China Auto Makers Shift Focus to Energy Efficiency
Beijing is using the power of the market to force the industry to compete on price, rather than relying on consumer tax breaks, by scrapping a vehicle-replacement program but retaining a subsidy for the purchase of green cars.
March 24, 2011
SHANGHAI – The Chinese government is giving a clear message to China’s auto makers that it wants the industry to become more efficient and cars to be more environmentally friendly.
Beijing demonstrated its ability to accomplish this goal by using the power of the market to force car manufacturers to compete on price, rather than relying on consumer subsidies, by scrapping a national vehicle-replacement program in January.
Officials also reversed a tax break for the purchase of low-emissions vehicles with engines smaller than 1.6L by restoring the tax to 10% from 5% set in 2009.
However, consumers buying energy-efficient cars still can enjoy a subsidy of RMB3,000 ($456) introduced in July 2010 – a clear signal to the public and car companies alike that green pays.
The major auto makers are listening. “We will continue to bring to the Chinese market quality, safe and fuel-efficient vehicles from our global platforms while developing cars specifically for the Chinese consumers,” a Ford China spokeswoman tells Ward’s.
The auto maker says it sold 582,000 passenger vehicles in China in 2010, up 40% from recessionary 2009, with the Focus, Fiesta and Transit van leading the way.
“Ford has a strong commitment to the Chinese market, where a large part of our global growth in the future will come from,” the spokeswoman says.
Geely-owned Volvo investing in R&D center in China to develop more fuel-efficient cars.
Ford makes vehicles in China through a joint venture with Chongqing Changan and Mazda. The U.S. auto maker also holds 30% of Jiangling, which builds the Transit van.
Ford also is looking at alternative-energy vehicles as a potential opportunity for sales here, but has not yet developed specific production plans, the spokeswoman says.
Some major players already are a step ahead. In January, Volkswagen China President Karl-Thomas Neumann told the Chinese media the German auto maker plans to invest E10.6 billion ($14.8 billion) in the 2011-2015 timeframe for new-car development, including electric vehicles, and expanding production capacity.
Shanghai General Motors says a new version of the Buick LaCrosse powered by a mild-hybrid engine system will hit assembly lines in China by the end of this year.
Domestic car companies are not standing aside. Geely, the Hanghzou-based privately owned auto maker that acquired Volvo in 2010, is in talks with Shenzhen-based electronic components firm Foxconn International about supplying Geely’s electric vehicles.
“We are talking about cooperation on new-energy vehicles, specifically electric cars," Geely spokesman Victor Young says, noting an agreement has yet to be reached. He also emphasises the importance of low-emission cars in Geely’s strategy.