TIANJIN, CHINA • By 2020, Beijing says carmakers must meet tough new green standards to cut epic pollution in China's cities.
As domestic firms bet heavily on electric cars to meet that goal, foreign peers are set to stay in a different, petrol-driven gear.
In the latest sign of caution from global carmakers in China, Germany's Audi last month unveiled a new factory for high-efficiency transmissions in Tianjin, to be used in petrol-powered cars. While Chinese firms go electric in the world's biggest car market, Audi is intent on petrol engines that can run farther, cleaner, in tandem with hybrid technology.
As China's electrified vehicle production booms, some international industry officials warn in private that the ambitious electric goals of domestic firms could prove too costly, too risky, too far from what consumers actually want - and not a good fit with their operations elsewhere.
Still, China doled out US$4.5 billion (S$6.1 billion) last year alone in green car subsidies. Audi China chief Joachim Wedler said: "In 2020, most cars we will sell will be combustion engines, so to fulfil (fuel consumption targets) you have to improve the consumption of each and every car of the Audi model range."
In China, Beijing and state-linked carmakers have thrown their weight behind electric vehicles - despite the fact that the electricity they need may be generated from burning coal.
Under Beijing's 2020 requirements, on average, cars must consume less than 5 litres of petrol per 100km - nearly 30 per cent below current standard levels. Beijing has rolled out a raft of incentives to push domestic carmakers - foreign brands generally are not eligible - to build more electric and plug-in hybrid vehicles, spurring a quadrupling in sales of these so-called "new energy vehicles" (NEVs) last year.
Even with that surge, just 1.4 per cent of cars sold in the first seven months of this year were NEVs, as concerns linger over driving range and home charging. A powertrain manager at a major foreign carmaker's China joint venture said domestic companies' smaller scale made them nimbler. Many are also state-linked and, therefore, obliged to support government policy, the manager said, declining to be named.
For example, Geely - controlled by Mr Li Shufu, a member of the government's political consultative body - wants 90 per cent of all sales to be NEVs by 2020. Meanwhile, state-backed GAC Motor plans to be able to produce up to 400,000 green energy cars annually by the end of this year.
Foreign carmakers, who must form joint ventures with local partners to produce cars in China, have to consider a different dynamic - how manufacturing strategies on the mainland correlate with their traditional businesses and customers elsewhere.
The powertrain manager said his company, like Audi, is focusing on a more gradual strategy, developing more efficient engines as well as plug-in petrol-electric hybrids: an interim solution that will please a government intent on cutting harmful emissions.
Of course, foreign carmakers are not avoiding NEVs entirely.
General Motors' China venture last year pledged to spend US$4 billion on electrification, developing 10 new energy models by 2020.
In Tianjin, Mr Wedler said Audi and partner China FAW Group plan to launch their first locally produced plug-in hybrid vehicle this year, with a new imported car based on the same principle on the way next year.
But he acknowledged that as China's massive car market evolves, carmakers alone will not determine future directions. "The whole picture is driven by legislation," he said.