Chang-Ran Kim

With close to 150 million vehicles on its roads and new car sales alone adding 5-6 million a year, China is a test case for global automakers pushing their clean, fuel-efficient models and technologies

TOKYO, Japan; April 20, 2007.- While the immediate focus is on meeting voracious demand for cars ranging from low-budget models to gas-guzzling luxury saloons, manufacturers will use this month’s Shanghai Auto Show to showcase their green credentials, hoping to steer China towards supporting technologies in which they excel.

“Automakers are trying to educate the government,” said Ashvin Chotai, director of Asian Automotive Industry Research at Global Insight. “There’s a lot of lobbying going on because the government has not indicated any clear policy yet.”

The focus on the environment comes as China looks for ways to alleviate pollution and damaging traffic congestion without slamming the brakes on an autos sector driving much of the economy’s breakneck growth.

China’s vehicle market is second only to the United States, and is growing fast as incomes rise and cars become more affordable, prompting foreign carmakers and local firms to flood the market with new models.

The passenger car market grew 30 percent last year to 5.18 million units and has kept up double-digit growth in 2007. Most projections see growth of at least 15 percent this year.

ON SHOW

At the Shanghai event, which opens to the media on Friday and to the public from April 22-28, top brand Volkswagen AG will show off its fuel-saving systems based on conventional powertrains such as DSG (direct shift gearbox) and TDI (turbo direct injection) diesel engines.

The German automaker has promised a more than 20 percent reduction in fuel consumption and emissions in China by 2010.

Second-ranked General Motors Corp. is bringing its Chevrolet Volt electric vehicle concept, which won wide media attention at its Detroit introduction in January.

Japan’s Honda Motor Co. will display its FCX fuel-cell concept, a flex-fuel vehicle that can run on a broad mixture of ethanol and gasoline, as well as a home energy station for hydrogen fuel-cell vehicles.

Toyota Motor Corp., which is developing clean vehicles across the spectrum, will concentrate its green-car displays on hybrids such as the Lexus LS600h and GS450h as it tries to navigate the market towards that technology.

“We have to be prepared for anything, but the reason we’re hung up on hybrids is that it’s a technology that can be applied to all kinds of green vehicles in future, such as diesel hybrids or fuel-cell cars,” said Yoshimi Inaba, Toyota’s executive vice president in charge of Chinese operations.

WHERE ARE THE BUYERS?

Toyota made headlines in 2004 with plans to assemble hybrid cars outside Japan for the first time, with local China partner FAW Group. But without tax credits or other state incentives, sales of the locally-made Prius have been half a targeted 3,000 units a year.

“We’ll have to wait for Chinese consumers to get more environmentally conscious,” Global Insight’s Chotai said. “I’m expecting very slow progress.”

Chotai said, however, that hybrids probably had a better chance than diesels — the stronghold of European brands — due to the low quality and shortage of diesel fuel.

Whichever powertrain prevails, the Chinese industry will need technological input from the global leaders, putting them in pole position for when incentives and regulations arrive.

“For the time being, China will rely on guidance from Toyota in the hybrid field and from Honda and others in diesels,” said Koji Endo, auto analyst at Credit Suisse Securities.

“The carmakers that will continue to grow are the ones that are competitive in the field of emissions and fuel economy.”

(Reuters)

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