Many car models must stop selling if they do not meet fuel consumption limits.

Cars and motorbikes must reduce fuel consumption

In Decision 876/QD-TTg dated July 22, 2022, the Government requested to apply fuel consumption limits (FCR) for road motor vehicles according to a roadmap, aiming to minimize FCR and greenhouse gas emissions.

Cars and motorbikes are about to have fuel consumption limits.

On September 30, 2024, the Ministry of Transport (now the Ministry of Construction ) issued Decision No. 1191/QD-BGTVT on the Plan to Reduce Greenhouse Gas Emissions in the Transport Sector by 2030. This Decision proposed a hypothesis on fuel consumption limits for newly manufactured, assembled and imported motor vehicles - "Measure E17".

This measure sets the target for TTNL by 2030: "100% of motorbikes sold meet the standard of 2.3 liters/100km; 100% of cars sold meet the following standards: small cars (<1,400cc) reach 4.7 liters/100km, medium cars (1,400-2,000cc) reach 5.3 liters/100km, large cars (>2,000cc) reach 6.4 liters/100km."

Thus, by 2030, only cars with fuel consumption below 4.7 to a maximum of 6.4 liters of fuel/100km will be sold on the market depending on engine capacity, which means applying the MEPS method (minimum energy efficiency standard). It can be seen that this TTNL level is much lower than most car models currently in circulation.

According to Mr. Tran Quang Ha, Deputy Director of the Department of Science, Technology, Environment and Construction Materials (Ministry of Construction), many measures in the field of transport have been and are being implemented towards the goal of Net Zero by 2050, including the application of TTNL limits. However, the application of the TTNL management method is still being considered, with the view of harmonizing economic and environmental benefits.

"In my personal opinion, I think that controlling the TTNL level according to CAFC (average TTNL level of enterprises) will be more suitable for the current situation. It both ensures socio-economic and environmental goals and harmonizes the interests of enterprises."

"Currently, the Ministry of Construction has assigned the Vietnam Register to develop a set of standards on TTNL limits and is expected to issue them this year. This set of standards will be the basis for enterprises manufacturing and importing cars and motorbikes to self-examine and evaluate their ability to meet requirements and have timely preparation and adjustment before there is a set of mandatory standards that car manufacturers must implement. The choice of which TTNL management method will be considered, so that it is most suitable to the actual situation," said Mr. Ha.

Following MEPS, most large-engine, luxury car models are at risk of being discontinued.

Big impact on the auto industry

Recently, the Central Institute for Economic Management (CIEM) and the Institute of Transport Science and Technology (ITST) have jointly conducted an "Independent Research Report proposing to limit fuel consumption for passenger cars with 9 seats or less in Vietnam by 2030, aiming for a net zero emission target by 2050".

According to research, if Measure E17 is applied, up to 97% of ICE internal combustion engine vehicles will be forced to stop production and import due to not meeting the set limit. Of which, about 21.7% of customers can switch to using hybrid or electric cars. Thus, the annual decline in car sales in the market when applying this measure will be 77%.

The research team predicts that if the MEPS method is applied, it will have a severe impact on the economy. Meanwhile, if the CAFC method is used, although there will still be impacts on GDP, the level of impact will be much lower, while still aiming to ensure the target of reducing emissions.

For example, the MEPS application scenario will reduce the industry's contribution to GDP by about VND574 trillion and reduce state budget revenue from domestically produced and imported cars by about VND377 trillion.

While with the scenario of an annual car fleet growth rate of 10%, applying CAFC will only reduce about 73 trillion VND in GDP value contribution and about 38 trillion VND in budget revenue.

According to Mr. Dao Cong Quyet, Vietnam Automobile Manufacturers Association, if MEPS is applied, which means establishing a TTNL limit based on engine capacity, only BEV (pure electric vehicle), HEV (self-charging hybrid) or PHEV (externally charged hybrid) vehicles will meet the requirements. Accordingly, ICE vehicles (vehicles using traditional internal combustion engines) will have to stop production, assembly and sales.

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This will have a very serious impact on the domestic auto industry, state budget revenue and people's jobs.

At the same time, the application of MEPS will limit the vehicle market to certain vehicle types, while customer needs still exist and cannot be met.

Customers who are not ready to switch to hybrid or electric vehicles tend to prolong the use of old vehicles, further putting pressure on environmental protection goals, especially in vehicle recovery and recycling.

Most countries today apply the CAFC model in managing TTNL limits.

CAFC solution helps achieve dual goals

To date, most other countries that have taken the lead in implementing TTNL regulations (except China) are only applying the CAFC (or CAFE) model.

MSc. Dinh Trong Khang, Deputy Director of the Institute of Environmental Specialization (Institute of Transport Science and Technology) said: "We need to consider carefully if we apply the MEPS management model following China, because they are a country that produces vehicles independently and only applies MEPS in the early stages of policy issuance with the aim of gradually eliminating outdated technology, old vehicles with high TTNL levels and high emissions. In later stages, China has adjusted the TTNL limit management policy by simultaneously applying both MEPS and CAFC methods".

We can ignore MEPS because of its lack of flexibility compared to CAFC.

CAFC focuses on the average fuel efficiency of an entire fleet of vehicles sold by a manufacturer, allowing them more flexibility in meeting the standards. This encourages manufacturers to develop fuel-efficient vehicles while still allowing them to produce high-powered vehicles. MEPS, on the other hand, sets minimum efficiency standards for individual vehicles, which can limit consumer choice and make it difficult for manufacturers.

CAFC provides incentives for manufacturers to invest in research and development of new fuel-saving technologies, while MEPS could lead to manufacturers focusing only on meeting minimum standards, rather than working to improve fuel efficiency.

"If CAFC is used, the control of the TTNL limit will be more flexible, allowing the same car manufacturer to still sell cars with engines above 2.0L or 1.4L, on the condition that the manufacturer must control the output of the car models sold so that the total average TTNL of the car models it sells in the year must be lower than the prescribed standard. In addition, the CAFC model is also the basis for building a management system to support carbon market policies in the transportation sector," said a VAMA representative.

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