China to introduce heavy truck fuel economy “management measures” from 1 February 2012

Date Posted: 2012-01-19

http://selectiverationality.com

There’s an interesting albeit rather vague Xinhua article floating around from 18 January 2012. It details an “exclusive” interview with Miao Wei, the chief of the Ministry of Industry and Information Technology, on the need to improve fuel economy for heavy trucks, a program for managing which apparently starts on 1 February 2012.

• What’s it about and who benefits? The article provides more evidence of the importance of improved fuel economy not only in the US, Japan and Europe but also in China. In that sense this is old ground and we should look at the usual “fuel economy” auto parts candidates, especially those with diesel exposure. Weichai Power is a company with a great position in the China diesel engine market (and impressive production facilities) and is surely a good longer term play. Cummins would be the another choice, perhaps a bit boring. I note that Weichai can’t manufacture diesel fuel injectors in-house so it has to buy all its needs from unlisted Bosch or from the Toyota group’s Denso, as Weichai confirmed to me at our  meeting last year. The other obvious play in the US would be BorgWarner. For gearboxes, I would go with Aisin Seiki though of course BorgWarner also has exposure.
  
• Energy security trumps everything. When I met with CAAM in 2011 they made it clear that (for now) energy strategy takes priority over stimulating the auto market. The article gives the same impression and includes a number of background facts and figures to underline the simple problem facing China, which is that the vehicle park is increasing rapidly (93.5m at the moment, forecast to hit 200m in 2020) and thus its dependence on imported oil for fuel is also rising rapidly to keep pace. Miao Wei notes that the oil import dependency ratio was 51.3% in 2009 and rose to 53.7% in 2010 and 56.6% in 2011, which is a concern for the state. China wants more cars, but it’s keenly aware of the energy implications.
• Heavy trucks are the main users of fuel. China used 439m tons of oil used in 2010, equivalent to 307m tons at an extraction rate of 70%, so the 140m tons of diesel fuel used made up 46% of the total. Heavy vehicles account for only 13.9% of vehicle volumes but consume 49.2% of vehicle fuel. The Minister argues that reducing heavy vehicle consumption by 10% will have a huge impact on fuel demand. He also points out that compared to trucks in Japan and Europe the equivalent heavy vehicles in China use 20% more fuel, (though elsewhere he argues that the gap has closed somewhat).
• It’s not clear what concrete measures will be taken. However, Miao Wei makes the point that fuel consumption is intimately related to engine performance, including combustion, electronic control and high-pressure injection systems and that transmission and weight-reduction technology also have a major part to play. So no real surprise there; this is the orthodox industry view. There’s also some chest-beating by the Minister who claims that no other country has “really” implemented a program of commercial vehicle fuel economy management and that this initiative puts China at the forefront internationally. (And there was I naively thinking that the Europeans at least were doing this with Euro III, ten years ago.) But what, in the short term, is going to happen on 1 February? Maybe I’m misreading the article but there doesn’t seem to be any concrete plan.