Engine Makers in China Try Catching Up to Global Leaders at Home

To compete against large international rivals in the Chinese auto market, China's engine makers are working hard to introduce and upgrade production technology to make up for their own immature engine-development capabilities.

During the first 10 months of 2007, a total of 7,222,500 cars were produced and 7,150,300 sold in China, up 22.6% and 24.02% from a year earlier, respectively. Both figures were expected to break 9 million for the year as a whole.

The Chinese car market is expected to maintain a sharp 20% growth this year, meaning that sales will increase by about 1 million units compared with 2007. This strong growth has attracted foreign engine manufacturers from all over the world to test China's car market, posing a threat to the continued dominance of domestic counterparts and arousing fierce competition between local and foreign makers.

Local manufacturers have become increasingly aware of their weak capability in the development of key parts and high-end engines, a situation resulting from their long-term focus on assembling engines ordered from other carmakers. Some of them clearly understand that if they fail to build up core competency by absorbing up-to-date know-how and technology, they will inevitably lose out to foreign rivals in the market.

Some of China's leading carmakers, including Chery Automobile, Shanghai Automobile Industry, and Geely Automobile Holdings, have made good progress in upgrading their production skills and have developed high-end engines on their own.

Emergence of Domestically Developed Engines

In April 2007, Toyota started manufacturing Corolla series cars in its factory in Tianjin City, northern China. This was encouraging news for China's engine makers, being the first time for Toyota to turn out its ZR engines in a foreign country. These engines feature the Dual VVT-i (variable valve timing-intelligent) system that offers superior driving performance and world-class environmental performance, including excellent fuel efficiency.

Toyota's move to shift production of these high-grade engines to China was a signal that foreign carmakers want to inject their technology into local supply chains. It reflects their optimism about the future of the vast Chinese car market.

On May 18 last year Geely Automobile unveiled its Vision series of middle-end cars, which use self-developed CVVT (continuous variable valve timing) engines. These are the first engines developed in China that are based on the CVVT system, which optimizes engine performance under high-speed conditions. Geely's CVVT engine meets Euro III emissions standards.

Instead of developing engines from scratch as Geely has done, Shanghai Automobile decided to acquire technology from Britain's Rover as a shortcut to the production of high-end engines. The result is Shanghai Automobile's KV6 gasoline engine, which was first introduced in the company's Roewe sedans. It conforms to Euro IV emission standards.

Chery Automobile has not only developed its own engines but has also cooperated with AVL, an Austrian automobile consulting company, in the joint design and production of the ACTECO family of engines in the hope of narrowing the gap between itself and foreign manufacturers in the field of engine development. The Chery ACTECO is an advanced engine that incorporates aluminum-alloy cylinder blocks/heads and direct fuel injection, and also conforms to Euro IV emission standards.

New Windows for Chinese Makers

Worries continue to grow among Chinese manufacturers about their underdevelopment of high-grade engine technology. Observers believe, however, that this backwardness will be resolved as China's huge domestic market gives local engine makers a strong incentive to break through the technological obstacles now facing them and, eventually, to achieve the production of advanced engines.

Besides, market analysts predict that carmakers and engine developers will, in the future, focus on new-generation single-cylinder diesel engines, general gasoline engines, Euro III and IV standards-compliant diesel engines, and fuel-saving gasoline engines for use in trucks, buses, sedans, SUVs (sport utility vehicles) and MPVs (multi-purpose vehicles). Hybrid engines that can be fueled by CNG (compressed natural gas), LNG (liquefied natural gas), alcohol, or ether are also expected to become popular somewhere down the road.