The recent growth of China’s automobile industry has been tremendous. From 2005 to 2011, the sales number of passenger vehicles increased over 300%. However, in the same period, the motor gasoline consumption only increased about 55%. One possible explanation for the differences between these two numbers is the car models in China’s market become more energy efficiency. In this paper, we pursue to tease out the technological progress of energy efficiency in the Chinese automobile sector. Following Knittelís theoretical framework (Knittel 2011), we use a unique data set to empirically study the technological change pattern of car models in China’s market.

Because the Chinese car market has a very special structure, in which the joint ventures play dominant roles and technologies most transformed from abroad, it is important to understand how technology sources vary the technolgocial change trajectories of car models. In the markets such as U.S. and E.U., the PTFs mainly behave endogenously and are determined by consumersí preference. In contrast, in Chinese, market, because most technologies are transferred from abroad to China, the technology sources play an important role in determine the PTF of Chinese market. Hence, we focused on how models with technologies from different sources differentiate their technolgocial progresses. In addition, we examined whether the foreign car models have better performance in energy efficiency than Chinese domestic models. Using a model level panel data set of about 3000 car models from 2005-2011, we found

– Before 2007, average fuel efficiency in China was degrading; after 2007, we see improvement in fuel efficiency.

– Until 2007, technological change pattern varied across different sources; From 2008, technologies from all sources have similar trend.

– Chinese domestic technologies and foreign technologies differed in their fuel efficiency trends. Aggregately, nearly all foreign technologies were a slight but statistically significant better than Chinese domestic technology. However no foreign technologies improved faster than domestic technology.

Authors: Yang Shu, Huazhong University of Science and Technology, Yang Yu, Stanford University, Yueming Qiu, Arizona State University