Two years ago, OATS reported Beijing was considering offering financial incentives for drivers to scrap their old cars and buy new ones in a bid to stimulate the then-faltering auto market. Today, a similar scheme is being implemented to do precisely the opposite.
Smog continues to choke the residents of China’s major cities and the government has announced plans to take more than 5m ageing vehicles off the road, with 330,000 of those being removed from the capital alone. The city will also limit the number of cars on the road to 5.6m in 2014, allowing it to rise to 6m in 2017.
According to data compiled by Bloomberg, in Beijing 51.8% of the days in 2013 were ranked “unhealthy or worse” based on PM2.5 levels, which averaged out at 90.1 for the year. By comparison London has PM2.5 count of 16.7.
The municipality enjoyed just 41 days that were classified as “Good” last year, and 45 that were “Very unhealthy”. Worryingly, other cities fared far worse. Shijiazhuang, a city of some 10m plus residents, averaged PM2.5 levels of 148.5 in 2013. Of the 7m global deaths attributed to air pollution in 2012, 40% were in China alone according to the WHO.
China’s spending on energy saving and environmental protection rose by 14.2% year-on-year to 338bn yuan ($54bn) in 2013, according to a report by the World Health Organisation. Yet despite this investment, pollution continues to worsen, leaving some to question if indeed everyone is playing by the new rules.
In the auto and lubes sectors, the clear winners of China’s “War on Smog” will be suppliers of vehicle emissions control technologies and additives producers. Brands like EcoMotors and Faurecia SA are hoping their environmentally-sound engines and exhaust treatment systems will appeal to Chinese automakers looking to both compete with advanced foreign carmakers and comply with increasingly stringent regulations.
Additives firms are also likely to benefit significantly. According to Tianhe Chemicals, a Chinese additives giant that has just raised more than $650m on the Hong Kong Stock Exchange, lubricants additives account for just 5.7% of small engine oil composition in China compared to 15.4% in the US. Foreign additives producers such as Lubrizol and Evonik are already bolstering their Chinese operations with new technology and customer service centres.
New regulations will no doubt lead to more rapid adoption of new lubes specs. We also expect that convergence with European and US specifications will be faster than the adoptions rate in those regions. As we have seen elsewhere, these will become increasingly problematic to manage - a fact highlighted in OATS' China Liaison Manager, Diana Shen's presentation to the 8th ICIS Asian Base Oil and Lubricants Conference in Singapore this month.
With such a dynamic situation, OATS is committed to maintaining a database of up-to-date, meaningful data that can be put to use for in-house reference or through publicly accessible, fully Chinese-compatible EARL Fusion solutions. For more information, simply contact Diana Shen.
Sebastian Crawshaw
Chairman, OATS