China Powertrain Trend in The New Environment
Tianshu XinDirector of Global Powertrain Forecasting
Copyright © 2009 IHS Global Insight. All Rights Reserved. GLOBAL AUTOMOTIVE CONFERENCE
Presentation Outline
• What challenges are we facing in China?
• How does legislation address energy and environmental concerns?
• How will China respond to the challenges? – What impacts will the government’s latest
development plan have on the market?
– Will EV achieve breakthrough in China?
Copyright © 2009 IHS Global Insight. All Rights Reserved. GLOBAL AUTOMOTIVE CONFERENCE
What Challenges Are We Facing?
Nation Challenges• Environmental concerns• Lack of oil resources• Traffic jam
Auto Industry Challenges• Irrational industry
structure • Lack of technology know-
how• Weak independent R&D
capabilities• Incomplete market
demand/incentive policy
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2008•Phase II Fuel Consumption Standard•Revised Consumption Tax2006
•New Consumption Tax•New Fuel Price Policy
2007• National Climate Change Programme
• Euro III Emission Standard• Govern Alternative Fuel vehicle development
Legislation Addresses Energy and Emission Concerns. But It Might Not Be Enough
1994Auto Industry Policy
2004•Overloading Restriction•New Auto Industry Policy•EURO II Emission Standard Implementation•Auto Loan Policy
2005•New Official Vehicle Classification System•New Local Content Regulation•Auto Distribution Regulation•Phase I Fuel Consumption Standard•Hybrid Standards
Sustainable Growth can only be achieved with appropriate regulatory guidance
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StrengthStrength• 30% fuel efficiency• 25% better torque• 30% less CO2 emission• Mature diesel technology
WeaknessWeakness• Higher initial cost
Can Diesel Cars be the Solution in China?
OpportunityOpportunity• Uncertain market:
Dieselisation or Hybridisation?• Lack of oil resource• Increasing consumer fuel
economy awareness
ThreatThreat• Poor customer perception• Hybrid technologies• No difference on fuel price• Poor diesel quality• Lack of government’s financial
support
0.01.02.03.04.05.06.07.0
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-09
Fuel PriceFuel Price
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0.9%0.6%0.7%
0.9%
1.3%
1.3%
1.3%
1.3%1.2%
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0.0%
1.0%
2.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Diesel Solution is Unlikely to Be the Winner
Jetta was and still is the only diesel sedan with mass production.
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Can Gasoline Technologies Provide the Solution?
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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Gas
olin
e En
gine
Pow
er D
ensi
ty (k
w/l)
Local Engine KW/L Imported Engine KW/L
• The localisation of advanced engines help to reduce the gap of power density between locally produced and imported gasoline engines.
• Technical support from the independent engineering houses such as AVL and FEV also assists local OEMs in designing more advanced gasoline engines.
The power density gap has been closing very quickly
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Is the Evolution of Gasoline Technologies Significant Enough?
0%
1%
2%
3%
4%
5%
6%
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8%
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%
10%
20%
30%
40%
50%
60%
Turbocharger Gasoline DI VVT
Gasoline turbocharger will rise due to trend of downsizing
Gasoline direct injection will only achieved modest growth due to poor fuel quality and higher cost
Variable valve train will become popular
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But Chinese OEMs Are Still Behind
Japan
China
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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Japan USA W. Europe World China
4 years
>10 years
kW/LChina is behind Japan for more than 10 years
Gasoline Engine Power Density
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2008•Phase II Fuel Consumption Standard•Revised Consumption Tax2006
•New Consumption Tax•New Fuel Price Policy
2007• National Climate Change Programme
• Euro III Emission Standard• Govern Alternative Fuel vehicle development
2010 …•Euro IV Emission Standard•Government subsidies on alternative-powertrain•Emission Tax•Stricter Fuel Consumption Standards•Euro V/VI Emission Standards
More Drastic Changes are Needed…
1994Auto Industry Policy
2004•Overloading Restriction•New Auto Industry Policy•EURO II Emission Standard Implementation•Auto Loan Policy
2005•New Official Vehicle Classification System•New Local Content Regulation•Auto Distribution Regulation•Phase I Fuel Consumption Standard•Hybrid Standards
2009• Fuel Tax• Development Plan to Aid Auto Industry
• Stimulus Package for New Energy Vehicles
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0
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12,000
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18,000
10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 30,000km/year
Fuel
Cos
t and
Roa
d M
aint
aine
nce
Cos
t rm
b/ye
ar
1.6L with fuel tax 1.6L with RMF SUV with fuel tax SUV with RMF
Advantage Disadvantage
Impact of Fuel Tax on Consumers is Marginal
• Fuel consumption: Excelle 1.6L MT 8L/100km;
CR-V 2.0L 2WD AT 10L/100km
• Road Maintenance Fee: 1200 RMB/Year
• Gasoline Price: 5.2 RMB/L, including 1 RMB/L fuel tax
Tax:1
4.2
Tax:0.8
4.08
0
2
4
6
rmb/
lFuel Price Structure
Gasoline Diesel
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Japan 1.0L
Japan 1.5L
Target 1.5L
Target 1.0L
China 1.6L
China 1.5L
China 1.0L
0%
10%
20%
30%
40%
50%
60%
70%
80%
2005 2006 2007 2008 2009
Ambitious Target? Will China Become a Kei Car Market
Purchasing Tax Cut
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Learn from Best Practice with an Opportunity to Leapfrog
Plug-in Hybrid
•Downsizing•Gasoline valve train•European emission standards•DCT
•GDI•Strong downsizing•Hybrid focus•Small car•CVT
•C02 Focus•Diesel CMR•Strong downsizing•DCT
•Stricter emission stand.•Gasoline valve train•Automatic Trans
Legislation&Technology
EV
Non Plug-in Hybrid
Diesel
Gasoline
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SAICRoewe 750 Shanghai EV Shanghai FCV
JAC
GAICBingyue
Concept car Concept car
HafeiSaibao
GeelyPanda
LiebaoLiebao
Lifan320 EV
CheryTiggo 3 Fulwin
BYD
F6DM
ZOTYEe6
Riich m1
Kylin
FAWBestun B50
2008EV
DFMShuaike EV
BAIC863
WandeEV
ChangAnJiexun
Aeolus
GreatwallKulla2 EV
Haimame
NissanNuvu
ToyotaCamry Hi-CT Prius
Hyundai AVANTE
HondaInsight Civic
SuzukiSX4 FCV
FCHV
FCX Clarity
BenzS400
BMWMini E BMW7
There is No Shortage of Innovation…
I-Car
FC
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Government Target: Establish 500K production capacity for new energy vehicles (HEV+BEV+FCV) by 2011 AND sales of these vehicles account for 5% of Passenger car sales (425K) by 2011
Short Term Target with a Long Term View
425K
The fuel saving only accounts for about 1.4% of 2008 imported oil. The fuel saving is NOT significant enough to reduce China’s reliance on oil import.
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Cost
InfrastructureIndustry
Standard
Behaviour
Build Infrastructure
Quick battery recharging stations/swap stations
Household charging facilities
Set up Standards
•Industries
•Technical Foster Demand
Consumer education
Financial incentives
Reduce Cost
Vehicle
BatteryDevelop Industries
Battery
Motor
Control system
What Chinese Government Would Like to Achieve…
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Actions From Chinese Government
6.0100%Pure EV25.0100%Fuel Cell
3.22.8
10%-20%Maximum Electric Power Rate
5.0>40%
5%-10%Hybrid
4.54.230%-40%
4.23.620%-30%3.20.410%-20%
30%-100%20%-30%BSG*Fuel
SavingVehicle Type
Subsidy on Public Use PCs and LCVs (rmb0000/unit)
*Belt Starter GeneratorNote: Plug-in hybrid are covered in the maximum electric power rate over 30%
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Cost is Too High for Consumers
Consider the following…BYD F3 1.6AT BYD F3DM
Purchase Price: 68,000 RMBCombined Fuel Consumption: 12L/100Km
Purchase Price: 149,800 RMB Government Subsidy: 50,000 RMBElectricity Consumption: 16KWh/100Km
Adjusted Price Difference: 31,800 RMB
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And Payback Period is Too Long, But if…
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sand
s rm
b
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Initi
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utla
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(Ele
ctric
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ost
1.6AT+Fuel Cost DM+Peakhour Charging DM+Offhour Charging Cost Reduced DM+Peakhour Charging
Assume 15,000 Km/year, 10% annual increase of gasoline price and 2% rise of electricity price
Less sensitive to charge timing leads to more flexibility
Economy of scale achieved if 200K units reached. The cost to the government will be 10 billion RMB.
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And Cheap Oil Has Dried Up -Meanwhile, Competition is on for Fuel Efficiency
WTI Oil Price (Annual Averages)
Gasoline Retail Price(Annual Averages)
Short term volatility and long term return to high oil price and
pressure for Fuel Economy
Tipping Point?
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Hybrids and EVs Will Have a Significant Role to Play in China
All Hybrid and Electric Passenger Car Sales
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
China has an opportunity to leapfrog in Plug-in Hybrid and EVs.
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Points to Take Away…
• Chinese government is taking a greater step to meet its challenges and the focus will move to sustainable growth
• Conventional powertrain technologies will still play an important role in reducing fuel consumption and emission
• However, China presents a great opportunity for new energy vehicle development
• Develop your Winning Strategies - shift the attention from low cost to advanced technologies – “Bring the Global Powertrain to China” – Mr Fritz Henderson, GM CEO
• BYD Phenomena!!!