Firms from Bill Gates-backed start-up EcoMotors Inc to Faurecia SA,
a parts supplier controlled by French giant Peugeot SA, are jostling
to help automakers meet new diesel emission rules taking effect in
January, despite concerns the standards may not be strictly
"Generally speaking, we will benefit from higher emission standards
in China as they will further spur our business growth," said Liu
Xiaoxing, China vice president of Cummins Inc, a U.S. diesel engine
maker that partners with Faurecia and counts China as its biggest
and fastest-growing market.
Pollution has reached crisis levels in China after decades of
growth-at-all-costs, contributing to hundreds of thousands of deaths
a year and sowing the seeds of social unrest. Automobiles are
chiefly responsible for China's foul air, according to the country's
Among other measures to tackle the problem, from next year China
will adopt a new set of diesel emissions regulations aimed at
eliminating mainly trucks and lorries that produce high levels of
harmful substances such as nitrogen oxides, carbon monoxide and
The country will also take six million high-emission cars off the
road this year, and is drafting regulations aimed at slashing fuel
consumption by passenger vehicles.
"Foreign component makers will benefit most from the stricter
emissions standards over the long term, as they have more advanced
technology than Chinese suppliers," said Li Jia, an analyst at
consultancy IHS Automotive.
Leading component suppliers that can help Chinese automakers cut
emissions include Continental AG, Robert Bosch GmbH [ROBG.UL], Denso
Corp, Tenneco Inc and Faurecia, Swiss private bank Bank J. Safra
Sarasin Ltd said in a report on June 3.
The technologies they bring to the table include exhaust treatment
systems, turbo chargers, direct injection mechanisms and powertrain
CLEARING THE AIR
The World Health Organization says about 2 million people die every
year from air pollution, mostly in developing nations. Beijing is
among the world's most polluted cities, it says.
Concentrations of fine atmospheric particles known as PM2.5 averaged
89.5 micrograms per cubic meter daily in the Chinese capital last
year. That was 156 percent higher than national standards.
From Jan. 1, 2015, China will adopt the long-delayed national stage
4 emission standard (NS4) - the equivalent of Euro 4 standards - on
diesel vehicles, meaning automakers will be allowed to sell only
trucks and lorries that puff out lower levels of pollutants than
they do currently.
China also aims to reduce average fuel consumption by passenger
vehicles to 6.9 litres (1.8 gallons) per 100 kilometres (62 miles)
in 2015, from 7.38 litres currently.
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Mathias Miedreich, Asia president of Faurecia's emission control
technologies unit FECT, whose clients include makers of both diesel
and gasoline-propelled vehicles, said annual sales stood to grow 40
percent faster than the broader auto industry's growth rate over the
remainder of the decade.
The company forecasts FECT's China revenue will double to 2 billion
euros ($2.72 billion) by 2020. FECT recently invested several
million euros in a plant in Beijing to expand capacity for
NS4-compliant exhaust systems.
"China represents the highest growth market ... We believe our
products will give us significant advantage," Miedreich said.
Other players are also boosting investment. EcoMotors struck a deal
in March with a unit of state-owned China FAW Group Corp [SASACJ.UL],
one of China's biggest producers of commercial vehicles, to jointly
build a $200 million engine plant in China.
EcoMotors President Amit Soman said many Chinese automakers were
looking to skip straight to the latest technology in fuel efficiency
rather than "just do small changes in conventional engines".
German automotive supplier Eberspaecher Group is also getting in on
the act, setting up a joint venture in December with Shaanxi
Automobile Group Co Ltd to make exhaust systems for the China
Faurecia's Miedreich said the risk that the tougher emission
standards would not be enforced, exposing companies that invest in
the technology to potential losses, was worth taking.
"The risk is, basically, we spend money and have no return," he
said. "Our decision is and will be - we will take the risk."
($1 = 0.7345 Euros)
(Editing by Stephen Coates)
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