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Executive Summary I n 1991 the Chinese government published its eighth five-year plan (1991â1995), which designated the automotive industry as a âpillar industryâ that would drive the economy in the twenty-first century. Accordingly, in its most recent five-year plan for the Chinese automotive industry (2001â2005), the government stated that its immediate goal is to produce over 1 million cars a year. At present, China has relatively few motor vehicles per capita, and, of the cars on its highways, few are privately owned. In 2001 China had 18 million vehicles, of which 5 million were cars. If Chinaâs number of motor vehicles per capita were comparable to the world average, its fleet would have to total 160 million, with 10 million new and replacement vehicles acquired each year. The 2001â2005 plan for the automotive industry calls for its massive restructuringâfrom 118 individual manufacturers to 3 large automotive groups and from several hundred parts suppliers to 5â10 large supplier groups. The industry also is encouraged to produce, independently of foreign manufacturers, a Chinese economy car, utilizing a 1.3-liter engine and meeting Chinese emissions and fuel economy standards, that could be purchased for less than RMB80,000 ($9,800). Investments in highways, oil and gas pipelines, and other transportation infrastructure are expected to accompany the expansion of car ownership. Assuming continued economic growth, it is highly likely that Chinaâs vehicle fleet will grow rapidly. Although such a rapid growth will bring many benefits to China, it also will present its social, environmental, and economic systems with serious challenges. 1
2 PERSONAL CARS AND CHINA In mid-1999 representatives of the Chinese Academy of Engineering (CAE) visited the U.S. National Research Council (NRC) to explore the prospects for collaboration between the two institutions on a study of the future of the personal car in China. The study was to suggest strategies for developing a Chinese national car, as described in Chinaâs five-year plan for the automotive industry, and the role of such a car in the national transportation system. It would take into account Chinaâs social develop- ment, opportunities for cooperation between government and industry, and the impact of a large increase in the number of private cars on sus- tainable development. The study also was to examine the various options that might be available to mitigate problems such as increased conges- tion, pollution, and energy consumption. In 2001 the study committee, composed of an equal number of Chinese and American experts, began work. THE IMPACT OF RAPID MOTORIZATION ON CHINAâS CITIES AND ECONOMY Whether from domestic or overseas sources, a rapid increase in the number of cars in China will produce both benefits and liabilities. In the short term, a more mobile population will have greater choices in hous- ing, employment, shopping, and leisure. But the experience of other coun- tries suggests that in urban areas, in the absence of government interven- tion, poorer air quality, more auto accidents, and increased congestion will negatively affect all urban residents. In the longer term, the devel- oped areas of cities may expand as populations and their employers move outward from the city center, away from congestion and pollution. This expansion would impose some hardships on those without automobiles and additional costs on the government for roads, services, and public transport. In rural areas, the effects will be more benign, bringing new opportunities for employment and other economic benefits with little added congestion or pollution. Local governments will have increased responsibilities for traffic management, regulation, and enforcement. The average cost of new cars will increase as national performance standards on emissions, efficiency, fuel quality, and safety are applied. As energy consumption almost certainly rises, China will become more dependent on imported petroleum. Unfortunately, some of the important issues identified could not be explored in detail within the present study. For example, what effect will motorization have on inequities among various segments of the popula- tion? What will be the cost of and method of financing for the new infra- structure that will accompany increased motorization in China? To what extent will the air pollution from the emissions that will accompany the
EXECUTIVE SUMMARY 3 proliferation of cars in China have global implications for climate change? An expanding Chinese automobile fleet suggests that China will become a major petroleum importer; what effect would that have on the world demand for oil? Because these issues were beyond the resources available for the study, it was only possible to recognize their importance and to leave them for examination in later studies. Furthermore, the details and costs of implementation of the committeeâs recommendations will require a comprehensive analysis of specific urban development patterns, market forces, public revenues, and expenditures that was beyond the scope of this study. THE EXPERIENCE OF OTHER COUNTRIES Many other countries have gone through a similar motorization pro- cess, though few in so short a time. Some countries provide models for coping with the economic, environmental, and societal effects of rapid motorization in cities, and others offer successful examples of rapid de- velopment of a viable, independent automotive industry. Singapore, Hong Kong, Curitiba, and Houston provide different models for attempt- ing to control urban traffic congestion, although none of them was trying simultaneously to develop a local automotive industry. The United States, Europe, and Japan have different approaches to controlling emissions and limiting fuel consumption. The development of an indigenous automo- tive industry can be observed in the varied experience of Japan and Ko- rea, and a government-industry partnership to develop advanced vehicle technology was recently attempted in the United States. Each of these ex- periences offers a different lesson, and some were more successful than others in achieving their objectives. Though none of them is closely repro- ducible in the present situation, a careful examination of their experiences will be helpful to planners in China. RESEARCH AND DEVELOPMENT The Chinese automotive industry faces significant challenges in achieving independence. In the medium to long term, the industry must adjust to the effects of Chinaâs membership in the World Trade Organiza- tion (WTO), which will allow independent foreign automobile manufac- turers and importers into China for the first time and may open the do- mestic market to an increased volume of imports that would challenge even the joint ventures in the growing Chinese market. Presently, China spends a smaller percentage of its gross domestic product (GDP) on automotive research than any of the automobile-ex- porting countries and has limited trained and capable human resources in
4 PERSONAL CARS AND CHINA this area. Moreover, the current structure of its joint ventures with major producers does not encourage the transfer of technology to the Chinese partners. The result is that, at present, China does not have the indepen- dent capability to develop world-class vehicles. The Chinese automotive industry must, then, find ways to maintain currency with the research and development that is actively under way in several countries on the most promising technologies. In the short term, it will have to invest sub- stantially to achieve capability in technologies such as advanced gasoline and diesel power trains, the application of sophisticated electronic con- trols, emissions control technologies, the use of new materials, and the application of complex engineering methods to optimize vehicle perfor- mance. To achieve long-term competitiveness in the world marketplace, the Chinese also must stay abreast of and contribute to emerging techni- cal developments that may not materialize for 15â20 years. The challenge will be to maintain a proper balance between short-term and long-term needs. The industry cannot become competitive by concentrating its re- search only on one time frame. Meanwhile, it should attempt to develop partnerships with foreign producers that offer Chinese companies more access to evolving product and process technologies. RECOMMENDED KEY ACTIONS To meet the challenges presented by growing motorization and its environmental and social consequences, as well as Chinaâs entry into the WTO and the restructuring of its industry, the Chinese government and the automotive industry should consider the following key actions. â¢ The government should establish national standards for vehicle attributes such as low emissions, fuel efficiency, and safety. The goal set forth in the five-year plan for the automotive industry of adopting nation- wide emissions standards on a par with European standards for vehicles and fuels by 2010 is an important step. Meanwhile, the Chinese govern- ment and automotive industry should develop and implement a process that will regularly assess the appropriate levels of vehicle performance standards, fuel standards, and infrastructure needs of the country. â¢ To achieve the 2010 emissions target, China must substantially im- prove the quality of fuels, with specific emphasis on drastically lowering the sulfur content. To meet European emissions standards, China also should adopt fuel quality standards identical to those of the European Union. Such a step will require major upgrades and the construction of new refineries, improved production efficiencies, and expanded foreign partnerships. â¢ State-owned motor vehicle enterprises should be restructured to
EXECUTIVE SUMMARY 5 make them more competitive in the world marketplace. The government should facilitate the introduction of market-oriented management systems and the removal of social burdens. â¢ The government and the automotive industry must carefully con- sider their roles in developing the industryâs capabilities. For example, they could jointly fund government-industry long-range R&D projects, the government could directly fund specific industry projects such as re- finery upgrades and expansions, and industry could increase its spend- ing on research and development. Research on advanced technologies, including hybrid vehicles, fuel cells, and alternative fuels, and on conven- tional technologies, including advanced gasoline and diesel power trains, pollution controls, electronic controls, and new materials, could provide the tools needed to design and develop world-class vehicles. Because for- eign original equipment manufacturers (OEMs) are highly involved in the Chinese automotive industry, the government must soon decide how much these foreign members will be allowed to participate in any govern- ment-industry program. â¢ To meet the need for new technologies and attainment of environ- mental goals, the government should organize and support government laboratories and academic institutions in the pursuit of next-generation automotive technologies. Industry, including small companies, should be encouraged to participate. The government also should expand its sup- port for academic programs that train students in automotive research and technology. â¢ Because the overseas joint venture partners possess much of the automotive technology that would be needed by an indigenous Chinese industry, ways should be sought to enhance the sharing of intellectual property. This may require that the joint ventures be restructured to allow the Chinese partners to participate more fully in research and develop- ment, and Chinese enterprises may need to limit their partnerships each to one foreign company to maximize trust and confidence, with appropri- ate long-term sharing of technology and knowledge. â¢ The highest growth sector in the future vehicle market is likely to be that for the small âChina carâ described in the five-year plan for the automotive industry. It should utilize technologies that allow high fuel efficiency, while providing reliable, comfortable, and safe transportation at an affordable cost. To be competitive, it should have attractive attributes that differentiate it from most imported cars in the growing Chinese mar- ket. Although a specific technical approach is not prescribed in the report, the various technical options for achieving both the near-term and the long-term product are described. â¢ The national, regional, and municipal governments must provide the infrastructural capacity needed for the increased motorization. In the
6 PERSONAL CARS AND CHINA cities, the municipal governments should undertake comprehensive devel- opment planning and provide additional road space and improve traffic management while minimizing social disruption. The new construction in cities should not be limited to ring roads and flyover highways; arterials also should be improved to relieve congestion in the neighborhoods and business areas while increasing the proportion of urban space dedicated to transportation. Meanwhile, the available schemes for road pricing should be explored to provide incentives for more efficient use of road space and financial resources for road maintenance and construction. â¢ As motorization proceeds rapidly in China, it is imperative that attention be directed to providing public transportation that is convenient, comfortable, sufficiently widespread, safe, and affordable. Recognizing that the fraction of the population that will own personal cars will be small for many years, China must maintain a balance between public transpor- tation, nonmotorized vehicles, and private cars to ensure that the nondriving public, including bicyclists, is served adequately.