South Korea Raising Fuel-Efficiency Targets for Cars

SEOUL – The government of South Korea is expected in 2014 to announce a new CAFE standard that could increase target performance to 47 mpg (5.0 L/100 km) in coming years.

A senior official with the transportation energy team of Korea Energy Management expects the change to benefit the automotive industry by encouraging automakers to develop more fuel-efficient vehicles, including hybrids, electric vehicles and clean diesels.

“Korea’s first CAFE standard was too easy to meet, leading to no incentive to develop fuel- efficient vehicles,” the official tells WardsAuto.

According to the country’s Ministry of Trade, Industry and Energy, the current CAFE standard of 27.6 mpg (8.5 L/100 km), introduced in 2012, applied to only 30% of automakers’ total production volume. This year, 60% of production volume is required to meet the standard.

That number will rise to 80% in 2014 and 100% in 2015, when the 27.6-mpg standard is expected to expire. Beyond 2015, South Korea’s CAFE standards are undecided.

The environment ministry and the Korean Environment Institute published a report in 2009 entitled “Korea’s National Green Growth Strategy and Environmental Policy” that suggested a 47-mpg CAFE standard by 2020. That report also outlined the South Korean government’s plan to voluntarily reduce greenhouse-gas emissions 30% by 2020. Four years later, both plans still are in place.

President Park Geun-hye reiterated the 30% emissions-reduction target during the opening of the headquarters of the United Nations Green Climate Fund on Dec. 4 in Songdo. In light of this, some in the industry expect the new CAFE standard to be higher than the 47-mpg target that has been under discussion thus far.

The KEMCO official is one of these people. Although he is unsure of when the announcement will come, he expects the government to set a new standard for car fuel efficiency to take effect in 2016.

That new standard could go “well beyond” the one suggested in the 2009 report and could require South Korean automakers to improve the fuel efficiency of their cars as high as that of Japan’s proposed 2020 standard of 54.8 mpg (4.1 L/100 km) or even the European Union’s proposed 2020 standard of 64.9 mpg (3.6 L/100 km). The official anticipates South Korea’s new CAFE standard to be fully implemented by 2020 or 2025.

Not everyone favors the proposed changes.

“Given the regulations, consumers may be forced to choose something they don’t necessarily want,” says John Schuldt, chief marketing officer-Ford Korea. Vehicle sales could spike before the new regulations take effect because market demand is “pulled ahead,” as happened when the Car Allowance Rebate System, informally called Cash for Clunkers, was implemented in the U.S.

For governments to legislate new fuel-efficiency standards is one thing; for drivers to achieve those numbers in real-world driving is another.

Regarding this, the KEMCO official cites a feature of South Korean fuel-efficiency controls he says does not exist in either the U.S. or European markets: A 1989 law requiring that manufacturers and importers to label their vehicles with fuel-efficiency information allows  KEMCO to randomly select vehicles after manufacturing and test them for compliance with their marketing data.

The official also says consumer groups can work with KEMCO and the Trade, Industry and Energy ministry to select cars for this “market surveillance” and, if discrepancies are found, automakers can be fined and forced to modify the fuel-efficiency label information. However, even if discrepancies are found, the 5 million won ($4,760) penalty is “negligible.”

In spite of this, the KEMCO official says under current CAFE testing procedures, his office through early December had not received any complaints about fuel-efficiency discrepancies for the year. He says this makes South Korea the second country in the world after the U.S. to have fuel-efficiency labeling standards that “reflect real-world driving.”