China’s New Subsidy Policy for Fuel Saving Cars Explained

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Many car dealers in China are stressed these days, because most of their products failed to reach the new limit to get 3000 RMB (€340) subsidy for fuel-saving cars again.

The subsidy policy for fuel-saving cars started from June 1, 2010, which has involved more than 400 models and 2 million cars.

The so-called fuel-saving car is a passenger vehicle powered by a petrol or diesel engine, including non-plug-in hybrid or bi-fuel power, and the displacement is less than 1.6 liter. Additionally, its fuel consumption should reach the limits of a standard (see the figure).

According to the standard, all cars are divided into two kinds. The first is the cars with one or two rows of seats AND manual transmission (named MT in the figure), while the second is the cars with three or more rows of seats OR non-manual transmission, including AT, DCT, AMT, CVT (named AT in the figure). For each kind of cars, the fuel consumption limits are not fixed, but various with curb weight (named CM (kg) in the figure).

The original standard is not difficult for most car manufacturers, no matter joint ventures or local brands. For example, the standard for a 1500 kg mid-size sedan with an automatic transmission is up to 8.0 l/100km. Thus, most 1.6L cars can obtain the 3000 RMB.

However, the new standard, which is enforced from October 1, 2011, is much more severe. The fuel consumption limits for the cars less than 1430kg decreased by 7.2%-9.3%. Moreover, the limits for the cars more than 1430kg are fixed, no longer increase with the curb weight, which means the Passat has to share a same limit with the Golf.

In the new catalogue of fuel-saving cars, only 49 models still exist, while more than 85% disappeared. Among the 49 models, 27 are made by joint ventures, 22 are local brands, but no one equips an automatic transmission or continuously variable transmission, which means these transmissions can hardly reach the limit.

Local brands’ products will face more difficulties, because their cheap cars are more sensitive to the 3000 RMB subsidy, and their mid-size cars will never reach the limit without efficient turbocharged engines. But in a long run, this new policy will give greater impetus to local brands’ R&D.