Global Automotive News Updates

Brazilian Ethanol Finally USA-approved

Hardly news after three decades of efficient sugarcane cultivation, Brazil's widely reported success in distilling ethanol from the crop is finally recognized stateside: Earlier this year the U.S. Environment Protection Administration (EPA) approved Brazilian sugarcane-derived ethanol as an advanced biofuel for automobiles, which reportedly emits 61% less CO2 than gasoline.

Meanwhile and likely due to political pressure to be eco-conscious, the USA will purchase 15 to 40 billion liters of Brazilian ethanol within 12 years.

Maximizing recycling potential, Brazil generates heat and power at very competitive prices by using residual bagasse as fuel.

In 2008, Brazil produced 24.5 billion litres of sugarcane ethanol or 37.3% of the world's total ethanol used as fuel, making the nation the world's first to have a sustainable biofuel economy and the biofuel industry leader.

Besides relying on sugarcane-derived ethanol, Brazil also discourages light vehicles running on pure gasoline, a policy that is working. Doing the same with heavier vehicles is less viable for the volumetric energy density of ethanol still lags that of fossil fuels as gasoline. And since 1976 Brazil has stipulated blending 10% to 22% of anhydrous ethanol with gasoline, which has been gradually raised to 22% in 1993 and 25% in 2007.

China Keeps Tax Breaks

The Beijing government, to continue pushing the auto sales boom in China, is making tax breaks even more attractive this year: cutting sales tax on a 1,600cc sedan from 10 to 7.5%, and raising the subsidy for each “cash-for-clunker” buyer from US$732 to US$2,635.

Further making sure car sales do not falter, Beijing is encouraging lenders to make financing more accessible. The minimum interest rates on car loans currently are 12% per annum, with the authorities planning to reduce such rates to below 10%, which is expected to roll two million more cars out dealerships this year.

Casual observations would reveal that China is taking after the American way of life—to live on credit. The “Auto Revitalization Plan,” published in March 2009, is an official policy to promote financing for car purchasing. The China Automobile Dealers Association (CADA) says 10% of cars sold are financed in China, with the ARP to likely raise such rate to 30% this year, or an extra two million vehicles.

These policies are working: The China Association of Automobile Manufacturers (CAAM) says January auto sales hit a record high of 1.316 million vehicles, up 110% from that of last year.

EU to Take on American GPS in 2014

The European Union (EU) announced in January that the Galileo Project will be formally launched in 2014, a European initiative for a satellite navigation system to challenge the dominating American GPS (global positioning system).

The Galileo Project reportedly provides a highly accurate, guaranteed global positioning service under civilian control. “While providing autonomous navigation and positioning services, Galileo will at the same time be interoperable with GPS and GLONASS, the two other global satellite navigation systems,” says the European Commission.

According to the Commission, the Galileo Project is an improved version of the American counterpart, with a sub-one-meter deviation compared to 5-10 meters of the GPS. With its first satellite launched in 2005, the Galileo Project will complete its satellite system of 30 satellites by 2011, and will begin full service in 2012 or 2013.

India Penalizes China's Dumping of Auto Tires

India has announced beginning this year anti-dumping duties on China-made auto tires and plastic-processing machines, further putting the brakes on China's auto tire exports that have been hit hard by earlier implemented American punitive duties on China-made tires.

The world's largest auto tire exporter, China ships around 40% of its output overseas, 33% of which goes to the USA, its largest buyer.

In September 2009, the U.S. announced punitive duties on import of China-made sedan and truck tires for three years—35% for the first year, 30% for the second year, and 25% for the third year, with Indian anti-dumping duty ranging from 24.97% to 88.27%. Over 10 countries have followed suit to impose anti-dumping or anti-subsidy duties on China-made auto tires since.

FTA Benefits S. Korean Auto Parts Trade

With the free trade agreement (FTA) signed between South Korea and the European Union (EU) to be effective in July, the EU will gradually reduce and finally cancel tariffs on S. Korea-made auto parts.

The FTA will not only strengthen South Korean export competitiveness, but will also weaken that of South Korean competitors, especially the other three Asian tigers—Hong Kong, Singapore, and Taiwan.

South Korea has been in recent years adopting two effective tactics to promote exports: signing FTA with trading partners to realize more favorable tariffs and allowing Korean won to depreciate to strengthen competitiveness of South Korean exports. For example, the South-Korea-Singapore FTA has realized a 30% growth in exports to the Merlion State. Signing another FTA with the ASEAN (Association of Southeast Asian Nations) will further stimulate trade between South Korea and other Asian countries.

Taiwan Plans Green Intelligent Auto Park

In line with the official policy to target developing green energy as one of the six newly-emerging industries, the Ministry of Economic Affairs (MOEA) plans to set up a green intelligent auto park in the Changjua Coastal Industrial Park in central Taiwan with an initial budget of US$47.255 million.

The park is designed to be the biggest cluster of Taiwan's ICT sector to develop indigenous auto brands, with the Taiwan Cabinet now considering ways to attract companies to locate inside the compound.

The MOEA official says that, despite Taiwan's lack of competitive technologies in the auto sector, the island boasts world-class ICT capacities that can be tapped to enhance existing auto technologies to develop Taiwan's auto industry.

Given an annual production of 12 million units in China, the ICT market value there could reach about US$6.3 billion. The official plan is to push the intelligent auto project in two phases: the first 3-year phase budgeted at US$63-94.5 million will build products through official-private joint ventures, also serving as models for interested private companies, with the second phase to offer subsidies to private companies interested in engaging in the business.

U.S. Finances Fisker's Hybrid Project

The U.S. Energy Department offered US$529 million in loans to Fisker Automotive for its hybrid R&D program, which aims to build two hybrid models for the upscale and popularly-priced segments in the USA. Fisker Automotive is the fourth to benefit from the green auto project that offers incentives to automakers to build eco-friendly vehicles for Americans.

The green car program started last June when the U.S. Energy Department gave the first loan of US$5.9 billion to Ford Motor to set up a production line to make small hybrids. Then Nissan's US-based plant and Tesla Motors were given loans of US$1.6 billion and US$465 million for the same purpose. The Energy Department says the loans are not only to encourage automakers to build hybrids for Americans but also create roughly 5,000 jobs.

Fisker Automotive, established in 2007, aims to build a hybrid, dubbed Karma, this year with at least 65 percent US-made parts but assembled by Valmet Automotive in Finland.

Partly solar powered, Karma will be equipped with a solar panel on the roof to enable driving for around 50 miles or 80 km. If driven for up to 50-mile cycles, Karma will only need be refilled with gasoline once a year, says Fisker Automotive, which has received orders for 1,500 Karmas and expects to sell 15,000 vehicles in its first year. Karma prices will be reduced to US$80,000 per vehicle with growing sales, says Fisker, which plans to launch another hybrid priced around US$40,000 by 2012, targeting the mid-segment who may wish to be green but can't afford 6-figure vehicles.