Domestic carmakers struggle to build affordable green cars

PUBLISHED : Monday, 22 October, 2007, 12:00am
UPDATED : Monday, 22 October, 2007, 12:00am

'There's no such thing as a free lunch.' And that's especially true of the green revolution in the mainland.

Domestic carmakers are struggling to produce 'green cars' - those with low fuel consumption and emissions - at a price low enough to gain consumer acceptance. The country is eager to clear its smog. That is especially a tight schedule with just 291 days before the Olympic Games in Beijing,

But global manufacturers are hoping that the central government will provide them with tax benefits for making green cars, which otherwise could cost 50 per cent more than the petrol-powered vehicles widely used today.

Nissan and General Motors are planning to launch their first green cars by next year - on or before the Beijing Olympics.

Tetsuo Hasegawa, general manager of Nissan's global government affairs department, said the business environment would be more favourable if the government provided tax benefits to make green products more price attractive to customers.

Volkswagen and General Motors, the joint venture partners of Shanghai Automotive Industry Corp, showed their green engines and concept electric passenger cars at the Shanghai international car show in April, while Honda will begin importing and selling its Civic Hybrid through Dongfeng Honda dealers. The models are designed to consume less fuel and thus have lower emissions but pack the same power as medium-sized petrol-run cars.

In general, green cars include electric, fuel cell, hybrid, cleaner diesel and smaller-engine cars.

Many observers doubt that mainland consumers will welcome small petrol-engine cars. That is why the central government intends to shift its policy to encourage the use of cleaner, hi-tech diesel engines. It wants to meet the Euro IV emission standards by early next year, though some regarded this as highly unlikely since few domestic carmakers manufacture diesel-engined cars at present.

The nation missed full compliance with the Euro III emission standards in July because it uses fuel that does not meet new tougher emission requirements for petrol engines.

European emission standards started in 1992 and set benchmarks for the emission of nitrogen oxide, hydrocarbon and carbon monoxide. Euro IV tightened Euro III standards on emissions. For example, it requires that passenger cars reduce their carbon monoxide emissions to 0.5 gram per kilometre from 0.64 gram.

According to industry research, passenger cars that use greener diesel engines can reduce carbon dioxide emissions 30 per cent and sulphur emissions 97 per cent.

But industry experts agree that green cars come at a higher cost. 'Sometimes fuel efficiency and low price are not in line with each other,' said Dong Yang, secretary-general of the China Association of Automobile Manufacturers.

Denis Duchesne, chief executive of PSA Peugeot Citroen's China operations - the joint-venture partner of Hong Kong-listed Dongfeng Motor and Hafei Automobile Group - said if a green car costs 50 per cent more than petrol-engine cars, it will be difficult to lure consumers.

Shi Yaobin, chief director of the Ministry of Finance's Taxation Department, said last month at a vehicle conference in Tianjin that the government was working on preferential taxation policies to promote low-fuel-consumption and environmentally friendly vehicles.

'The government is also thinking of levying punitive taxes on high-fuel-consumption vehicles in line with the practices of Western Europe and the United States as a reference,' he said, without providing details.

Mr Duchesne said PSA Peugeot was interested in developing diesel hybrid cars in the mainland. But this may require government incentives or consumer acceptance of higher prices. '[In fact] there are no difficulties in building green cars in China since all the technologies already exist,' he said.

The company may work on its green projects with its joint-venture partners - Dongfeng or Hafei - or with a third independent party.

Jeroen Struben, a post-doctoral associate of the Sloan School of Management at the Massachusetts Institute of Technology, told science website Earth & Sky that there was a 'tipping point' for alternative-fuel cars. It will come when enough people see them in their neighbour's driveways and on the highway, and there is the necessarily alternative fuel infrastructure.

On the other hand, Nissan, another joint-venture partner of Dongfeng, said its primary 'green project' in the mainland would involve diesel-engine cars under the Nissan Green Project 2010.

Though it hopes for some government incentive, Nissan - working under guidelines set by Japan's Ministry of Economy, Trade and Industry and the central government to implement a green revolution - plans to roll out its first green car during the Beijing Olympics.

'[We hope] that would be a friendly gift to China,' Mr Hasegawa said.