AutoNation
— 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 million units.
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 world.
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 efficient
vehicles.
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 Volkswagen.
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.
The Beautified Bus
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 2008.
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.
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