WRI Report Outlines Impacts of New Chinese Fuel Economy Standards on Automakers

WASHINGTON--Nov. 9, 2004--New Chinese fuel economy standards are likely to affect companies differently and could produce significant gaps to fill for vehicles sold in China by GM and DaimlerChrysler. Toyota, Ford, PSA appear to be better positioned to meet the standards.

This is among the findings of a brief report released today by the World Resources Institute (WRI). Taking the High (Fuel Economy) Road: What do the new Chinese fuel economy standards mean for foreign automakers? raises important issues and questions about the new fuel economy standards that take effect in 2005.

"Our analysis is based on the best available data to understand how companies are positioned to meet the new Chinese regulations," said Amanda Sauer, author of the report. "However, there remains great uncertainty around important issues that investors must assess, such as government enforcement and future production plans, which will ultimately determine the competitive implications of these standards."

The Chinese auto market is an important expansion market for major global automakers. At the same time, it is an important factor in China's growing demand for oil. To address China's increasing oil consumption and dependence on oil imports, the Chinese government approved a program of fuel economy standards for new vehicles in September 2004. Taking effect in two phases (Phase I beginning in 2005 and Phase II in 2008), these standards are based on vehicle weight and require each vehicle to meet the minimum fuel economy standard for its weight class.

Overall, the Chinese fuel economy standards would be slightly more stringent than the current CAFE system in the United States. Specifically, an increase in the average fuel economy of the U.S. vehicle fleet of 5 percent for Phase I (and 10 percent for Phase II) would be necessary to meet the new Chinese standards.

Taking the High (Fuel Economy) Road is the first in a series of reports to be released by WRI's Capital Markets Research project. These reports will analyze and comment on important new issues for financial markets created by climate change risks and opportunities. As a growing number of countries adopt measures to address climate change, investors and financial analysts will need to consider these influences and their financial impact in security analysis and portfolio management.

World Resources Institute (http://www.wri.org) is an environmental think tank that goes beyond research to find practical ways to protect the earth and improve people's lives. This report is a product of WRI's Sustainable Enterprise Program.

The full report is available for journalists in Media Previews at http://newsroom.wri.org