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China's New Fuel-Economy Standards To Challenge Automakers

Stringent new fuel-economy standards in China will force multinational automakers to upgrade their vehicles as Beijing moves to regulate gas consumption and curb its growing dependence on oil, a Washington, D.C.-based research group warned Nov. 9. The regulatory tightening is set for two phases -- one in 2005 and the other in 2008. When completed it will make China's fuel-consumption standards overall more strict than the United States', the World Resources Institute said in a report.

The environmental think tank said that if the United States were to meet the Chinese standards announced in September, average auto fuel economy would need to increase by 5% in 2005 and 10% in 2008.

"The new standards are designed to bring about rapid changes to the Chinese vehicle fleet, including the introduction of more advanced technologies," the report said.

While questions remain about enforcement, and future oil and auto production plans, light trucks, for one, would be significantly affected because that segment requires more fuel-economy improvements to bring them up to scratch. While 66% of autos sold in China currently meet the 2005 standards and 35% today would meet the 2008 levels, only 4% of sport utility vehicles (SUVs) and minivans would meet next year's changes, according to the World Resources Institute.

"As a result, the standards are likely to disrupt the future plans for automakers who intend to introduce larger, more powerful vehicles into the Chinese market," the report said.

Furthermore, the new Chinese fuel economy standards would affect companies differently. "GM is likely to face the highest cost in the industry to comply with both phase one and phase two standards because its vehicles have to cover the largest gaps in fuel efficiency to become compliant with the new regulations," the report stated, adding that Peugeot Citroen, Ford and Toyota are best positioned to meet the requirements.

Copyright Agence France-Presse, 2004

TAGS: Regulations
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