Beijing emission standard latest blow to domestic brands

An anticipated tough new emission standard in Beijing will put more pressure on domestic carmakers, even forcing some to leave capital city market due to high costs in upgrading their products.

The Beijing V emission standard - equivalent to the Euro V standard and the strictest in China - could take effect this year, although no final decision has been made on the timetable for its implementation.

Once in force, models that can't meet the new standard will be denied registration in Beijing.

Compared with Sino-foreign joint ventures, domestic carmakers generally have weaker R&D capability and a slimmer profit margin to fund the retooling needed to improve fuel efficiency and emissions, analyst said.

The move would be just the latest blow to domestic companies after Beijing restricted on car purchases two years ago and an overall auto market that has cooled significantly, they said.

According to Lin Huaibin, auto analyst of consultancy IHS, only 20,000 to 30,000 domestic cars have been registered in Beijing annually since the city limited new license plates at the beginning of 2011.

Cleaner running cars are "necessary in the long run as more cities will adopt stricter emission standards, but at the moment, for some carmakers, sales in Beijing are too trivial for them to develop products that meet the new emission standard solely for one city", he said.

Su Hui, an official with the China Automobile Dealers Association and former general manager of the Yayuncun Automobile Trade Market, agreed that some domestic carmakers would not consider technological improvements unless the new emission standard is implemented nationwide.

"They can choose to give up the market in big cities like Beijing and seek growth in smaller cities," Su said.

Some small homegrown carmakers may leave the Beijing market entirely, but even leading domestic carmakers will have fewer models to sell in the city, at least at the outset.

Chery Automobile Co, one of the top domestic carmakers and China's biggest car exporter, has only two models that meet the Beijing V emission standard, according to Huang Huaqiong, the company's spokesman.

"We will have more models to meet the new emission standards next year," he said.

Yang Xueliang, spokesman for Geely Automobile, whose parent group also owns Volvo Cars, said that the company will have several models that meet the new standard in Beijing.

"But we will only select some models for the upgrade instead of the entire lineup," he said, indicating the investment will be huge.

Yang said Geely now sells just a few thousand cars in Beijing each year. The annual number was about 15,000 units before the city adopted its policy to cut car sales.

Yan Jinghui, assistant general manager of the Yayuncun Automobile Trade Market, saw a bright side. "For domestic companies with adequate technical reserves, it (a new emission standard) will be an opportunity to improve brand strength."