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On Strategy: The Challenge in China

Car ownership in China is growing—and presenting a range of different challenges.

Each day, around 1,000 new cars hit the streets of Beijing. Chinese car ownership levels are growing rapidly, driven by the burgeoning middle class. The car, that symbol of freedom and status, is changing China. But the transformation carries a hefty price: badly congested streets and rising carbon dioxide emissions.

Preventing people from owning and driving cars is clearly not the solution to this environmental problem. Automakers, the general public, and government together bear a social responsibility to find ways to lower carbon dioxide emissions and improve traffic flows. OEMs and suppliers are certainly responsible for developing environmentally friendlier vehicles, but if cities are to become cleaner, drivers and politicians also need to do their part.

 

Car choice

As more and more Chinese begin to drive, the fabric of Chinese life changes. Buying a vehicle has become a milestone of success in China. The benefits of car ownership are obvious, but the impact on the environment this social change brings should not be overlooked.

Everyone trying to maneuver through clogged streets experiences the environmental impact. Air quality worsens as car ownership increases. Unfortunately the pace of technological progress has not buffered the hike in emissions caused by increasing traffic. Alternatives to conventional combustion engines, such as fuel cells, will not be ready for the mass market for the next two decades. Therefore, we need to further develop established technologies, like gasoline direct injection, to increase the availability of environmentally friendly vehicles. Breakthroughs in lightweight materials also constitute a promising alternative. The pace of innovation by automakers in these fields must be increased.

 

Infrastructure

The infrastructure in which a vehicle operates is also important to reducing damage to the environment. Smooth traffic flow produces less pollution. Infrastructure must exist to meet demand, but nearly every large city suffers from traffic jams and an overloaded road system. More worrying still, China’s car penetration is one of the lowest in the world and will increase with growing prosperity. There are only two possible mechanisms to meet this challenge. Cities must offer better alternative transportation and they must install modern traffic management systems.

Traffic management systems can help reduce air pollution. Also, by improving the throughput of the entire system, they effectively generate extra capacity. This is especially important in China, where the vehicle penetration rate is still quite low.

 

Regulatory framework

The regulatory framework to support innovative car technologies and traffic management systems must also exist. The list of possible measures is long, ranging from collecting an inner city traffic congestion charge to regulating which vehicles can be driven on certain days.

The government must support the development and implementation of modern engines and modern traffic management systems, proactively pushing certain investments. Investing in technology, whether in vehicles or traffic management systems, should be the primary goal, while introducing charges should be a government’s last resort.

The automobile civilization has to focus on pushing innovation and technology in order to develop and maintain a sustainable base for the future. Such a framework should encourage and support technological advancements. It is far better to create innovative solutions to control traffic flows and invest in alternative transportation than to introduce new taxes. When it comes to environmental standards, innovative technology is simply the key to success. Enterprises must win support for environmentally friendly technology.

 

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