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backASIAtalk May, 2012

China in the Driver’s Seat

After a century of continuous growth in vehicles, America’s love affair with the car appears to be idling. The number of passenger cars and light trucks in operation has hovered around 240 million since 2007. U.S. vehicle miles traveled have also been gradually declining since 2007.

But China is just getting started with its car romance, and the rate at which they’re adopting vehicles is astonishing.

The sheer number of vehicles being added in Asia means a whole new level of competition for oil. It’s a competition that Asia will almost surely win, and will probably do more to drive the adoption of electric cars in the U.S. than any policy or tax credit.

A blistering pace

In 1999, there were just 15 million vehicles on the road in China, and only 6 million of those were cars. In the U.S., there were 216 million vehicles, of which 132 million were cars.

To view graph/chart, please click here.

But in the past five years, the growth rates have shot up. By 2010, China had the world’s second-largest fleet at 78 million vehicles, and sales had climbed to 18 million a year, about half again as much as U.S. sales.

This year, total domestic vehicle sales in China are expected to be about 20 million, according to the China Association of Automobile Manufacturers. And over the next five years, China is expected to add over 125 million vehicles—more than half the total number of cars and light trucks in the U.S.—to its fleet.

While the growth rate of China’s fleet has slowed somewhat from its blistering double-digit pace in 2009 and 2010, it is still estimated to grow by at least 8 percent this year. And with a total population nearly five times that of the U.S., it will continue to adopt far more vehicles long into the future.

At the end of 2011, there were 106 million automobiles (including three-wheeled motor vehicles) in China, according to its National Bureau of Statistics. And although estimates vary fairly widely, it’s possible that the Chinese auto fleet will be larger than the U.S. fleet by 2020.

Along with its new vehicles, China has been laying pavement at a furious rate. As of last year, China had 53,000 miles of expressway nearly all of it built over the last five years. The U.S. Interstate Highway system has 47,000 miles, which took more than three decades to construct.

The fuel efficiency race

After improving substantially from the late 1970s through the 1980s, our fuel economy began to flatten out in the 1990s as gas prices fell and the SUV craze swept over America. The average efficiency of U.S. cars barely budged from 21.2 mpg in 1991 to 23.8 in 2009.

To view graph/chart, please click here.

And thanks to improved engineering and reliability, our vehicles are older than ever before. The average age of automobiles and trucks in the U.S. has crept up in a straight line, from 5.6 years in 1970 to 11 years in 2011.

By contrast, the vast majority of China’s vehicles are much newer, and much more efficient. New cars, minivans and SUVs in China already get nearly 36 mpg, while the average fuel economy of new vehicles purchased in the U.S. is just 23.7. By 2016, when U.S. standards will require vehicles to get the same fuel economy that China’s do today, China’s will be required to get 42 mpg. Indeed, it would appear that U.S. vehicles may never catch up to China’s fuel economy.

These trends may not hold to their current trajectories, however. iCET notes that the average fuel efficiency of the Chinese fleet hasn’t improved much since 2006, and that as Chinese consumers become wealthier, they may opt for larger vehicles and end the trend toward better fuel economy. Even so, if we account for the efficiency of their two-wheeled fleet, with motorcycles getting 60 – 80 mpg, and scooters getting over 200 mpg. China’s overall fleet efficiency is vastly better than that of the U.S. Including motorcycles and other vehicles, China’s registered motor vehicles numbered 225 million in 2011, implying that they actually have more motor vehicles with two wheels than vehicles with three or four.

Largest and most inefficient fleet

In short, the U.S. wound up with the world’s largest and most inefficient fleet because we bought the most vehicles, and the most inefficient vehicles, and bought them earlier. While we were snapping up 14 mpg SUVs in the 1990s, Europe was buying little 30+ mpg 4-bangers, and China was hardly buying any. Now we’re dragging around this huge old fleet like a turtle shell, while China is just getting started, and they’re buying vehicles that are twice as efficient as ours at the outset. At current sales rates, it would take nearly 20 years to turn over the existing U.S. fleet, and its fuel economy is improving far too slowly to catch up with the rest of the world.

The implication is clear. Since the global supply of conventional oil stopped growing at the end of 2004, competition for oil has increased and forced prices up. With its far more efficient and rapidly-growing fleet, Asia will be able to outbid the U.S. for fuel. By the time we replace just half of our fleet, a larger number of far more efficient vehicles elsewhere will be competing for diminishing exports and driving prices beyond our pain threshold. A transition to electric vehicles and mass transportation in the U.S. is probably inevitable.

Source: Txchnologist - GAI

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