Demand expected to grow for small-engine, new-energy cars

Jochem Heizmann, president and CEO of VW Group China, said, "With China being Volkswagen's most important market worldwide, we are forging ahead with e-mobility solutions to meet the needs of our customers. At this year's auto show in Guangzhou, the Volkswagen brands will not only be showcasing full electric vehicles like the e-Golf but also the GTE badged plug-in hybrids, as we commit to being at the forefront of electrifying China."

The second trend, of small-engine vehicles, is also a major focus for VW, with small-engine models sitting side by side with NEVs.

"Efficient cars featuring high-tech, compact, turbocharged TSI engines will sit alongside GTE models," the automaker stated. VW will introduce three new models at the auto show, an imported model and one each from VW's joint ventures in China, FAWVolkswagen and Shanghai Volkswagen.

Toyota said it will showcase 30 models at the Guangzhou motor show with half of these being models that highlight the NEV trend, including locally produced hybrid vehicles. Toyota will also show EVs, such as the FT-EV III concept and the company's latest plug-in hybrid electric vehicle concept, the NS4.

Geely will also display its allegiance to the trend, according to company vice-chairman Yang Jian. He said most Geely models in the future will be offered in hybrid, PHEV and battery EV variants.

Outlook and implications

IHS Automotive forecasts for vehicles with zero emissions show that there will be a steady increase in the volume of these vehicles produced and sold in China.

However, they continue to account for only a small fraction of the overall light-vehicle market in the country.

China is, however, going through a change with smallerengine vehicles gaining traction in the market, a trend that is set to remain even after the expiration of policies currently in place promoting sales of vehicles with small engines.

The main reason for this is the tougher corporate average fuel economy requirements set by the Chinese government for the 2015-2020 period.

Growth of small-engine models in China also sheds light on the continued and increased use of turbochargers by automakers as Chinese consumers' appetite for sport utility vehicles is not expected to abate.

Current IHS Automotive forecasts for light-vehicle production in China indicate that the total light vehicle market will grow by single-digit rates, with volume rising to more than 25.4 million vehicles in 2017 and 29.6 million produced in 2020.

Within this vast volume, the proportion of vehicles with smaller engines will rise. In 2015, the volume of vehicles in the Chinese light-vehicle market fitted with small engines (1.6 liters and smaller) accounted for about 63.08 percent of the total light-vehicle market. By 2020, vehicles with smaller engines are expected to account for 68.8 percent of the light-vehicle market in China, according to IHS forecasts.