the product lines they sell, auto importers face stiff fines that
could amount to that will significantly increase the prices of their vehicles –
and will also contribute to China failing to meet its national targets. For a
company that exceeds their target by 1 L/100km in 2015, fines could amount to
hundreds of thousands of RMB per vehicle sold.
According to the “Energy
Saving and New Energy Vehicle Industry Development Plan (2012-2020)”, by 2015,
passenger cars’ average fuel consumption should decrease to 6.9 L/100 km and
energy saving passenger cars should decrease to 5.9 L/100km; By 2020, normal
passenger cars’ average fuel.
consumption should reach 5 L/100 km, and
energy saving passenger cars should achieve an average of 4.5 L/100km. It will
be essential for domestic carmakers as well as importers to bring smaller, more
energy efficient, and new energy vehicles to the market in large numbers.
Fuel Economy Standards Save Huge Amounts of Fuel
Since
2006, fuel economy standards have saved huge volumes of fuel in China. Analysis
by iCET indicates that from 2006 to the end of 2011, more than 3.5 million tons
of gasoline had been saved, resulting in avoided emissions of 11 million tons of
greenhouse gases. Fuel economy standards globally are the greatest proven method
of reducing fuel consumption and GHG emissions from the transport sector, and
their continued tightening will continue to help governments around the world to
provide transportation for their citizens, while also providing a cleaner, more
sustainable living environment.
iCET holds ‘2011 China Automotive Corporate Average Fuel Consumption (CAFE) press conference” in Beijing.