China's Cars, Accelerating A Global Demand for Fuel

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China's Demand for Oil

China's increasing demand for oil is a key contributor to the dramatic rise in global oil prices.

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The northern port city of Dalian; the Hunan provincial capital, Changsha; Shenzhen, across the border from Hong Kong; and many other cities ban cars with engines smaller than 1 liter from entering their downtowns on the grounds that those cars are old and dirty. Some other municipalities ban smaller cars from expressways, claiming the cars are so small they may endanger their owners when going at high speed. Other local governments single out owners of small cars for special charges -- "traffic capacity expansion" or "road and bridge maintenance" fees -- that can run $150 to $1,500.

In 2006, when China released its most recent "five-year plan," a national road map of priorities, a newly environmentally conscious central government began to encourage local governments to remove any disincentives for consumers to buy and for manufacturers to produce small cars. But legislation that would require local governments to revise their old practices is still pending, and change has been slow.

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The impact of China's official car polices is perhaps most evident in the manufacturing center of Dongguan, a maze of motorways and parking lots close to the country's southern border in the heart of the Pearl River Delta. For every 1,000 residents in Dongguan, 520 have cars -- the highest rate in the nation and nearly 15 times the average.

Spread out over 952 square miles of industrial parks and housing complexes, Dongguan may be the closest thing to a Washington-style suburb in China. With no local subway system, a shortage of taxis and buses with limited routes, Dongguan's 7 million inhabitants often have no way of getting around without a car.

To help residents purchase cars, the government has offered numerous financial incentives. In 2007, the city worked with local banks to allow consumers to put zero down and get a car loan. Civil servants receive generous subsidies for using their own cars for official business, which prompted a rush on automobile purchases by local government workers. Dongguan also ordered operators of parking garages to cap their monthly charges at half the market price in neighboring cities.

All this has been good news for Feng Jiangming, 28, who owns a small business that sells nails, screws, ball bearings and other hardware to stores. Earlier this month in Dongguan, Feng was at the Zhicheng car dealership shopping for a new car to supplement the one he has had for five years.

In 1998 at the age of 17, Feng arrived here from Hunan Province to try his luck as a laborer at the many export-oriented factories that were opening. He remembers that the area was dotted with small villages and that the dirt streets were packed with bicycles. Back then, he said, no one he knew had a car. These days, few of his friends don't.

Feng ran his fingers along the shiny four-door, brown Buick Excelle sedan in front of him and nodded at the roughly $22,000 sticker price. He inspected the sunroof, extra-large headlights, all-leather interior.

When he first heard about the increase in fuel prices in China, Feng said he gave the idea of a smaller car a few seconds of thought -- and ruled it out. "If you want to go golfing or fishing, it's not very convenient," he said.

Salesman Xie Bin elaborated: "A small car is for people with money problems or if they want it as an extra car to give to their wives, daughters or girlfriends to go buy food."

As recently as a few years ago, automakers were betting that the future of the Chinese car market was in small vehicles that could easily maneuver the narrow alleyways of its ancient cities. Then they discovered a quirk in Chinese consumers' tastes.

Many car owners, even those who are lower middle-class, want to appear wealthy enough to have a chauffeured automobile. That means extra room for the owners in the rear. As a result, even big cars in China tend to be a third of a foot or more longer than their American counterparts.

This helps explain why roomy cars, such as the Volkswagen Santana -- a family sedan based on the Passat that is the country's top-selling car -- the Audi A6, Honda Odyssey and various Buick models are doing so well in China.

In China, the roomy Buick is associated with Sun Yat-sen, the father of the modern Chinese state, and Zhou Enlai, one China's most respected leaders. Both used to ride around in classic black Buicks. Buick's advertisements in China these days add a modern twist, depicting two tall businessmen in suits giving each other high-fives as if they have just closed a sweet business deal.

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Another factor driving the sale of bigger cars in China is the rapid emergence of suburbs. Many of these satellite cities are romanticized versions of how the Chinese imagine the United States and other Western countries, rich with spacious villas and two-car garages, big-box chain stores, strip malls and office parks.

Zhai Yongping, an energy specialist with the Asian Development Bank, fears the Chinese are buying into the American lifestyle: "big houses, big air conditioning, big roads." Compared with the breakneck pace of road construction, public transit has developed slowly.

To encourage the Chinese to go green, General Motors, which has ranked first for passenger car sales in China in each of the past three years, is preparing to market hybrid vehicles or cars that run on alternative fuels.

But Zhang doesn't expect Chinese consumers to change their car-buying habits. "Fuel economy is probably the last thing Chinese look for," Zhang said as he drove around the Shanghai suburbs in his Hummer. He said he wasn't worried about filling up the tank even after the government trimmed oil subsidies last month, raising gas prices about 18 percent.

Zhang bought the Hummer in 2006, on special order from the United States. It cost him $220,000, including hefty shipping and import fees. "It feels like a man's car," he said.

Last month, he and two friends set up a Web site announcing the formation of a Hummer club in Shanghai. Some 20 other owners e-mailed him within days. They included several other businessmen but also coal mine bosses from inland provinces and three women in their 30s who are friends and purchased identical Hummer H3s.

Zhang said he and other club members were talking about organizing off-road trips, perhaps to the mountainous parts of Sichuan Province to help with reconstruction efforts in areas hard hit by the recent earthquake. For now, however, Zhang said he's happy just using his car to visit friends, cruising along at 17 miles per gallon on China's ever-growing network of highways.

Staff writer Steven Mufson in Washington and researchers Wu Meng and Crissie Ding contributed to this report.