TAKING THE POLE POSITION
From vehicle manufacturing and sales to battery production, China is racing ahead in the electric car industry
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.