Michelin North America
Chinese take in environmentally friendly vehicles shown at the main campus of Shanghai International Automobile City. Major carmakers selling in China each have a pavilion there. The green car event was sponsored by tiremaker Michelin.
By Miguel Llanos Reporter
updated 12/31/2004 10:24:57 AM ET 2004-12-31T15:24:57

The view from the main street of this Shanghai suburb is striking. On one side is a symbol of China's past: rows of two-story tenements, home to hundreds of Chinese peasants, some still farming the shrinking plots around them. On the other, a symbol of China's future: pavilions built to show off the nation's growing car culture and its version of Detroit.

Between them runs China's present: A new eight-lane road that's used by bikes, scooters, pedestrians and, increasingly, cars and trucks.

This suburb, recently recrowned Shanghai International Automobile City, exists to encourage consumption — enticing peasants, the middle class and multinationals with a sprawling showcase and consumption that rivals any Western city.

Miguel Llanos  /
This high-rise is being built on the main campus of Shanghai International Automobile City.

American-style housing for 60,000 people and a golf course are being built to serve the dozen carmakers and 100 suppliers in the area.

The community even has its own university, specializing in automotive engineering, of course, and is home to a new $230 million Formula 1 race track, China's first.

A theme park will include a convention center and car museum.

But this fast track to a car culture has had enormous costs — in terms of soaring energy use and pollution — that China is only now trying to tackle.

Problems by the numbers
Xie Wong, a vice minister at China's Environmental Protection Agency, told reporters and auto executives at a recent gathering in Shanghai that cars have certainly increased mobility in China. But the costs, Wong said, have been that "respiratory diseases are on the rise" and 100 Chinese cities will be "severely polluted" by 2010.

China already has some 25 million motor vehicles, and that number is expected to grow to 50 million by 2010 and 150 million by 2020.

Transportation is the fastest-growing sector in terms of energy use: It now consumes 10 percent of the nation's energy and is projected to consume one-third by 2050.

More vehicles also mean more emissions, which now account for nearly two-thirds of China's urban air pollution. Leaded gas was recently phased out, but pollution from most vehicles is still several times worse than Western levels.

Moreover, China is second only to the United States in fossil fuel emissions of carbon dioxide — emissions that many scientists say are tied to global warming.

What to do?
With all of these problems in mind, plus the fact that China will host the 2008 Olympics, the government has responded with a series of edicts.

A plan announced in November calls for replacing 38 million tons of oil by 2010 with cleaner-burning natural gas, ethanol and liquefied coal.

Gang Wan, director of Tongji University, where hundreds of students are being trained to be tomorrow's automotive engineers, sees China shifting away from a reliance on coal and oil to one that embraces natural gas and eventually hydrogen. "The future will be diversified," he predicts.

Video: Expanding China

In addition, in October China decreed a 10 percent increase in the fuel efficiency of new cars by 2008, creating a standard slightly higher than U.S. levels.

Also, a ban on smaller economy cars from many urban expressways has been lifted. The small cars were once criticized for slowing traffic, but now they are touted for their higher mileage.

Lower-sulfur gasoline and diesel are being phased in to cut pollution.

And Beijing, having vowed to deliver a green Olympics, is requiring that nearly all of its 60,000 taxis and most of its 6,500 diesel buses be replaced by 2007 with cleaner vehicles.

Carmakers are also getting involved. Toyota plans to assemble and sell its gas-electric Prius in China next year, General Motors and a Chinese partner will work on hybrid buses and DaimlerChrysler is testing three hydrogen fuel-cell buses in Beijing.

China says it's also embracing mass transit. The World Resources Institute is working with Shanghai to develop a "bus rapid transit" system that would dedicate driving lanes to buses.

"BRT will keep people out of cars by providing faster service, and even attract people from cars and two-wheelers," predicts Lee Schipper, a researcher at the institute. "Per passenger mile, BRT is far less polluting."

Potholes along the way
But even with decrees and outside help, there's no guarantee China will be able to cope with its explosive growth in cars. Beijing alone has 2.3 million vehicles, and that figure grows by 1,000 each day.

"This presents an enormous environmental challenge," says Margo Oge, director of the Office of Transportation and Air Quality at the U.S. Environmental Protection Agency.

The EPA has been working with China to improve emissions, most recently agreeing to help retrofit older diesel buses.

Schipper is among those who believe China can still leapfrog to cleaner cars even if the focus now is on simply producing vehicles to meet consumer demand.

"The window is by no means closed because the overall size of production is still small compared to what it will be in five years," he says. "There is no reason why Honda and Toyota can't market their hybrids ... and why Honda can't sell its very clean CNG (compressed natural gas) cars in the next round of factories."

But Eric Harwit, an Asian studies professor at the University of Hawaii whose research includes China's auto industry, suspects those markets will be slow to evolve. Carmakers "will be very careful to guard their hybrid technology," he says, "as they worry about Chinese intellectual property theft."

Tianshu Xin, an analyst with consultants DRI Global Automotive Group, sees another weak point. "Chinese consumers are still price sensitive," he says, noting that cleaner cars are more expensive than gasoline ones.

China's energy and environmental problems affect the world, from putting pressure on oil prices to increasing CO2 emissions. Chinese-produced smog and acid rain are carried by trade winds over the Pacific and into the United States.

In the long run, how China manages its growing car culture could impact what kind of cars are driven by Americans.

"If China's booming automobile market demands smaller and more efficient vehicles than those being produced in the United States, carmakers will have no choice but to respond," Duncan Austin, an economist at the World Resources Institute, said in a recent report.

"China's decision will have a spillover effect," he predicted, "influencing what types of cars are sold in other countries."

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