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March 03, 2009

Comments

Aimee Barnes

Great point regarding geographic differences in China's auto industry as compared to that in the US. I think there is a tendency to overlook the fact that, by closing one Chinese auto manufacturer, there will inevitably be a political issue of favoritism between regions to contend with. Given the current state of China's economy, this complication will surely be magnified.
You are correct- China will need to shift away from petroleum-fired internal combustion engines to something else; Beijing's air quality is already a bit unbearable. Since so many people rely on electric-powered scooters for personal transport, I would think that the natural evolution of this mode would be the electric-powered automobile- they've taken center stage at the Geneva Motor Show this week, so why not? Clean deisel technology may also be an alternative, but as China-based auto industry expert, Bill Russo, explained, "one of the things that will limit acceptance of deisel will be the availability of clean deisel fuel. The infrastructure isn't there yet."
Informative post- I've been following this sector closely as well and its nice to see that coverage is expanding in the blogosphere.

David

Aimee, thanks for the comments. I hardly consider myself expert in this industry, but I follow it for two reasons. First, because it will be a bellwether for the global competitiveness of Chinese heavy industry, and second because the industry is about to be hit by a series of systemic perturbations (environmental and geopolitical) and technology disruptions (starting with drivetrains but quickly moving beyond that.)

It is hard to overstate how much local protectionism is going to inhibit this process, especially in these tender times. I could do a post on that issue alone.

Russo is correct that infrastructure is one issue inhibiting clean diesel in China - in this aspect the US and China face similar challenges. Yet the Chinese government has it within its power to mandate that infrastructure into being in a very short time if it wished. SinoPec, PetroChina, and the truck makers would have to comply. But obviously the government does not wish it to be so, and the question is why?

I suspect it is because the nation's leaders are not happy with the idea of leaving themselves any more beholden than necessary to petty despots perched atop petroleum reserves. They will direct energy infrastructure investments into alternatives that are as independent as possible from foreign influence.

Thanks for the comments. I am tardy in adding your blog to my blogroll, but I'm rectifying that now.

Bill Russo

I posted this comment on Aimee's blog regarding the diesel question above. Since this is where it was originally asked, I repost it here for your reference:

"As for Dan Wolf’s question on why the government does not wish to mandate diesel, there are a few answers: the China government would have to invest in developing the clean diesel infrastructure, and that may neither be in the current planning nor consistent with the capital investment plans of the Chinese OEMs - all of whom are invested by the government. So, a decision to move toward clean diesel would require the redirection of investment from conventional fuel towards clean diesel, and would require chinese-invested OEMs to redirect capital development dollars. It would also give European brands an “unfair” advantage over the local brands who have not yet adapted the technology.
My observations in the interview were made in the context of a question about hybrid gas engine market acceptance. My response was that from the consumer perspective, clean diesel technology offers clearly tangible benefits vs. hybrid gas technology. On the supply side, the China government would likely resist mandating a shift to clean diesel until they can figure out how to fund the technology development needed to level the playing field among the European and Chinese OEMs."

I have some additional comments I will add in a subsequent comment on the industry consolidation process you refer to above.

Bill Russo

Bill Russo

Regarding the pathway to industry rationalization in China, I commented on Greg Anderson's blog: http://burnurl.com/DdVjhC

And for reference, GM sold approx. 8.3M unites worldwide in 2008, and Ford approx. 6M units.

stuart

"...until they can figure out how to fund the technology development needed to level the playing field among the European and Chinese OEMs"

I suspect, in all seriousness, that China's strategy will be to 'acquire' the technology rather than fund its development.

As an ethical question the acquisition of said technology ought to respect international law; as a remedy to environmental meltdown it ought to happen as fast as humanly possible.

Another informative and interesting analysis of something I wouldn't have otherwise considered.

David

Bill, great perspective, and thanks for correcting me on the unit sales.

I think your approach to the clean diesel issue and mine are complimentary. You point out the micro/industry specific challenges. None of this is going to happen unless the industry makes the investments in developing and commercializing the technology.

As a tyro in the auto biz, then, let me pose a few questions that would help put this into perspective.

1. The auto industry has to make investments in alternative drivetrain technologies regardless. Would the investments required by clean diesel be greater than, less than, or about the same as those for hybrid gas-electrics, plug-in hybrids, or electrics?

2. Could we not assume that if the government decided any specific technology was a national priority that automakers would get the fiscal support needed to fund its development?

3. What role do the oil companies play in this process? This is the other half of the clean-diesel question: refining, distribution, and retail. All would require investments. Are those investments prohibitive, or would the dinosaur-juice folks see clean diesel as a way of keeping them relevant in an age when we are moving away from burning stuff for our heat, light, and kinetic energy? Keep in mind these folks also wield considerable political pull.

4. Do policy makers really understand the value of clean diesel in the context of the other alternatives? I think it is safe to say Capitol Hill doesn't.

Really appreciate your thoughts.

And BTW - it's "David" not "Dan."

Cheers,

David

David

Bill - the link to Greg's blog in your comment actually takes us to Aimee's.

electric bicycle

I have great respect for the chinese. Rather than blaming their communist regime, people must instead be thankful for their great spirit and their technological advances. It seems like they have their hand in a meaningful way in the world future developments in technology.

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