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The "limit value" of fuel standards to change the rules of the car market
China is set to introduce its first-ever fuel economy standards for passenger vehicles, marking a long-anticipated policy shift in the automotive sector. Xu Banmin, a senior engineer at the China Automotive Technology and Research Center, revealed that the mandatory national standard "Limits on Fuel Consumption of Passenger Vehicles" will be officially announced on October 28 during a press conference. The new regulation has been largely approved by the State Council, aligning with the government's broader goal of curbing rising crude oil consumption.
According to Xu, if implemented gradually, the new standards could reduce China’s vehicle fuel consumption by nearly 15% in 2008. However, he emphasized that the current limit is not yet as strict as it could be. He noted that China’s 2008 standards will be comparable to U.S. levels from 2002. In fact, the China Automotive Technology and Research Center had previously referenced U.S. regulations from 2001 and 2002 when developing its own standards. In recent years, however, U.S. fuel efficiency rules have seen minimal changes.
In contrast, China’s approach resembles Japan’s, where different fuel efficiency targets are set based on vehicle weight. Each model must meet its respective standard. Notably, the new limits allow for a 6% relaxation for certain special passenger vehicles, which include various special structures, though these relaxations cannot be combined.
Industry insiders believe that large-displacement, high-fuel-consumption cars—especially SUVs—will face significant pressure once the standards take effect. This could dampen the growing popularity of SUVs. However, Great Wall Motor’s spokesperson, Shang Yugui, claims that the Saif model, an economical SUV, already meets the first phase of the new standard. He also mentioned that Great Wall has one of the largest engine R&D and production bases in the country, ensuring future compliance.
Hua Dongtai Automobile Sales’ Yu Dong added that Huate’s new diesel model consumes only 7 to 10 liters per 100 km, compared to 14 to 18 liters for similar gasoline models. Still, foreign automakers may resist due to increased costs associated with adapting their models for the Chinese market.
Toyota’s representative in China, Mr. Guo, stated that no official document has been released yet, so they are not commenting. Meanwhile, Professor Ye Minghai from Tongji University pointed out that domestic manufacturers like Volkswagen may not need to redesign entire models, but companies planning new models in China, such as Toyota and GM, will have to adjust accordingly.
Beijing Hyundai’s Sun Zhenjie noted that engine modifications under the new standards would cost only a few thousand dollars per car, which is manageable. However, he warned that poor fuel quality in China could negate any improvements, potentially damaging engines. He stressed that improving fuel quality requires major investments from PetroChina and Sinopec, and whether they are willing to make those investments remains a key issue.
Sun also pointed out that while the new standards represent a long-term vision, implementation challenges remain. Yet, the impact of this policy could be far-reaching, subtly reshaping the auto industry's landscape.
China has become the world’s second-largest oil consumer after the U.S., surpassing Japan in 2003. Currently, 30% of China’s imported crude oil is used by automobiles, and this share is expected to rise to 50% in the future. China’s current fuel economy performance is significantly better than both Japan’s 2010 target and the EU’s goals, showing that the country is already ahead in some aspects.
At a recent meeting on motor vehicle emissions, Xu Tamming highlighted the importance of controlling vehicle fuel consumption for energy security. Since 2002, the China Automotive Technology and Research Center has worked with 10 industry companies to develop testing methods and fuel consumption standards. These were finalized in 2004 and submitted to the WTO, with approval from the State Council later that year.
An unnamed expert noted that the rapid development of these standards reflects the government’s push to counter local policies that still restrict small-displacement vehicles. Despite central government support, many cities, including Beijing and Shanghai, continue to impose restrictions on mini cars.
The new standards are seen as a corrective measure against local protectionism, with potential impacts on the entire auto market far greater than just market effects. With rising oil prices and supportive policies, low-energy, small-displacement cars are poised to reshape competition in the auto industry.