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Gas Prevails as China Not Ready for Diesel

Diesel-powered vehicles, already used to address energy and environmental concerns in many Western countries, are still not ready for mass use in China, analysts from China Passenger Car Association said.

Although converting China's auto industry to diesel is being discussed amid government efforts to battle pollution and record high oil prices, it has been rejected due to energy shortages as well as poor fuel quality.

"The development of diesel-powered cars relies on abundant diesel supply," Cui Dongshu, analyst from CPCA, the semi-official automotive institution, wrote in a research report. "But the diesel shortage hasn't been improved, and is getting worse."

Oil refiners are unwilling to add diesel production, fearing a loss in profits amid soaring crude oil prices and the low diesel market price, which is strictly capped by the Chinese government.

Despite limited production, market demand for diesel has gone up quickly. China used around 125 million tons of diesel last year and is forecast to use 140 million tons by 2010. The demand comes from agriculture, power generation, rail transportation industries and, in particular, the large population of commercial vehicles.

The world's second largest auto market included more than 10.27 million commercial vehicles last year, accounting for 25 percent of the total civilian car population. The proportion is much higher compared to the 9-percent market penetration in Germany in 2005 and 4-percent in Canada, indicating diesel cars will be less encouraged in China to avoid overburdening the diesel supply.

"For social stability, the development of the auto industry should not progress at the cost of taking resources from other industries," Cui added. Diesel models are also not expected to grow significantly in number in the short term due to poor diesel quality, high purchase price and costly spare parts.

Progress has made diesel cars quieter, smoother and more powerful after automotive producers such as Volkswagen and Bosch poured millions of yuan into research. Modern diesel vehicles now could be about 30 percent more fuel efficient than gasoline vehicles and emit 40 percent less carbon dioxide.

But the poor-quality diesel fuels in China has been blamed for damaging the engine and emitting more waste.

In Europe, most countries offer incentives to encourage the use of diesel models, including taxes that lower the diesel price to less than that of gasoline. China hasn't issued any incentives for diesel and has ruled out the model from its top priority in 2007.

About 25 percent of all new passenger vehicles sold in Europe are powered by diesel and by 2005, diesels accounted for 50 percent of all new vehicles sold.

In China, gasoline engines power more than 99 percent of all car sales, with less than 1 percent powered by diesel or other fuels.

(Shanghai Daily June 10, 2008)

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