China Car Times

In the midst of the Olympics, I missed an interesting story about a car tax that will go into effect September 1. Ostensibly it is designed to reduce pollution and vehicles that use a lot of gasoline. However, as the Economist points out, the real goal is to reduce imports from foreign car manufacturers, who conveniently make most gas-guzzlers.

Yet, while that sounds sinister, there is no real way to be cynical about this move. Even though China did not come up with this idea with the environment in mind, it nonetheless shows how the WTO can help promote a more efficient marketplace. After the WTO Court ruled that China’s import tariffs were in violation of their committments to free trade last month, the government came up with a creative way to continue to protect its local auto industry.

One might argue that this is protectionism, and it is. But the Chinese have managed to create a genius and positive form of it. They were only able to implement this policy because the local car industry has a natural advantage over foreign competition: its fleet is more fuel efficient. If, for example, things were reversed and domestic industry was producing gas guzzlers, the Chinese never could have gotten away with taxing smaller engines. Instead, China can promote this policy because it is in the interest of the enviornment, an area that the free market typically ignores (free market economics never work well with externalities).

So I say kudos to an increasingly sophisticated group of Chinese lawmakers. Regardless of the motives behind the move, the results will be positive. Not only will more of the cars on the road be of the Chinese small-engine variety, which use less gas, but you should also expect to see foreign competitors building more models that fit the mold. And don’t be surprised if many of them end up in markets outside of China, cleaning the air for those in the rest of the world as well.

A Cup of Cha

The only reasoning against this is that many of the Chinese car makers are intent on knocking the Camry and Accord out of the mid size sedan segment, and by using their own, sometimes crude engine designs or off the shelf Mitsubishi motors.

Daihatsu seem to be wanting to get back into the PRC market after several years absense from the PRC, their last car, the Tarios, was sold in few numbers until it turned into the Zotye SUV (although we’re not entirely sure how). Previously Daihatsu were involved in making their minivans in China, then small SUV’s before dissapearing completely, however, it appears that Daihatsu are having a second run at the Chinese market with a new line up, including the Copen roadster, and also this Daihatsu Bego which was spotted recently in China:

The compact SUV market has really taken off in China, with stiff competition between the Japanese and the Korean brands, although the Chinese brands have yet to bring in a real fighter other than the Chery Tiggo, the Bego’s expected end of year launch in the PRC is only going to add pressure to the Chinese makers to push out their own competitive compact SUV.