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China’s bumpy road toward transport efficiency

At Volvo Trucks’ Asian launch of its new truck range in Seoul, Korea in the middle of May, Eric Labat, president of Volvo Trucks China, again pointed to the issue of lack of quality diesel fuel when answering a question from CBU/CAR on whether China is really ready for the implantation of State-IV emissions standards for diesel vehicles due next January.

Labat responded by saying that even though his company is ready for Euro VI, China is still not ready for Euro IV because the quality of diesel fuel is still not up to Euro IV standards.

Interestingly, it has been nearly three years since Volvo Trucks launched the State-IV emissions standards-compliant engines and trucks in the Chinese market in August 2011. The implementation of the State-IV emissions standards for diesel vehicles was originally scheduled for July of that year. What happened thereafter is well documented in the industry: delay, delay and more delay, until the most recent announcement.

It seems that the fuel quality issue has never been properly addressed all this time as the country works to improve its transport efficiency, which OEM and supplier executives have reiterated is the ultimate goal of the future development in the auto industry.

Mats Harborn, executive director of Scania China Strategic Center, for example, has reiterated on numerous occasions that if efficiencies were maximized, China really needs to sell only 200,000 heavy-duty trucks a year, not the 700,000-800,000 units it currently sells annually. For Volvo Trucks, one of its marketing efforts in China has been to educate potential customers how they can transport goods using only two to three trucks instead of five.

But the problem, as Labat pointed out, is that not all customers are ready to think about total cost of ownership or the trucks’ productivity lifecycle. Many of the purchase decisions are still dictated by the upfront purchase price because many of these customers are just not willing to spend the extra ¥20,000 ($3,279) or ¥30,000 for a State-IV-compliant model and added cost and burden for AdBlue infrastructure.

This then leads to the industry practice of selling trucks that classify as State-IV-compliant when in reality they are only State-III or lower. JAC, for example, became a scapegoat when it was recently exposed on national TV for such practice, something that almost every domestic truck maker does.

Premier Li Keqiang’s vow to provide State-IV-compliant diesel fuel by yearend is good news for the truck industry, but it only solves one of the many thorny issues as China tries to become more transport efficient. Customer acceptance, infrastructure availability, proper laws regulation as well as supervision remain difficult issues to be tackled.

Unless these factors and interests align, China’s road toward transport efficiency will remain bumpy.  

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