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BEIJING--Lorry driver Zhang Jianwei isn't worried about cleaner fuel requirements that come into force in China next year, raising the price of motor fuels--he will just keep buying cheaper, dirtier diesel at smaller stations.

Zhang's example underscores the cautious approach the world's second largest oil consumer is taking to introducing tougher diesel and gasoline specifications, and shows why there will be little initial impact on China's fuel trade.

Motorists across China will switch to 150 parts-per-million (ppm) sulphur gasoline from January 1, 2010, from 500 ppm, and a lower content of benzene, a carcinogen, three years after the specifications were first announced.

The changes, a hard sell to motorists already facing record pump prices, won't bring China's fuel standards into line with even stricter Western market benchmarks, tempering the risk of Asia's leading gasoline seller flooding export markets with still more fuel.

"It will not allow them to break into advanced markets yet, but I don't think they aimed for that anyway," said Al Troner, managing director of AP Energy Consulting, and an expert on Asian fuel specifications.

But its start to move Chinese oil firms beyond their traditional role of being self-sufficient toward being more like aggressive exporters in South Korea and more recently, India. For example, 150-ppm gasoline will probably help boost Chinese sales into Australia, which uses a similar grade.

Also from January 1, China is launching automotive diesel with a sulphur content of 350 ppm, to differentiate from the 2,000-ppm general diesel used by its vast rural and industrial sectors. However an 18-month "transitional" period is allowed before the specification becomes mandatory.

One significant change in diesel quality is the cap on polyaromatics, a main contributor to urban smog. That requires refiners to use costly hydrocracking and hydrotreating units, instead of traditional catalytic crackers.

Oil duopoly Sinopec and PetroChina have in the past decade or so been spending heavily on units that strip sulphur and crack heavy residues into motor fuels, as China imports a growing share of sour and heavy crude oil.

The new specs mean the cost of fuel is set to rise further, a challenge for refiners like Sinopec to pass on to Chinese drivers already paying record pump prices.

"It's Sinopec's chance to showcase our strength in technology. But as it costs to build and run hydrocrackers to meet the specs, we will expect a premium price for premium quality," Sinopec's spokesman, Huang Wensheng, said.

The diesel factor
The formal introduction of automotive diesel specs highlights the oil industry's focus on meeting the rapid growth in road freight traffic in an economy that is heavy on manufacturing and as the country swiftly expands its highway networks.

China's demand for automotive diesel overtook gasoline in absolute volumes a couple of years ago, and is poised for strong growth in the coming years, analysts said.

Automotive diesel now makes up more than half of China's total diesel use of some 3 million barrels per day, against a third previously.

"The improvement in auto diesel standards in the past has been slowed in part because of China's massive use of rural diesel by tractors. Auto diesel is growing rapidly," said Lu Changjiang, Sinopec's fuel quality and efficiency chief.

China's environmental watchdog wants to fast track the more stringent standards, and Sinopec says it has the technical ability to produce Euro V motor fuels with sulphur content of 10 ppm and steeper cuts in polyaromatics.

"We're aiming to catch up with European standards (V) by around 2015/2016," said Tang Dagang, head of vehicle emissions control of the Ministry of Environmental Protection, adding that mationwide specifications for 50-ppm gasoline, already in use in Beijing and Shanghai, are expected to be announced soon.

For the country's swelling fleet of private car owners--car sales in China recently passed those in America to make it the world's top market--the mandatory shift to cleaner petrol of 150 ppm will put China in the league of clean fuel markets like Japan and Australia.

And the cut to 1 percent from 2.5 percent of benzene places China at the top of the moderately high quality ranks, said AP Energy's Troner.

But both the government and oil firms will need to gauge if users like lorry driver Zhang are going to pay up, after a doubling of prices in the past five years and a dwindling of China's exports, which has heightened competition among truckers.

To cut the bills for his 1,000-liter tank, Zhang says he may stop more often at gas stations near his mountainous hometown in Fujian, where cheaper and lower-grade fuels are popular, before hitting the 4-lane interprovincial highways dotted by petrol outlets run by state giants Sinopec and PetroChina.

"If it can save me 300 to 400 yuan ($45 to $60) per trip, I will not hesitate to refuel at the smaller stations," said Zhang.

Story Copyright (c) 2009 Reuters Limited. All rights reserved.

(Credit: Automotive News)

DETROIT--BorgWarner forecasts about $1.8 billion in new powertrain business in the next three years as automakers revamp their engines and transmissions to meet stricter government mandates on emissions and fuel efficiency.

Analysts, who had expected the supplier's plan to take a sharper hit from the global recession, were surprised by the strength of the forecast.

The suburban Detroit company, which last month posted a third-quarter profit after four straight quarters in the red, said half of the new business would come from Europe, the main market for advanced gasoline and diesel engine technology. Asia will account for 30 percent of the new business and the Americas, 20 percent.

When it unveiled its three-year plan a year ago, BorgWarner said it expected to bring in $2.1 billion in new business from 2010 through 2012.

"The size of the drop is somewhat smaller than expected, given the decline in expected global light-vehicle production," David Leiker, an analyst with Robert W. Baird & Co., said in a research note. Last year's projection came in late October, "when the global financial crisis was still in its early stages," Leiker said.

North America soon should bring in more drivetrain and engine air management business, CEO Tim Manganello said last week during a conference call.

For instance, Chrysler Group does not account for any new business in BorgWarner's backlog of orders. That could change because Chrysler's future vehicles with smaller-displacement gasoline engines are to be powered with engines from Fiat S.p.A.

BorgWarner already supplies the control module for Fiat dry-clutch transmissions and turbochargers for diesel and gasoline engines. The supplier's contracts include turbochargers for Fiat's 1.8-liter gasoline engine, which Manganello said could power a number of Chrysler vehicles.

Manganello said he expects that by 2013 or 2014, North American car and truck production will return to rates seen in late 2007 and early 2008. Production then was around 3.5 million vehicles a quarter but has dropped to around 2.5 million now.

Dual-clutch transmissions make up about 13 percent of BorgWarner's 2010-12 backlog of orders. Manganello said he expects dual-clutch transmissions to occupy a larger share of sales in 2013 to 2015, noting a "very strong" development program with a Japanese carmaker for dual-clutch technology.

(Source: Automotive News)

(Credit: Automotive News)

The federal government is taking public comments on proposed changes to the long-standing corporate average fuel economy mandate. Those proposed changes include considering new approaches to improving fuel economy and, for the first time as part of CAFE, reducing emissions.

New CAFE rules are being hammered out by the EPA and the National Highway Traffic Safety Administration, an agency of the Transportation Department.

The two agencies considered more than 35 technologies that automakers could use to improve fuel efficiency and reduce carbon dioxide emissions during the 2012-16 model years, according to the agencies' joint proposal for the new rules.

That proposal, currently the subject of public comment, is expected to be completed around April, a NHTSA spokeswoman said.

The technologies being considered fall into five categories:

1. Engine.

2. Transmission.

3. Vehicle.

4. Electrification/accessory.

5. Hybrid technologies.

Most "are readily available, well-known, and could be incorporated into vehicles once production decisions are made," the 337-page proposal says.

At the same time, though, the EPA has opened the door for automakers to get credits for using new technologies that would reduce greenhouse-gas emissions.

"Eligible innovative technologies would be those that are relatively newly introduced in one or more vehicle models but that are not yet implemented in widespread use in the light-duty fleet," the proposal says.

Combining NHTSA's miles-per-gallon targets for CAFE with the EPA's emissions goals could result in overall efficiency improvements.

Said Jim Kliesch, a senior engineer with the Union of Concerned Scientists, "This is good news from an efficiency standpoint because there's overlap between the amount of greenhouse gas emitted and fuel economy."

(Source: Automotive News)

(Credit: Automotive News)

Whatever happened to ethanol?

With all the buzz about hybrids, full electrics, and plug-ins, the industry doesn't seem to talk a lot about biofuels these days.

But research is continuing. So is a political debate over the amount of ethanol that should be blended with gasoline in the U.S. fuel supply.

Proving grounds tests

Vehicles at General Motors' Milford Proving Grounds in Michigan have started testing cellulosic ethanol made by GM partner Coskata at a new plant in Madison, Pa., outside Pittsburgh. Coskata dubbed its plant, which opened last month, "semicommercial." It is capable of producing 50 million to 100 million gallons of fuel a year from such feedstocks as wood biomass, agricultural, and construction waste, and crops raised specifically to be used for energy.

"The next step is to build full-scale facilities and begin licensing our technology to project developers, project financiers, and strategic partners," Coskata CEO Bill Roe said in a statement.

Among the nation's automakers, GM has been the most visible backer of ethanol. In January 2008, it launched a partnership with Coskata. A few months later, it invested in a second cellulosic-ethanol venture, Mascoma.

Companies such as Coskata and Mascoma are working to address a major criticism leveled against the use of ethanol derived from corn: that it jeopardizes the world's food supplies and raises food prices.

Cellulosic-ethanol companies are looking at ways to make fuel by breaking down cellulose, the material that gives structure to plants. The idea is to get away from relying on corn and other food crops by using waste matter, such as corn stalks.

"We invested in Coskata so that we could enable the rapid deployment of commercially viable and environmentally sustainable ethanol globally," said Bob Babik, GM's vehicle emissions director, in a statement issued at the startup of the Pennsylvania plant.

The debate over cars and ethanol long has centered on the relative scarcity of ethanol fueling stations and the low fuel economy that vehicles achieve when fueled with ethanol.

How much is too much?

Lately, that debate has shifted to how much ethanol should be blended into the nation's gasoline supply.

By law, standard gasoline in the United States can contain up to 10 percent ethanol. Recently, backers of the biofuel, led by a group of ethanol makers known as Growth Energy, have lobbied to increase that limit to 15 percent. High corn prices and a slump in demand, the result of Americans driving fewer miles in the recession, have hit makers of corn-derived ethanol hard. Many ethanol makers have gone out of business.

Flexible-fuel vehicles, which many automakers now offer, are designed to run on such a high concentration of ethanol, a blend specifically labeled E85.

Groups representing carmakers, including the Alliance of Automobile Manufacturers and the Association of International Automobile Manufacturers, are fighting efforts to allow 15 percent ethanol in standard gasoline. They say that engines designed to handle no more than 10 percent ethanol would suffer if the mix rose to 15 percent.

Michael Stanton, CEO of the international association, wrote this summer in a letter to the EPA that if the EPA "were to approve the sale of such fuels, we believe a range of problems would result that could jeopardize the control or reduction of automotive emissions."

(Source: Automotive News)

One year before starting production of the Chevy Volt, General Motors engineers say they are confident in the performance and safety of the electric car's batteries.

GM executives gave an update on the car's plans on Tuesday, saying engineers are making some tweaks to the design but that they are on schedule.

The Volt's chief engineer, Andrew Farah, also implied that GM is close to moving ahead with a project to make a Cadillac that uses the same gas-electric power train that the Volt uses. Last week, there were reports that the Converj concept had been given the green light internally, with expected car delivery in 2013.

For the Volt, GM is preparing the battery and auto manufacturing, which will happen in its home state of Michigan, with the process and product validation scheduled to begin early next year, executives said.

In the meantime, GM engineers are testing the Volt's battery pack, called the Voltec, and putting 80 prototype vehicles through the paces. In addition to crash tests for safety, they are testing the car's performance on a range of conditions, including very hot and cold temperatures, and steep hills.

This crash test shows that the orange T-shape battery pack of the Volt is not impacted during frontal collision, says GM.

(Credit: General Motors)

The Volt is a gas-electric hybrid, but unlike the Toyota Prius and other hybrids on the road now, the Volt moves only from electric motors. The gasoline engine is used to supply energy to the batteries through a generator.

Because it's a new car, GM still is trying to project what sort of performance to expect. Overall, engineers are happy, but they also know that climate conditions and driving style will affect the battery's performance, they said.

"Ten years is the target life (for the battery). Depending on how you use it and where you live, you could see significantly longer time," said David Wallace, engineering group manager for Voltec Battery Systems.

The biggest challenge is battery durability in very hot weather, he said. People who live in more temperate areas and do a lot of city driving will have more forgiving conditions, Wallace added.

"But even if you live in Phoenix, as long as you charge at night, and you run during the day, your battery will remain happy," he said.

During its testing, GM has to tune the chemistry of individual batteries, which will be supplied by LG Chem. Various tests, including crash tests, have indicated that battery safety is good, executives said.

For the car itself, auto engineers are now making adjustments to reduce the overall noise during times when the gas engine kicks on for longer rides.

Farah declined to say how big the gas tank will be, which will indicate what the overall driving range is, saying that decision will be made as late as possible.

Separately, Farah said GM's plan to produce an Opel in Europe that uses the Voltec powertrain is still on target, with a schedule roughly one year behind the Volt.

Photos: OnStar EV Lab connects to Chevy Volt

(Credit: Automotive News)

FRANKFURT -- BMW AG has set up a joint venture with carbon-fiber specialist SGL Group to build lightweight components for BMW's Meg-acity electric vehicle.

The new entity, in which SGL has a 51 percent stake, will build a plant in North America and one in Germany to make carbon fiber automotive parts on a large scale for the first time, the companies said.

BMW's Megacity car is an offshoot of the carmaker's Project i, which seeks to develop transportation options for urban areas with more than 10 million inhabitants. BMW recently enlisted a Robert Bosch and Samsung SDI joint venture to supply lithium ion battery cells for the vehicles.

"We will enter into a new dimension in the use of carbon-fiber-reinforced plastics, both in terms of volume per car and in vehicle numbers," a BMW spokesman said, declining to be more specific.

So far, carbon-fiber components are used almost exclusively in luxury cars and sports cars.

Production is expected to start in the first half of the next decade, SGL said.

"For the first time, carbon fibers are taking on an important role in series vehicle manufacture," SGL said.

The deal is the latest in a slew of joint ventures formed by Germany's SGL to branch out into the industrial use of its carbon products.

In May, SGL combined its carbon ceramic brake discs business with Italy's Brembo. Last year it set up a company to supply carbon-fiber composites for the car industry with Germany's Benteler Automobiltechnik GmbH.

SGL looks to reduce its dependence on its best-selling graphite electrodes for steel furnaces by boosting sales of carbon-fiber and composite carbon materials to makers of aircraft, windmills and automobiles.

(Source: Automotive News)

A group of CEOs on Monday came out favor of a regional roll-out of electric vehicles in up to eight cities to demonstrate the viability of the technology and incubate the fledgling industry.

The Electricifcation Coalition held a press conference in Washington, D.C. and released an Electrification Roadmap, which prescribes the business and policy steps required to ramp up electric vehicle adoption.

There are 13 members of the coalition, including the CEOs of Nissan Motor, FedEx, Pacific Gas & Electric, and battery maker A123 Systems. The coalition was spun out of Securing America's Future Energy, a lobbying group focused on reducing U.S. imports of oil.

Photos: Plug-in vehicles in Motor City

The Electrification Coalition argues that light-duty electric vehicles are the only technology that can cut oil imports and reduce carbon emissions in the near term. Its report (click for link) focuses on what's required to make electric cars available at large scale.

"I think we have the conditions for the mass market. But it's going to take more time," said Carlos Ghosn, the president and CEO of Nissan. "The investments to be made are huge. To make 50,000 batteries is a $250 million investment."

Of all the major automakers, Nissan is the most bullish on electrification. It is releasing an all-electric family sedan called the Leaf in the U.S. and Japan next year. It projects that 10 percent of new cars sales in 2020 will be electric, which is higher than most analysts' projections.

The shift presents challenges to auto makers that are unsure of consumer acceptance. Utilities and municipalities need to prepare in order to make these vehicles more consumer-friendly but they, too, are unsure what the volume of sales will be.

To take some uncertainly out of the picture, the Electrification Coalition advocates a "foothold strategy." Six to eight cities would create a number of incentives for electric vehicles, such as preferential parking and public charging stations. They would apply for government incentives and then test out the system to help bring electric cars to "critical mass," explained David Crane, the president and CEO of power generator NRG Energy.

In the first phase, the plan calls for getting 50,000 to 100,000 light-duty plug-in vehicles on the road per year in certain areas starting next year and then expand to 25 cities. Its report sets a target of having 25 percent of new vehicle sales be plug-ins by 2020, which is 5 million vehicles. A jump to 90 percent of new vehicle sales being plug-ins by 2030 would represent roughly 17 million units, according to data from consulting company PRTM.

For consumers, batteries should be owned and financed separately from the car itself, Crane said. Because batteries are an expensive component that makes it more expensive than a comparably-sized gasoline car, auto makers, including Nissan, are looking at ways to keep monthly car payments roughly the same by leasing batteries.

Governments around the world have established financial incentives for electric vehicles because it improves national security and addresses environmental problems, Nissan's Ghosn said. He noted that France, the U.S., and Japan each have established a tax credit of about $7,500 to consumers who buy an electric car.

In addition to federal tax credits, the coalition endorses incentives for municipalities dedicated to bringing in electric vehicles. Also required is technology to allow consumers to charge at off-peak times.

Speakers at the coalition launch also underscored the economic reasons for which governments are pushing electrification. Reducing oil imports would mean that billions of dollars of U.S. wealth would stop being exported, said Crane.

Government programs to drive investing in electric vehicle manufacturing also help the U.S. auto industry adapt to emerging technologies.

"We can do this. This is something we have the ingenuity for--we have enough innovation. What we need to do is capture that and use that to our advantage to build factories," said David Vieau, the CEO of A123 Systems.

Click for larger image.

(Credit: Electrification Coalition)

(Credit: Automotive News)

DETROIT--As General Motors Co. expands its lineup of rechargeable vehicles beyond the Volt, it will not brand them to be identified with the plug-in Chevrolet launching next year, a senior GM executive says.

That approach sets GM apart from Toyota Motor Corp., which is considering a range of hybrids identified with the Prius.

"Our thought is to take the Volt technology to other products," Brent Dewar, chief of global operations for Chevrolet, told the Reuters Autos Summit in Detroit this month. "The Volt was the original vehicle that we started, but I wouldn't see that as a brand marketing direction for us."

The Prius, introduced in the late 1990s, commands about three-fourths of the hybrid market.

Dewar said the Volt would pave the way for more vehicles based on the same technology--combining a rechargeable battery pack for all-electric driving with a gasoline-powered generator for longer trips.

But Dewar said the Volt name would not be identified with GM's future electric vehicles.

By contrast, Toyota's brand chief has said the automaker was considering a plan to put the Prius name behind a broad family of high-mileage hybrids.

Bob Carter, group vice president of Toyota's U.S. sales arm, told the Reuters Autos Summit that he thought the Prius had become synonymous with hybrid cars.

The Volt is on track to become the first mass-market plug-in hybrid in the United States. It is designed to run for 40 miles on a battery charge and can be recharged at a standard electric outlet.

When the battery is partly depleted, a small gasoline engine kicks in to recharge it and power the vehicle. That will allow the Volt to make longer trips without what Dewar called "range anxiety."

Separately, the Detroit News reported last week that GM will produce the Cadillac Converj plug-in concept car it introduced last January at the Detroit auto show. The vehicle uses the same technology as the Volt.

A Cadillac spokeswoman declined comment.

The Volt will be sold in North America and Europe before it goes on sale in Asia, Dewar said. The introduction in Europe is to be in 2011.

Dewar said Opel will sell its extended-range Ampera, derived from the Volt, in Europe alongside the Volt.

(Source: Automotive News)