On July 1, the State
Environmental Protection Administration (SEPA) implemented
nationwide auto emission standards equivalent to Euro II. There are
plans to adopt standards equivalent to Euro III in Beijing next
year and to extend these across the country by 2008. The topic has
attracted much attention in China. How will Euro III affect the
Chinese auto industry and people's daily lives?
No auto price increases
According to the SEPA plan, from the day that Euro III is
introduced all new automobiles will have to conform to the
demanding new standards. However existing owners needn't worry for
vehicles already on the roads at that time.
The experts say the standards required by Euro III are much
higher than those of Euro II. To be able to comply with them,
automobile manufacturers will need to carry out research and
development to update their engines. It marks yet another stage in
the development of China's automobile industry. They predict that
for current domestic models, Euro III might mean additional
expenditure perhaps exceeding 1 million yuan (about US$120,750) or
even 10 million yuan (US$1.21 million) per model. This may not be
much of a problem for large volume, well capitalized joint ventures
like Volkswagen and Ford but could put quite a strain on smaller
domestic manufacturers.
Gao Lixin, president of the Chery Automobile Engineering
Research Institute, said, "Implementation will eliminate some of
the weaker small and medium-sized domestic automobile
manufacturers. Mature enterprises like Chery will have no
difficulties either in terms of the new capital investment or in
the technology required."
Gao said that the necessary innovations were in the core
technologies of engine electronic spray atomization control systems
and purifying systems. Even large joint ventures have to out-source
these from specialist manufacturers. Suppliers such as United
Electrics are already operating in the domestic market so auto
manufacturers here won't have a problem in meeting the technical
requirements of Euro III.
"Automobile production costs will rise with the implementation
of Euro III," Gao said. "Considering the present state of the auto
market, manufacturers will likely absorb the additional costs
themselves rather than passing them on to the consumers in order to
maintain market share."
No Euro III gasoline at the pumps
More than just engine modifications will be required if Euro III
standards are to be met. The quality of the gasoline is also a key
factor. Take the sulphur content of diesel oil for example. Euro
III requirements will mean a reduction in sulphur content to only
one seventh of what is acceptable under Euro II.
SEPA official Wang Jian said, "None of the gasoline currently
available on the domestic market conforms to Euro III, not even the
98 octane so called noble gasoline. If consumers put the currently
available gasoline into new vehicles conforming to Euro III
standards, not only will they damage their automobiles but the Euro
III emission standards will still not be met.
In order to be able to ensure the smooth introduction of Euro
III in Beijing and elsewhere, the China National
Petroleum Corp. (CNPC) and Sinopec Corp.
started work on updating their technologies and equipment several
years ago. An employee at the CNPC research office said that some
of the products produced by the company's refineries can already
meet Euro III standards. Beijing has now issued local quality
standards for oil products. These two big companies will make
special arrangements to supply Euro III standard oil to
Beijing.
Little impact on gas prices
Some people are concerned that Euro III implementation will mean
higher prices at the pumps. If gasoline and diesel to be supplied
are to meet Euro III standards, then the oil refineries will need
to invest in updated technology and new equipment and this must be
reflected in increased costs. Experts at Sinopec Corp. put the
additional expenditure as high as several billion yuan.
However, Zhang Xingye, honorary chairman of SAE-China said,
"Although the move from Euro II to Euro III will no doubt increase
costs, this will have only a small effect on the price of a liter
at the pumps. Even if a new item of equipment were to cost say
several hundred million yuan it may well have a working life of
twenty years and the capital cost could be depreciated over many
years."
"So the implementation of Euro III won't make much difference to
oil prices," Zhang said. "The real decisive factor for price
increases will remain fluctuations in international crude oil
prices."
(Global Times, translated by Li Jingrong for
China.org.cn August 9, 2004)