Overview - KGP · DPF – Diesel Particulate Filter SCR – Selective Catalytic Reduction The reasons for this deviation from normal legislative practice of following the Europe-an

NON-ROAD MOBILE ENGINE AND AFTERTREATMENT

FORECASTChina State IV

Overview

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This briefing looks at the potential impact of China State IV, and what it means for the international Non-Road Mobile Ma-chinery market.

What are the technology options?

What does it mean for Western and Chinese OEMs moving beyond 2020?

Where is investment needed?

Is your market share under attack?

Background China’s Non-Road Mobile Machinery mar-ket has fluctuated widely over the past 10 years, with central government policy changes, infrastructure investment, eco-nomic growth and refocussing of the econ-omy all playing a role.

2017 saw a rebound in volumes, mainly in the construction segment, even if the total market was still well of its artificial, incen-tive driven peak of 2010.

Table1: Market Demand China 2010-17

(Off Highway Research)

With the continued invest in construction and agricultural segments, combined with China’s air quality problems, NRMM is tightening, as it has done in most other ma-jor markets.

State III Historically China has followed the Europe-an Union legislative outline for Non-Road Mobile Machinery (NRMM) emissions lim-its. In practice, the current China State III is equivalent to EU Stage IIIA/EPA Tier 3. In most cases the adoption of State III re-quired a move to electronic engine control and common rail fuel injection.

Future Legislation It was widely anticipated that for their next round of emissions legislation (China State IV); set to be introduced by 2019/2020; the Chinese would introduce limits that regulat-ed to the same standard as EU Stage IIIB and EU Stage IV dependant on power cat-egory. However, whilst China State IV fol-lows the framework of EU Stage IIIB, there are several additions and amendments that will take it beyond EU Stage IV, and closer to Stage V in some respects.

The current (near final) draft legislation re-quires all equipment of 37kW or above to have a Diesel Particulate Filter (DPF) as standard, most will have Selective Catalytic Reduction (SCR) as well, for machinery above 56kW.

We expect however China will use a tiered approach for China State IV, as it has done with on-road legislation. China will regulate large cities (Beijing State IV – passed 2017) before moving to more urban areas and then extra-urban areas. Fuel quality is a major factor looking forwards, high levels of sulphur in many rural provinces in China will make the sustainable, and efficient run-ning of DPF and SCR systems virtually im-possible. Because of this we hold some reservations as to the actual timing stated by the Chinese government of 2019 for type-approval. We suspect they’ll postpone in some aspects.

Divergence from Euro Stage IIIB/IV Alongside the regulated emission levels involved in China State IV, the legislation is also expected to introduce GPS tracking of all machine types above a certain power category (yet to be announced). This will alleviate some crime issues that have been negatively impacting rural regions of China for several years. However, the second life implications of this GPS tracking are yet to be fully considered.

More stringent OBD required?

Cleaning up China — The Global Impact James Dorling, Head of Non-Road Services With thanks to Reggie Zhan, Chinese Emissions Consultant

China

(000’s)

2010 2016 2017

CE 459 139 251

AG 496 415 354

YoY 16/17

+81%

-15%





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China are currently weighing the options to consider whether having on-board monitor-ing for particulate matter and noxious emis-sions is viable for China State IV. They have expressed their intention to include this in the first draft of legislation, but many in the industry hold reservations as to whether it is achievable or enforceable. This proposed section of the legislation is expected to allow for a NOx and PM sen-sor on the exhaust system. The impact of these sensors flagging a fault is yet to be announced. Will the engine ECU force the machinery into a version of limp-home mode? Will the government be monitoring sensor output as well as GPS – and fine accordingly? Is the data the owned by the operator or the OEM? How easy will it be to by-pass the sensors? These are just some questions that OEMs and supplier will be keen to answer in the coming months as more details emerge.

Table 2: EU IIIA-V vs China III-VI

EGR – Exhaust Gas Recirculation

DOC – Diesel Oxidisation Catalyst

DPF – Diesel Particulate Filter

SCR – Selective Catalytic Reduction

The reasons for this deviation from normal legislative practice of following the Europe-an guidelines has taken some by surprise, and there are many possible reasons as to why China has taken this path. Some peo-ple in the industry have suggested it is a

way of ensuring Chinese companies have a competitive edge over their Western competitors. However, Chinese engine OEMs do not have the capability or the re-source to develop aftertreatment systems such as those required by proposed State IV regulation. In addition to the technical aspects of SCR and DPF systems, the poor fuel quality in China adds an addition-al level of R&D expense. It is more likely that instead of offering a competitive ad-vantage to domestic OEMs China State IV could help develop relationships between Chinese and Western OEMs.

Western OEMs WOFE vs JVs In China, historically a foreign OEM was only allowed to manufacture in China if their facilities were part of a Joint Venture with a Chinese company. This is now loos-er. There are still many examples of this, Cummins has several JVs with Chinese vehicle OEMs (Foton, DongFeng for exam-ple), CNHi (SFH). Doosan (Foton Lovol),

Deutz (FAW). But Western OEMs are go-ing it alone i.e Volvo/SDLG, CAT/SEM, AGCO, Deere with their new wholly owned plants). (For more information regarding Chinese JVs and their impact on the glob-al Non-Road Machinery supply chain, please visit our website www.kgpauto.com, or contact me at [email protected])

However, when considering the long-term outlook for the global NRMM market, the legislation begins to make a little more

EU Stage IIIA EU Stage IIIB EU Stage IV EU Stage V

Majority electron-ic common rail fuel injec on and Engine Control

Introduced by Power category 2006-2008. -

<56kW – EGR, DOC, DPF or EGR, DOC only

>56kW – SCR or SCR and DOC or EGR, DOC and DPF

<56kW – SCR not required

>56kW – SCR re-quired for all en-gines. Other solu-

ons include EGR, DOC or DOC only. DPF also used widely in North America, and some in Europe.

DPF Required, Par-culate Number

added to emis-sions limits.

State III State IV State V State VI

Many mechanical <56kW, mix me-chanical and elec-tronic above 56kW

Adds DPF require-ment

Optional limits for State IV likely to approximate to State V

Not yet considered





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competitive sense. KGP has been talking to several Chinese OEMs, they have stat-ed that one of the key challenges for them moving forwards is expansion outside of China and lesser-regulated regions. They want to compete on a global basis, with the likes of Caterpillar, CNHi, John Deere, JCB, Komatsu, Doosan, Hitachi, Volvo CE, to name a few. There are very few wholly owned Chinese OEMs that are successful-ly trading in Western highly regulated mar-kets, apart from some ventures into North America by Sany, there isn’t as much as the Chinese government would like from their OEMs within the global marketplace.

The problem is that historically, when Chi-na has passed legislation, OEMs have in-vested huge amounts of their R&D budgets and vast amounts of resource into meeting current Chinese legislation, which is effec-tively the previous round of legislation for Western OEMs. With China State IV effec-tively by-passing the current European leg-islation and bringing it in line with the next set of emissions limits (Stage V), by 2020, Chinese and European engines should re-quire the same aftertreatment. Will this al-low Chinese OEMs to compete more effec-tively in the global marketplace?

The impact of China State IV on the global NRMM market could be significant! The Chinese does not have the domestic ability to develop engines compliant with their proposed plans, not yet anyway. This will mean massive opportunity for companies throughout the supply chain of highly regu-lated markets. We expect joint ventures and technical partnerships to continue to flourish in China over the next 3-5 years.

Timing Then there is the question of timing! Does China have the ability, commitment and resource to enforce this legislation by 2019/2020, in line with EU Stage V? The answer to this question is unknown, we at KGP hold reservations as to whether China will be able to meet the various require-ments of what they’re suggesting. The im-pact on Western companies would not change dramatically either way, as the Chi-nese will still need their technological ex-pertise regardless of timing. However, it would certainly boost the Chinese profile in

the international market if China were able to pass such advanced legislation within a reasonable period after Stage V is intro-duced!

KGP’s forthcoming multi-client report focused on hybridisation and electrification in the non-road and commercial vehicle seg-ments. The report delves deeper into the issues outlined in this article, and answers key questions including: What does electrification and hybridisation mean for cus-tomers, suppliers and OEMs? - It is critical that companies un-derstand the scenarios facing the technological landscape of the non-road industry moving for-wards, the opportunities are great, but the without the knowledge, companies could find themselves stranded with little to offer industry. There will be hardships, threats to market share and weakening of profits for some companies. However, there is a bright light at the end of the tunnel! Electrifica-tion and hybridisation offer great-er functionality, lower emissions and lower fuel costs. It is just a matter of time before technology becomes commercially viable on a large scale. KGPs Non-Road Hybrid and Electrification Forecast Study will give industry the vital insight to help companies understand the possibilities presented by electri-fication and hybridisation poten-tial.





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Meet us! KGP will be attending various industry events in Spring 2018. Contact us to arrange a free con-sultation on Single Client, Multi-Client and Special Reports at any of the following:

Intermat - 23rd to 28th April - Paris, France

Integer Europe - 26th to 28th June - Brussels, Belgium

We can also prepare a client specific webinar to introduce our services and provide an industry overview.

New Products in 2018 Non-Road Mobile Machinery Electrification and Hybridisation - A Critical Impact Report

Non-Road Mobile Machinery Electrification and Hybridisation Production Forecast

Commercial Vehicle Electrification and Hybridisation – A Critical Impact Report

Commercial Vehicle Electrification and Hybridisation Production Forecast

Briefings KGP’s free briefings are published twice per month covering Commercial Vehicle and Non-Road Mobile Machinery topics. Forthcoming briefings will include:

References Knibb Gormezano and Partners Q4 2017 Non-Road Engine Market Summary Report:-

Click Here

Off-Highway Research International Database Service Update April 2018 Click Here

Knibb Gormezano and Partners Q4 2017 CV Engine Market Summary Report:- Click Here

LMC Global Commercial Vehicle Forecast Click Here

Contacts Alex Woodrow, Managing Director [email protected]

James Dorling, Head of NRMM Services [email protected]

Paris Kiernan, Analyst [email protected]

Mick Beeson, Sales Manager [email protected]

Knibb, Gormezano and Partners

6 Lancaster Park, Newborough Road, Needwood, Staffordshire, DE13 9PD UK

Disclaimer Information contained in this document has been obtained by Knibb, Gormezano & Partners from industry sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Knibb Gormezano does not guarantee the accuracy, adequa-cy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.

Copyright Knibb, Gormezano and Partners 2017

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Legislation Electrification Supply Chain

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Low NOx Tech-nology 7/06

Documents

Overview - KGP · DPF – Diesel Particulate Filter SCR – Selective Catalytic Reduction The reasons for this deviation from normal legislative practice of following the Europe-an