China is already the second largest oil importer and according to a Michelin forecast, could have 100 million vehicles by 2020. Growth in vehicle sales has been phenomenal over the past year (25% in the first eight months) and is expected to keep increasing.
The State Environmental Protection Adminstration (SEPA) estimated that vehicles were responsible for producing 79% of the air pollution in China's major cities (Source: India Times). A fuel tax would certainly encourage the development of and use of hybrids and fuel cell vehicles as well as more public forms of transportation. But a fuel tax has been in discussion for over 10 years.
Currently, Toyota is the only producer of hybrid cars in China (Source: AP), although Honda has been considering building the Honda Civic Hybrid in China for some time. Toyota began producing the Prius in China back in December of 2005. But they only sold 2,000 Prius last year. In contrast, the sales of SUVs were way up (58.6%) through the first 10 months of 2007 according to the China Association of Automobile Manufacturers (Via GCC).
Part of the blame for the slow uptake in hybrid car sales so far is the added cost. The National Development and Reform Commission is drafting stringent local content rules for alternative fuel vehicles to qualify for likely government subsidies. The bad news for Toyota is the rules will require that key components be made in China. Toyota currently ships the critical components in sealed boxes from factories in Japan.
Chinese automakers have repeatedly introduced vehicles that look identical to Western models. So far, however, there have been no copyright infringement cases of more advanced engine technology.GM will begin building hybrid cars in China starting in 2008 according to Martin Murray of Automotive News. The cars will use GM's four-cylinder Ecotec engine, which is also built in China. GM also recently announced they will be building an advanced research center in Shanghai to develop hybrid technology and other advanced designs.
According to Science and Technology minister Wan Gang, former academic and Audi engineer, 50% of new cars in China would use electric power by 2020 (Source: Auto Industry).
In the meantime, some Chinese automakers are looking to produce and export their own hybrids. For example, BYD Auto Co. wants to begin exporting its own brand cars to the US and Europe beginning in 2008 or early 2009 (Source: Autonews). They have promised to have their own plug-in hybrids and electric cars on display at the Detroit auto show in January.
Chang'an, Ford's partner in China, has also promised hybrids by 2008. They are hoping to have 10% of their total sales be made by hybrids by 2010, with 25 to 30% of their sales occurring overseas.