Cheap gas in China prompts buyers to go bigger, while Gov't wants smaller

Apparently, China hasn't learned from the policies of the United States when it comes to petroleum prices. For decades, the price of gasoline has not reflected its true cost because prices have not factored in the cost of military expenditures required to maintain "friendly" governments in countries that supply large amounts of our oil. As a result Americans have long favored larger, more powerful vehicles - and they could afford them because gasoline was cheap and plentiful. China has gone from being a net exporter of oil to the world's largest consumer since 1994. China now imports half its oil needs and subsidizes the retail price to less than $3/gallon.

As a result Chinese drivers with increasing disposable incomes are opting for bigger, more powerful and thirstier vehicles, just like Americans. SUV sales jumped 38 percent and luxury car sales jumped 30 percent in the first two months of this year, bucking the trend in the U.S. Those segments are outpacing the overall sales increase of 16 percent in the fast growing market. Just as in the U.S., the Chinese government is pushing automakers to build more efficient vehicles but so far consumers aren't buying. It seems that just as in the U.S. and elsewhere only higher fuel prices will prompt drivers to go for more efficient vehicles. The Chinese government is certainly in a better position to determine what fuel prices will be than in other countries and with a market that is still evolving they could make a push for alternatives like battery and fuel cell electric vehicles. Given the pollution that plagues cities like Beijing and the increasing dependence on imported oil, they need to do something.

[Source: New York Times]

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