China Passenger Vehicle Fuel Consumption

Development Annual Report 2016

The Innovation Center for Energy and Transportation

September, 2016

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Executive Summary

One of the main drivers of the national increase of oil consumption, greenhouse

gases and pollutant emissions is the rapid growth of passenger vehicles ownership in

China over the past decade. International experiences demonstrate that fuel economy

standards are one of the most effective policy initiatives for improving vehicle fuel

efficiency, promoting technological development, and reducing greenhouse gas

emissions.

China started implementing its fuel economy standards in July 2005. Since then,

China’s fuel economy standard regime has expanded the original by-vehicle

weight-group fuel consumption limitation standard to also include by-vehicle

weight-group fuel consumption targets, corporate average fuel consumption targets,

also known as CAFC, and imported vehicles inclusion (as of Phase III, since 2012).

The Innovation Center for Energy and Transportation (iCET), as the only domestic

non-governmental organization to participate in China’s passenger car fuel consumption

standards system development, continues to track and analyze development of China’s

passenger car fuel consumption standard implementation. iCET’s efforts are primarily

aimed at advising policy-makers to design and enforce a robust and effective standard

regime.

iCET’s “2016 China Passenger Vehicle Fuel Consumption Development Annual

Report” – the sixth report of its kind – analyzes the gaps of Phase III and IV of China’s

fuel consumption standard based on China’s 2015 reported fuel consumption (FC)

data and production of each auto manufactures , presents auto manufactures’ individual

FC performance, evaluates New Energy Vehicles’ (NEVs) contribution to corporate and

overall car market performance, and proposes recommendations towards the 2020

target of 5L/100km and translates to CO2 emissions of 167kg/km (from the 2015 target

of 6.9L/100km or about CO2 120kg/km). The report’s key findings are highlighted

below:

1. In 2015, domestic passenger vehicle manufacturers’ CAFC reached an

average of 6.95L/100km; after including FC credits from NEV production,

the average CAFC decreased to 6.60L/100km, outperforming Phase III FC

target.

The 2015 domestic passenger vehicle FC target of 6.9L/100km was first announced

in the “Energy Saving and New Energy Automobile Industry development plan

(2012-2020)”. iCET’s analysis finds that, if calculating FC values and production volumes

of internal combustion engines vehicles (ICE) alone, China’s domestic passenger vehicle

manufacturers’ corporate average fuel consumption (CAFC) reached 6.95L/100km.

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However, when accounting for new energy vehicles (NEVs, namely electric power engine

vehicles) production and FC figures, the 2015 domestic average CAFC score improved by

0.35L/100km to 6.60 L/100km, well below the average FC target. On the other hand,

importing enterprises’ CAFC was much higher than that of domestic passenger car

manufacturers, reaching 8.44L/100km if excluding NEVs, the national average fuel

consumption was improving slightly to 7.02L/100km if excluding NEVs, still some

0.12L/100km higher than the national average fuel consumption. Generally, the Phase III

target is still loose for manufactures to achieve.

Note: TCAFE-III stands for Target CAFC for the year 2015, the last implementation year of Phase III; By

definition, domestic manufacturers CAFC is inclusive of both joint ventures (JVs) and independent

manufactures.

2015 CAFC versus 2015 Target CAFC (By manufacturer type)

2. In the past decade, passenger car fuel consumption (excluding NEVs) has

slowly improved, due in large part to a gradual increase in the production

of larger and heavier vehicle models; thus, the standard and management

regime could gain greater impacts on fuel consumption (and respected

emissions) by encouraging lighter and smaller vehicle production.

Overall FC levels have shown an average annual decline of less than 2% over the

past decade representing a very modest 0.10 to 0.25 L/100km annual reduction rate.

Independent enterprises’ FC reduction rates were the slowest, with an average annual

decline of less than 1% (0.5L/100km decrease in the last decade). Increases in large

weight-group models manufacturing helps to explain the annual slowing FC

improvements. Statistics indicate that, between 2012 and 2015(phase III duration),

93.1% 93.2% 92.4%95.1%

91.5%

85%

90%

95%

100%

105%

110%

4.0

5.0

6.0

7.0

8.0

9.0

10.0

National Average Domestic JV Independent Import

CAFC2015 TCAFC-III CAFC2015/TCAFC-III

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domestic passenger cars’ average curb weight increased by 70kg while that for

independent passenger cars increased by 150kg. Generally, a 100kg increase in curb

weight is accountable for an increase of about 0.4-0.6L/100km. Therefore, independent

enterprises’ FC performance declines 0.6-0.9L/100km due to an increase in curb-weight.,

Better FC results could be achieved through an increased attention to model type and

production volumes in China’s FC standards regime.

2006-2015 national average fuel consumption and curb weight trends

2006-2015 fuel consumption and curb weight trends for JVs and

independent manufacturers

3. The NEV super credits in CAFC calculation helps independent

manufacturers to reach short-term targets, but also weakens the

8.11 7.99

7.88 7.97

7.71

7.53

7.33 7.22

7.02

13131330

13631372

1387

1200

1240

1280

1320

1360

1400

6.50

7.00

7.50

8.00

8.50

2007 2008 2009 2010 2011 2012 2013 2014 2015

Cu

rb W

eigh

t，k

g

Natianal Average Fuel Consumption Average Curb Weight

Phase I Phase II Phase III

16.3% 12.2% 4.4%

8.37

8.13 7.99

7.97

8.02

7.69

7.42 7.31

7.11

6.92

7.55

7.75

7.54 7.43

7.49 7.23 7.30

6.95

7.14

7.01

1313 1321

1361 1363 1369

1192

1233

13181335

1357

1100

1150

1200

1250

1300

1350

1400

6.50

7.00

7.50

8.00

8.50

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Cu

rb W

eigh

t, k

g

Fu

el C

on

sum

pti

on，

L/1

00

km

JV FC Independent FC JV CW Independent CW

Phase I Phase II Phase III

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motivation for technological upgrades in traditional cars, undermining the

standards’ long-term goals.

In 2015, independent car enterprises produced about 95% of the NEVs (including

imports) in China, delivering a 17% FC decline from 7.01L/100km to 5.82 L/100km, as

opposed to a more modest decline of 0.5 L/100km achieved through technological

upgrading of ICE vehicles. Over the past two years the average fuel consumption of

independent brand cars didn’t do any improvement, some manufactures CAFC even

rebounded. Based on iCET analysis, some independent NEV manufacturers has almost

abandoned fuel saving technological upgrading after reaching a critical production

volume of NEVs. For example, Jiangnan Auto and Jiangling Motors’ FC levels increased by

10% in 2015, followed by BYD Auto, with a 5% FC increase, as illustrated in the below

figures. The two biggest independent car producers Chongqing Chana and Great Wall

were also increased the fuel consumption in 2015.

2015 NEVs production vs. ICE production by major domestic NEV producers

2015 vs. 2014 CAFC performance (excluding EVs) of major domestic NEV

producers

108%78%

126%

80%

41%

21%

42%

17%

198%64%

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Pro

du

tio

n

2015 ICE Production 2015 5×NEV production Proportion

0.5% -2.2%

4.9% 10.7%-7.4% -5.3% -4.2%

-8.0%

4.2%

10.5%

5.0

6.0

7.0

8.0

9.0

10.0

CA

FC，

L/1

00

km

2014 CAFC（excluding EV） 2015 CAFC（excluding EV）

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2015 NEVs CAFC credits effects on CAFC of major domestic NEV producers

4. Greater FC improvements, on the vehicle and corporate levels, are still in

need and fuel saving technologies could effectively deliver the necessary FC

improvements on the vehicle and corporate levels. CAFC Phase IV’s

increased stringency requires profound strategic changes in corporate

technological development.

iCET’s 2016 CAFC analyses reveals that the CAFC2015/TCAFC-IV ratio is 136% and

decreases to 129% only after including NEVs. Moreover, about 25% of the vehicle

models produced in 2015 do not reach the FC limits of CAFC Phase IV, despite the fact

that the new FC limits should have been met by 1st Jan 2016 for newly certified models,

and by 1st Aug 2018 for produced models. While the first implementation years of Phase

IV allow for some flexibility, with a 5-fold calculation privilege for NEVs (with FC counted

as 0 for EVs), the task of meeting the standards that increase in stringency over time will

be tough. From 2018 to 2020, the required 10% decrease in CAFC2015/TCAFC-IV ratio

(annual FC decline of 0.5L/100km on average) will suffice fuel saving technologies. The

projected 3 or 2-fold calculation privilege for NEVs replacing the current 5-fold in later

stages of Phase IV, or re-considerations of NEVs’ energy consumption (from the current

value of 0), poses a great challenge in meeting the CAFC target. Furthermore, iCET’s

scenario analysis reveals that a 40-80% FC decline can be obtained through fuel saving

technologies, and another 5-25% FC decline can be gained through off-cycle energy

saving technologies (e.g. kinetic energy recovery systems, efficient air conditioning, idle

start-stop system, and shift reminder). That means 65-85% FC declines for CAFC Phase

IV still depends on energy saving technologies, making it essential for the corporate

sector to advance its traditional manufacturing lines.

Geely

BYDBYDIndustry

Jiangnan

BAIC-

Moter

Cherry

SAIC-

Moter

JAC

Linfan-

Moter

JMC-Holdings

CAFC（excluding NEVs） 6.17 5.88 7.98 7.75 6.55 6.72 6.92 7.01 6.52 9.64

CAFC（including NEVs） 2.69 3.15 3.30 3.95 4.39 5.37 4.70 5.82 1.93 5.46

-56%

-46%

-58%-49%

-33% -20% -32% -17%-70%

-43%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

L/1

00

km

CAFC（excluding NEVs） CAFC（including NEVs）

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2015 China New Passenger Car Fleet Fuel Consumption Distribution

5. An effective CAFC credits exchange mechanism that reward first movers

are believed to be useful in advancing commercial technological

advancements; however, lack of enforcement and information gaps may

lead to discrepancies and ineffectiveness of such market mechanisms,

therefore iCET calls for the separation of CAFC credits from any other

NEV-related credits mechanism (e.g. the highly debated ZEV-credits

inspired program).

The CAFC credits mechanism was introduced three years ago to allow

manufacturers greater flexibility in meeting their targets. However, because the

standards’ lead authority, the Ministry of Industry and Information Technology (MIIT),

lacks any clear management and enforcement mechanisms, the flexibility mechanisms

are accused of unfairly serving the corporate sector by enabling them to avoid incurring

higher costs. iCET’s 2016 CAFC analyses show that CAFC credits and debts are limited to

a mere number of market players, and that credit volumes are higher than debt –

implicating that the CAFC credits mechanism is toothless. More effective and

comprehensive CAFC mechanism needs to be put in place before advanced energy saving

technologies are promoted, translating to a long-term impact on China’s overall auto

sector fuel consumption. CAFC credits and NEV credits (ZEV-like credits) differ greatly in

their policy goals and credits allocation mechanism. Moreover, potential mutual

offsetting and adverse effects of the two different systems, should they be linked, calls

for the independency of each of these regulatory tool at early stages. After reaching

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

500 1000 1500 2000 2500

Fu

el C

on

sum

pit

on（

L/1

00

km）

Curb Weight (kg)

MT Phase III target & Phase IV limit

AT Phase III target & Phase IV limit

Phase IV target for Row<3

Phase IV Target for Rows>=3

2015 new passenger car fleet

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maturity and proving their effectiveness, an integration of some sort should be

considered.

2012-2015 Main CAFC Credits/Debts Producers for Domestic Car

Companies

-20

0

20

40

60

80

100

120

140

160

180

CA

FC

cred

its/

deb

t，1

00

00

L/1

00

km

2015 2014 2013 2012

CAFC credits producers CAFC debt producters