Automotive News China Conference November 15-18, 2006, Beijing

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Automotive News China ConferenceNovember 15-18,
2006, Beijing

• Urban Transport Challenge and Its Implications to
  the Automobile Manufacturing Industry
• Zhi Liu
• World Bank

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Chinas auto industrial development is a major
economic success

• China has succeeded in developing a world class
  automotive industry within 10 years.
• The development of automotive industry drives
  national economic growth.
• The use of automobiles enhances mobility and
  generates economic benefits to firms and
  households.
• Improved mobility helps reduce regional disparity
  and enhance regional integration

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But rapid motorization also causes problems ...

• Pressure in energy consumption and oil imports
• Transport increasingly a leading driver of
  overall consumption, contributing more than
  one-third of Chinas total oil consumption
• Environmental pollution
• Among 340 cities, 58 do not attain the standards
• 45-60 of NOx and 85 of CO are from mobile
  sources in most Chinese cities
• Congestion can affect efficiency of urban
  economies which contributes 80 of the national
  GDP
• In Beijing average peak-hour speeds on arterial
  roads have declined from 45 km/hr in 1994 to
  about 10 km/hr in 2005

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Urban transport problems are getting worse

• Ownership and use of motor vehicles in China are
  heavily concentrated in cities
• Beijing Experienced tenfold increase of private
  cars in the last 10 years, and widespread
  congestion
• Shanghai Experienced increases of private cars
  from 10k to 250k in 8 years and rising congestion
• Shenzhen Traffic accidents are a main cause of
  death, especially among the 20-40 age group
• Nationwide Carbon monoxide and hydrocarbon from
  auto emissions account for nearly 80 of the
  total in urban areas.

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More cars do not make everyone happier

• Majority of urban households are car-less
• Their needs for mobility is seriously
  under-served by public policy
• Road congestion is making bus operations more and
  more difficult
• Bicycle right-of-way, pedestrian sidewalks, and
  roadside trees are often replaced by motor
  vehicle lanes and parking
• Car-owning population often stuck in traffic jam

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The problems have spillover effects

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Spillover effects are threatening the overall
sustainability

• Slow and congested transport system stifles the
  efficiency of the urban economy
• Excessive conversion of farmland for urban
  development wastes scarce resources
• Excessive investment in urban transport incurs
  heavy financial liabilities
• Rising fuel consumption endangers the nations
  long-run energy security
• Growing green house gas (GHG) emissions is
  increasingly an international concern

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Rapid urbanization is putting heavy pressure on
urban transport

• Urbanization is accompanied by
• Rising household incomes that increase demand for
  private cars
• Transformation from farms to firms that results
  in urban migration, growing demand for urban
  space, and the formation of large metropolitan
  areas
• Changes in living style that creates a more
  diversified range of travel demand
• Changes in urban land use patterns that is
  increasingly dependent on motorized transport

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Metropolitan areas are taking shape and are the
engines of economic growth
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All problems are expected to exacerbate unless
public policy manage to address them

• China will be more urbanized, cities will become
  bigger and commuting distance longer
• Strong economic forces and incentives will
  continue to drive motorization, significantly
  increasing fuel consumption and GHG emissions
• Cities will face major problems in
• Traffic congestion
• air pollution
• Worsening social inequality

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Motorization process should be carefully managed

• Motorization brings benefits and costs to the
  economy and society
• This is true in China and elsewhere, but the
  difference lies in the number of cars per 1,000
  population 9 in China vs. 700 in USA
• Big market potential and big challenges
• The process must be carefully managed to minimize
  the social and environmental costs

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What are the solutions ???
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The solutions have to be comprehensive

• There is no one-time technology fix
• We cannot build out of congestion
• Policy measures and new technologies are both
  needed

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Various policy measures are increasingly adopted
by cities around the world

• Policy to give priority to bus transport
• Policy to promote energy-saving, compact city
  land use development
• Demand-side management
• Auto ownership control
• Higher taxes
• Quotas
• Auto usage control
• Non-pricing access control
• Congestion pricing

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Environmentally friendly technologies are
emerging

• Hybrid electric vehicles (HEVs)
• Cleaner fuel such as compressed natural gas (CNG)
• Small conventional gasoline vehicles
• Small electric vehicles

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A combination of policy measures and new
technologies could achieve desirable outcomes

• A study by Ng and Shipper (2006) of World
  Resource Institute analyzes energy consumption
  and GHG emissions under three scenarios
• Road ahead
• Oil saved
• City-saved

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Scenario 1 Road aheadKey assumptions

• Current growth rate of motorization
• Current fuel prices
• Conventional gasoline vehicles as the dominant
  vehicular technology

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Scenario 2 Oil savedKey assumptions

• Current growth rate of motorization
• Hybrid electric vehicles (HEV) to gain 15 of the
  market by 2010 and 50 by 2020
• Higher market penetration of CNG and small
  electric vehicles
• A higher share of smaller vehicles in the fleet
• Higher oil prices including Japanese/European
  level of taxation on fuels, that would reduce
  average vehicle utilization

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Scenario 3 City savedKey assumptions

• One more step beyond the oil-saved scenario
• Allowing a lower level of vehicle utilization as
  a result of compact city development and better
  public transport services
• Hybrids, together with small electric and CNG
  vehicles will dominate the market
• Conventional gasoline vehicles only constitute 30
  percent of the total market
• There would significant congestion charges on
  vehicle use in cities

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Potential pay-off from comprehensive
interventions is high
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The political context is shifting in favor of
sustainable urban transport

• Green-GDP concept proposed and being
  operationalized
• People-centered development concept advanced by
  the top leadership
• Energy saving society and compact city
  development emphasized
• Public transport received attention from highest
  level leadership
• Public opinions increasingly heard and
  influential

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Looking forward

• Cities will increasingly adopt policy measures
  (including emission standards) and promote new
  technologies to manage motorization
• Various technology-forcing policies may emerge
  (such as the 1970 Clean Air Act in the US)

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Corporate Social Responsibility

• Automobile manufacturers are increasingly
  committed to the Corporate Social Responsibility
• This means delivery of cleaner, safer, more
  fuel-efficient, and more affordable vehicles to
  consumers
• In addition to cost, quality and product
  differentiation, corporate social image is a new
  dimension in industrial competition

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• THANK YOU