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

China's National Development and Reform Commission (NDRC) is set to introduce mandatory regulations aimed at strictly controlling vehicle fuel consumption, according to a report by the *Financial Times*. This will mark China’s first nationwide regulation on vehicle fuel efficiency, designed to guide the country’s rapidly growing automotive industry in a more sustainable direction. While the automobile sector has significantly contributed to China’s GDP, the environmental and social costs associated with it have been rising sharply. A recent study from Harvard University highlighted that over the past decade, many outdated exhaust emission technologies from foreign automakers have been transferred to China, causing its emissions standards to lag behind those of developed nations by over a decade. Fang Maodong, a researcher at the China Automotive Technology and Research Center, pointed out that not only are the standards outdated, but their implementation varies widely across different regions. In cities like Beijing and Shanghai, vehicle-related carbon dioxide emissions are about twice as high as those of European vehicles, while hydrocarbon and nitrogen oxide emissions are more than three times higher. Air pollution from cars now accounts for over 90% of urban pollution in these cities, leading to a sharp increase in respiratory diseases and massive healthcare expenditures. The World Bank estimates that China’s GDP has been reduced by 5% due to the economic burden of air pollution and lost productivity. With car ownership surging, traffic congestion has become a major challenge for city planners. In Beijing, where motor vehicle numbers have surpassed two million, average speeds during peak hours drop to just 11 km/h. To tackle this, Shanghai has implemented a license fee of between 30,000 and 40,000 yuan per vehicle. Energy security is another pressing issue. Currently, motor vehicles consume 85% of China’s total oil production and 42% of diesel. Zhang Xiaoji, president of the China Machinery Industry Association, warned that if China continues to grow at over 7% annually, car sales could rise by more than 10% each year, leading to a significant increase in oil demand and potential shortages. Under the new NDRC regulations, all vehicles sold in China must meet a minimum fuel consumption standard and obtain certification before being listed for sale. The goal is to improve fuel efficiency by 15% to 20% compared to U.S. levels by 2008. The U.S. model includes strict penalties for manufacturers who fail to meet fuel efficiency targets, such as fines of $5 per 0.1 mile/gallon shortfall, which helped save 190 million tons of crude oil and $92 billion in costs in 2000 alone. Experts believe that SUVs and large-displacement luxury cars will be most affected by these changes. Companies like Great Wall, ZTE, Beijing Jeep, Honda, Volkswagen, and General Motors may face significant challenges. In response, automakers are expected to invest more in fuel-efficient and economical diesel models. Some have already begun piloting diesel cars in select Chinese cities. In addition to the fuel efficiency rules, the NDRC is also preparing a new "Automobile Industry Development Policy." This policy will tighten project approvals, block the production of low-quality vehicles, prevent the illegal transfer of certifications, and restrict unqualified capital from entering the auto sector. Governments at all levels will be prohibited from using public funds for new or expanded auto projects, and banks will not be allowed to finance unapproved projects. Existing manufacturers without sufficient design and development capabilities will be given a deadline to upgrade or exit the market. These measures aim to ensure a more sustainable and efficient automotive industry in China.

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