National Development and Reform Commission will promulgate laws and regulations to strictly control vehicle fuel consumption

The National Development and Reform Commission (NDRC) is set to introduce strict regulations aimed at controlling vehicle fuel consumption, marking China's first mandatory policy in this area. According to a report from the *Financial Times*, the new rules will be enforced by the NDRC and will guide the country’s automotive sector with a strong regulatory approach. While the auto industry has significantly contributed to China’s GDP, the social and environmental costs associated with it are rising rapidly. A recent study by Harvard University highlights that over the past decade, foreign automakers have transferred outdated emission technologies to China under joint venture models, causing Chinese vehicle emissions standards to lag behind those of developed countries by more than a decade. Fang Maodong, a researcher at the China Automotive Technology and Research Center, noted that not only are the standards outdated, but their implementation is also inconsistent across different regions. In cities like Beijing and Shanghai, vehicle-related carbon dioxide emissions are about twice as high as those in Europe, despite existing CO₂ regulations. Emissions of hydrocarbons and nitrogen oxides are even three times higher than in European vehicles. The health and economic impacts are equally concerning. In recent years, automobile pollution has accounted for over 90% of urban air pollution in these cities, leading to a sharp increase in lung disease cases and massive medical expenses. The World Bank estimates that air pollution alone has reduced China’s GDP by approximately 5% due to healthcare costs and lost productivity. With the rapid rise in car ownership, traffic congestion has become a major challenge for city planners. In Beijing, where over 2 million vehicles are registered, average speeds on main roads during peak hours drop to just 11 km/h. To manage this, Shanghai has implemented a license fee of between 30,000 and 40,000 yuan per vehicle. Another critical issue is energy security. Currently, motor vehicles consume 85% of China’s total oil production and 42% of diesel output. Zhang Xiaoji, president of the China Machinery Industry Association, warns that if China continues to grow at over 7% annually, annual car sales could surge by more than 10%, leading to a significant rise in oil consumption and worsening shortages. According to the *Financial Times*, the NDRC plans to introduce mandatory fuel consumption certification for all vehicles sold in China. Each model must meet minimum fuel efficiency standards to be approved for sale. Fang Maodong, one of the regulation drafters, explained that the policy aims to reduce CO₂ emissions and enhance national energy security. The regulation sets targets for improving fuel efficiency by 15% to 20% compared to U.S. levels by 2008. In the U.S., non-compliance with fuel efficiency standards results in fines of up to $5 per vehicle for each 0.1 mile/gallon shortfall. Serious violations can also lead to penalties for buyers. Thanks to such policies, the U.S. saved 190 million tons of crude oil and $92 billion in costs in 2000 alone. Experts predict that once implemented, the new regulations will heavily impact domestic manufacturers of high-fuel-consuming vehicles, such as SUVs and large-displacement luxury cars. Companies like Great Wall, ZTE, Beijing Jeep, Honda, Volkswagen, and General Motors are expected to face significant challenges. In response, many automakers are likely to invest more in fuel-efficient and economical diesel vehicles. Since 2000, some manufacturers have already begun testing diesel cars in select Chinese cities. Additionally, the NDRC is preparing a new "Automobile Industry Development Policy" that will tighten project approvals, block the production of low-quality vehicles, and prevent the illegal transfer or sale of vehicle certifications. It will also restrict unqualified capital from entering the automotive sector and prohibit local governments from using public funds for new or expanded auto projects. Commercial banks will be barred from financing unapproved auto projects, and land authorities will not approve land use for such ventures. Existing manufacturers without proper design and development capabilities will be given a deadline to improve; those failing to meet requirements will be forced to exit the industry. This comprehensive approach aims to ensure sustainable growth and better alignment with global environmental and energy standards.

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