From ve­hi­cle man­u­fac­tur­ing and sales to bat­tery pro­duc­tion, China is racing ahead in the elec­tric car in­dus­try

China Daily European Weekly - - Front Page - By ROBERT BLAIN and CHEN YINGQUN

The in­ex­orable shift from fos­sil fu­els to elec­tric power con­tin­ues to gather pace on the roads as car­mak­ers and coun­tries alike make new moves in the devel­op­ment of elec­tric ve­hi­cle ini­tia­tives.

Renub Re­search, a mar­ket re­search and con­sult­ing com­pany, said in a re­port in May that the EV sec­tor is set to ex­ceed $100 bil­lion (84.9 bil­lion eu­ros; £74.5 bil­lion) world­wide by 2020.

Ac­cord­ing to a re­port by China In­ter­na­tional Cap­i­tal Corp, the largescale pro­duc­tion of elec­tric ve­hi­cles and a big­ger mar­ket share in the over­all mo­bil­ity mar­ket are in­evitable in the next few years.

Nor­way and the Nether­lands have an­nounced that they will end sales of gaso­line cars in 2025. Ger­many and In­dia will do so in 2030, and the UK and France in 2040.

In­done­sia re­cently an­nounced in­cen­tives for com­pa­nies de­vel­op­ing EVs, while Malaysia has pledged to have 100,000 such cars on the road by 2030.

“End­ing sales of gaso­line cars is a global trend, and China is not go­ing to fall be­hind,” the re­port said.

The groundswell of sup­port for elec­tric cars is steadily in­creas­ing, quicker in some coun­tries, in­clud­ing China, than in oth­ers.

In its lat­est E-mo­bil­ity In­dex sur­vey, con­sul­tancy Roland Berger tracked the up­take of EVs in seven ma­jor coun­tries.

“In terms of the mar­ket, China has seen a sharp in­crease in de­mand and now moves into sec­ond place — be­hind France — which has a big­ger mar­ket share de­spite its con­sid­er­ably lower ab­so­lute vol­umes. In third place comes the United States,” the sur­vey re­port says.

With 352,000 new EV regis­tra­tions in 2016, elec­tric car sales in China more than dou­bled those of the pre­vi­ous year.

The growth looks set to con­tinue as the Chi­nese gov­ern­ment fore­casts that 800,000 green en­ergy ve­hi­cles will be sold this year, made up of both fully elec­tric and hy­brid (elec­tric and fuel pow­ered) ve­hi­cles.

Ac­cord­ing to the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers, a to­tal of 507,000 fully elec­tric and hy­brid ve­hi­cles were sold in the coun­try in 2016. Sales of fully elec­tric ve­hi­cles reg­is­tered by the end of this year are es­ti­mated to reach around 555,000.

“Pol­i­cy­mak­ers are set­ting am­bi­tious goals for fur­ther ex­pand­ing the mar­ket share of elec­tric ve­hi­cles in the en­tire mo­bil­ity sec­tor,” says Gao Xiaob­ing, as­sis­tant to the pres­i­dent of Shen­zhen Gao­gong In­dus­try Re­search Co.

A plan set by the Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy says the mar­ket share of elec­tric ve­hi­cles will in­crease to 5 per­cent by 2020 and 20 per­cent by 2025.

Poli­cies have been en­cour­ag­ing the pur­chase and use of e-ve­hi­cles in China. For ex­am­ple, buy­ers are of­fered free li­cense plates in megac­i­ties. In con­trast, gaso­line car own­ers might need to pay more than 80,000 yuan ($12,100; 10,260 eu­ros; £9,020) for a plate at auc­tions in Shanghai.

Such in­cen­tives will likely fur­ther help to in­crease the mar­ket share of e-ve­hi­cles, Gao says.

While Ger­many takes the top spot for EV tech­nol­ogy in the Roland Berger sur­vey, China takes the lead in in­dus­try.

“In in­dus­try, China has con­firmed its pole po­si­tion. The rea­son for this is the con­tin­u­ing rapid growth of the mar­ket, more than 90 per­cent of which is sup­plied with lithium-ion cells pro­duced lo­cally. This high local share is partly due to the fact that sub­si­dies only ap­ply where there is local value cre­ation,” the Roland Berger re­port says.

Across the globe, how­ever, the up­take of elec­tric ver­sus fos­sil fuel pow­ered ve­hi­cles still has a long way to go. Other than China, France is the only coun­try to have more than 1 per­cent elec­tric car own­er­ship.

Still, China is seen as ex­tremely well placed as the switch to EVs gath­ers pace.

Si­mon Moores, man­ag­ing di­rec­tor of Bench­mark Min­eral In­tel­li­gence, says “there is no doubt China is the global hub for the elec­tric ve­hi­cle rev­o­lu­tion”.

“China is pro­duc­ing its own elec­tric ve­hi­cles, but the ex­port ve­hi­cles are first likely to be Western-branded ones.

“For ex­am­ple, ( US elec­tric-car maker) Tesla is look­ing to make bat­ter­ies in a new “Gi­gafac­tory” near Shanghai. This is the first step in mak­ing Tesla EVs in China for the do­mes­tic and ex­port mar­ket,” he says, adding that Volk­swa­gen “has sim­i­lar grand plans”.

For for­eign car man­u­fac­tur­ers to have power in the EV mar­ket, “they need to be in China”, Moores says.

BMW has suc­cess­fully part­nered early with Chi­nese EV mak­ers, he says, but VW’s in­volve­ment will bring a ma­jor boost to the mar­ket.

“While (VW) has been slow at en­ter­ing this EV space, once it gets go­ing the group will shape the future of auto mo­bil­ity. And for that, it will need to be in China in a big way.”

In other de­vel­op­ments, Volvo re­cently an­nounced that all of its new ve­hi­cles will be elec­tric or hy­brid from 2019. Chi­nese car­maker Geely is Volvo’s par­ent com­pany.

Moores be­lieves car­mak­ers’ plans to go elec­tric are jus­ti­fied and that a re­cent drop in the oil price will not have a long-term im­pact on the grow­ing mar­ket.

“While the oil price has some short-term in­cen­tiviz­ing im­pact on EVs, the re­al­ity is that peo­ple are start­ing to buy them not be­cause they are elec­tric but be­cause they are more de­sir­able, cheaper and bet­ter priced.

“This will be the trend go­ing for­ward, and soon, maybe from 2020 on­ward, the oil price will be­come ir­rel­e­vant.”

China is also well po­si­tioned in the pro­duc­tion and ex­port of lithium-ion bat­ter­ies typ­i­cally used to power elec­tric cars.

“China al­ready pro­duces the bulk of lithium-ion bat­tery cath­ode ma­te­rial,” says Moores.

“It is lock­ing up the lithium sup­ply chain through Gan­feng Lithium and to a lesser ex­tent Tianqi Lithium. It con­trols cobalt sup­ply and bat­tery grade re­fin­ing and pro­duces the vast ma­jor­ity of the world’s graphite an­ode ma­te­rial.”

Nearly 70 per­cent of all new lithium-ion bat­tery ca­pac­ity be­ing built in new megafac­tory struc­tures will be based in China, he adds.

“Th­ese are be­ing con­structed by Chi­nese bat­tery ma­jors like CATL and Lishen, as well as Ja­panese and South Korean joint ven­tures with Sam­sung SDI, LG Chem and Pana­sonic,” says Moores.

In real terms, China’s lithium-ion bat­tery ca­pac­ity in 2016 was 28 gi­gawatt-hours. By 2020, this is ex­pected to leap to 174 GWh, ac­cord­ing to data from Vis­ual Cap­i­tal­ist, a Cana­dian dig­i­tal me­dia brand.

It is likely that Chi­nese EV mak­ers with ro­bust bat­tery pro­duc­tion will be headed for greater suc­cess.

“There is no doubt that to date, BYD (a Chi­nese man­u­fac­turer of recharge­able bat­ter­ies and au­to­mo­biles) has led the world in EV pro­duc­tion by sheer num­bers. How­ever, the sway of in­dus­trial power will lie with

“End­ing sales of gaso­line cars is a global trend, and China is not go­ing to fall be­hind.” RE­PORT BY CHINA IN­TER­NA­TIONAL CAP­I­TAL CORP

those that pro­duce bat­tery cells and packs and con­trol the lithium-ion bat­tery sup­ply chain,” Moores says.

Ron Zheng, a Shanghai-based part­ner with Roland Berger, says a num­ber of Chi­nese EV mak­ers can carve up mar­ket share among them­selves, par­tic­u­larly in the neigh­bor­hood elec­tric ve­hi­cle (NEV) mar­ket.

NEVs are com­pact, elec­tric-pow­ered cars, typ­i­cally with a top speed of around 40 kilo­me­ters per hour — con­sid­ered ideal for in­ner-city driv­ing.

Zheng says local Chi­nese au­tomak­ers hold a 90 per­cent mar­ket share of China’s NEV mar­ket, since they “started the NEV busi­ness early and al­ready had some of the top-sell­ing mod­els”.

“Car­mak­ers SAIC, BYD, BAIC and Geely are the cur­rent lead­ers, as they pos­sess strong tech­nol­ogy ca­pa­bil­i­ties, while Ch­ery, JAC, Zo­tye, Changan and GAC are also show­ing great po­ten­tial,” Zheng says.

“The com­pet­i­tive land­scape will change again with new en­trants such as Nex­tEV launch­ing their prod­ucts af­ter 2018. Th­ese fancy-look­ing and fully con­nected cars will at­tract cus­tomers with good buy­ing power.”

Zheng adds that by 2020, mar­ket share will be a mix of tra­di­tional play­ers (49 per­cent), joint ven­tures (37 per­cent), new en­trants (10 per­cent) and im­ports, dom­i­nated by Tesla (around 4 per­cent).

En­vi­ron­men­tal con­cerns aside, over­all cost is also a key fac­tor in China.

“Con­sumers have a very com­plex buy­ing de­ci­sion­mak­ing process,” says Zheng. “They will go through com­par­ing the NEV and in­ter­nal com­bus­tion en­gine ve­hi­cles on pur­chas­ing cost, which is de­cided by the NEV price, sub­sidy, pur­chas­ing tax dis­count and li­cense plate fees in some ci­ties, such as Shanghai.

“In ad­di­tion, to­tal cost of own­er­ship is a vi­tal fac­tor, which is de­cided by the price gap be­tween gaso­line and elec­tric­ity, main­te­nance cost and resid­ual value.”

He adds that driver sat­is­fac­tion is also im­por­tant, and this will be im­proved by a bet­ter range on a sin­gle charge and wider cov­er­age with bat­tery-charg­ing in­fra­struc­ture.

Zheng adds that gov­ern­ment pol­icy also has an im­pact on the de­sir­abil­ity of EVs in China.

“In­cen­tives are very im­por­tant for the in­dus­try to boost at the be­gin­ning, but sub­si­dies are un­sus­tain­able due to gov­ern­ment bud­get con­trol and the in­ten­tion of de­vel­op­ing local orig­i­nal equip­ment man­u­fac­tur­ers’ ca­pa­bil­i­ties.”

Such a shift of the in­dus­try from gov­ern­ment-driven to mar­ket-driven is in­evitable, he says.

Zhang Junyi, a part­ner of Nio Cap­i­tal, a Wuhan­based in­vest­ment firm co-es­tab­lished by elec­tric ve­hi­cle com­pany Nex­tEV, Se­quoia Cap­i­tal and Hill­house Cap­i­tal, says that the Chi­nese gov­ern­ment has also been sup­port­ing the con­struc­tion of pub­lic charg­ing sta­tions. Since last year, re­lated doc­u­ments have called for charg­ing fa­cil­i­ties at ev­ery newly con­structed build­ing.

“Many pri­vate in­vestors also started op­er­at­ing pub­lic charg­ing sta­tions, so we think that by 2020, in big ci­ties such as Bei­jing, Shanghai and Shen­zhen, charg­ing for elec­tric cars won’t be a prob­lem for the own­ers,” he says.

Mov­ing up in scale, elec­tric-pow­ered pub­lic buses are also likely to be­come the norm, and China is forg­ing ahead.

Cen­tral China’s Hubei province be­came the first place in the world to have driver­less bus ser­vices, ac­cord­ing to the local econ­omy and in­for­ma­tion tech­nol­ogy com­mis­sion.

Ser­vices will be launched in se­lected ar­eas us­ing elec­tric ve­hi­cles de­vel­oped by Dongfeng Xiangyang Tour­ing Car Co and the Bei­jing In­sti­tute of Tech­nol­ogy. The com­mis­sion said the buses are un­der­go­ing fi­nal test­ing in Shen­zhen, Guang­dong province. Ac­cord­ing to the in­for­ma­tion pro­vided, the ve­hi­cles are 6.7 meters long and can carry 25 pas­sen­gers. Their max­i­mum speed is 40 kilo­me­ters an hour, and they can travel 150 km on a fully charged bat­tery.

Moores of Bench­mark Min­eral In­tel­li­gence says China has con­sid­er­able fo­cus in the of­ten over­looked elec­tric-bus sec­tor.

He pointed to China-based bat­tery man­u­fac­turer CATL, which plans to ex­pand its cell ca­pac­ity from 8 GWh to 100 GWh by 2020 to meet ex­pected de­mand.

“The num­bers are stag­ger­ing. But that shows the (in­crease) needed to sup­ply elec­tric ve­hi­cles and buses.”



Em­ploy­ees with JAC Mo­tors in­stall an bat­tery in an elec­tric car in He­fei, An­hui province.


A vis­i­tor looks at a new en­ergy car at an ex­hi­bi­tion in Bei­jing.

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