electric vehicles

China takes on the challenge of electric vehicles

September 19, 2014 by Denis Green

In a move to combat pollution and drive the growing new energy car market China recently unveiled a plan for government departments to buy more new electric vehicles (EVs). The plan, released jointly by three ministries and several other important state bodies, states that EVs should account for no less than 30% of the cars they purchase for the period 2014-16, with a higher percentage in future years. Will it work?

It is clear that China is not simply interested in controlling pollution. Officials have already made it clear, according to a 2012 McKinsey report, that interest in EVs is aimed primarily at building a car industry “that could leapfrog its global competitors in this emerging sector.” However, the same report noted that car makers “have produced only a fraction of the vehicles once expected. Ownership has fallen far short of projections, and the needed infrastructure has failed to materialize. Notwithstanding massive investment in battery R&D by automakers and suppliers, few vendors are qualified to provide batteries to the industry.”

The theory behind EVs is sound. Unlike hybrids, they run on electricity only and are propelled by one or more electric motors powered by rechargeable battery packs, giving them a number of advantages over internal combustion engines (ICEs). They are energy efficient and environmentally friendly and emit no polluting exhaust gases.

With China currently in the midst of a ‘war on pollution’, these technologically-advanced vehicles may prove pivotal for the future of the country. And for the consumer, as well as reducing air pollution, EV motors provide a quiet, smooth driving experience and stronger acceleration and require less maintenance than ICEs.

The possibilities are boundless. China has recently become the world’s largest car market, with Chinese consumers last year buying 2.7m more vehicles than American buyers. This year sales have accelerated even further, surging by nearly 10% in the first six months. Total deliveries are expected to be well in excess of last year’s 20m.

Chinese companies producing EVs, such as BYD and Geely, are in direct competition with overseas EV giant Tesla. And they are taking them head-on. Wang Chuanfu, chairman of BYD, recently slated Tesla’s range of luxury electric vehicles which retail for prices in excess of $60,000, saying they are nothing but a “rich man’s toy” that only a handful of the world’s population would be able to afford. In contrast, said Wang, BYD vehicles are “mass oriented and designed for everyone”.

Wang further mentioned that China was the “world’s largest market,” and BYD would carry on with their own plans for electric vehicles despite stiffer competition from foreign brands such as Tesla.

At the 2014 Beijing International Auto Show a large array of electric cars were introduced to the public, including the latest version of BYD’s E6. However, there are still many obstacles ahead for new energy cars in China, despite the government putting a series of preferential policies in place. Inadequate battery capacity is a major barrier when it comes to EVs making long-distance journeys in China; added to which there is still a severe lack of charging stations in the big cities of China, let alone smaller ones.

And despite Wang Chuanfu’s bold words, the E6 is priced at $52,000 and was delayed by 18 months due to lack of charging points. Between 2010 and April 2014 the company sold 4,549 vehicles in China, but has had to revise down its range estimate per charge – to around 230 kms.

So what are the overall market prospects for EVs in China? According to a report by research consultancy Research in China, China plug-in car sales are accelerating. Sales volume in the first half of the year exceeds 20,000, which is more than in the whole of 2013. The report predicts sales of 50,000 for 2014 and that the industry average growth rate “will be maintained above 50% for years to come”.

So what are the problems? First, unlike many Western countries, where people usually park their cars directly outside their houses and can therefore charge their vehicles overnight, China lacks a fully functional charging infrastructure. Without a convenient and safe place to charge your new electric car, who is going to buy one?

Second, is the issue of technology bottlenecks. The main reason EVs have not been able to break through into the auto market is due to battery technology. Even with the largest batteries being used today – the BYD E6’s battery weighs a staggering 2.3 tons – there are still a large number of limitations. Air conditioning, for example, shortens a car’s driving range by almost half, as does turning on the heating. Due to the seasonal temperature extremes in China these problems are signficant. Until they are solved, EVs in China are likely to remain just a footnote inside an industry that continues to be dominated by the sale of petrol-powered vehicles. One solution being looked at is battery-swop rather than recharge.

Some companies are trying to resolve the power issues. Zhejiang Geely Holding Group, headquartered in Binjiang District, Hangzhou – and which owns the Volvo car company – is at the forefront of innovation for EV batteries. Spokesman Ashley Sutcliffe told China Outlook that the company is constantly striving to both to increase efficiency and reduce environmental impact. He says that the company has invested heavily in a a joint technology centre in Europe called China Europe Vehicle Technology Europe (CEVT) to capitalise on Western inputs into key modular components.

Geely is also pushing for environmentally friendly technology with lower fuel costs. Sutcliffe says his company was one of the first in China to fit its vehicles with stop-start technology and is also pushing for wider adoption of duel fuels within China to lower fuel costs and improve the environment.

The company is also innovating in the way in which it markets its vehicles. Sutcliffe says that Geely and its electric vehicle partner Kandi have created a ‘Car Dispenser’ in the centre of Hangzhou where users can rent small electric vehicles for only 20RMB ($3.30) per hour.They plan to make 100,000 rental vehicles available to the residents of Hangzhou and intend to expand into two or three more cities this year.

But are EV vehicles really so green that they could help to address the country’s pollution problems? In large cities like Beijing, their use would certainly help to reduce severe pollution. However, 80% of China’s electricity is produced using coal, meaning that a change from gasoline fuel to EVs will barely affect the overall amount of carbon emissions. All in all, EVs shift pollution from the inner city to the suburbs, and to wherever the coal burning plants are located. And while that may suit to people living in the cities, it doesn’t necessarily deal with the country’s ever-worsening pollution problem.

“Charging infrastructure and EV growth is a chicken-and- egg situation,” said Ashvin Chotai, managing director of researcher Intelligence Automotive Asia. “It’s got to be a gradual process to scale up both EV sales as well as charging infrastructure. EVs are still not very attractive when compared with conventional-powered cars.”

Faced with these difficulties, the Chinese government is considering investing 100bn Yuan (€412bn) in EV charging facilities to spur demand for clean cars. If China can make the most of this funding then unprecedented changes are likely to take place. While central authorities have set a target for EVs to make up at least 30% of government vehicle purchases by 2016, this ratio will be raised beyond 2016, when local provinces will be required to meet the target. China has the bit between its teeth and looks set to take the EV market surely but steadily.

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