Electrifying China Transportation

July 14th, 2012
in econ_news, syndication

Written by Jillian Friesen, GEI Associate

Econintersect: In the recently published study at McKinsey & Company, it is reported that China's electric car industry is faltering. The ownership of the china-electric-carSMALLelectric vehicles (EV's) has remained far below forecasted expectations. Lack of proper industry infrastructure and competent vendors only adds to China's electric automobile woes.

In 2009 China exceeded the United States to become the world's largest automobile market. The amount of gasoline needed to fulfill its demand was quite large. In order to cut down on reliance on oil imports as well as reduce the amount of emissions, the Chinese government turned its attention to electric vehicles.

Follow up:

Source: SlideShare.net

The Chinese government first acknowledged plans for expanding its electric vehicle industry back in 2009. Automobile sales were rising at an incredible rate, after tapering off in 2008.  We share here two slides from a 29-slide show produced in 2009 that spelled out a glorious picture of what China's electric car industry would become.

Click here for larger graphics and to view entire slide show.

Source: SlideShare.net

According to the study at McKinsey & Company, the move towards electric vehicles would bring three major advantages to the Chinese economy:

  • The annual expenditure of oil-based energy sources would drop off significantly allowing for electric vehicles to feed their energy needs with Chinese-based coal production. This would also shield China from global oil supply fluctuations.
  • China would reduce the pollutants and emissions in its atmosphere by roughly 40%.
  • Lastly, China realized the potential of being the first ones in on a still emerging market such as electric vehicles. The amount of human, technological, monetary ect. capital required to enter the already saturated internal-combustion engine automobile market was far too daunting, if not impractical.

    "On a well-to-wheels basis, battery-powered electric vehicles can cut carbon dioxide emissions by about 40 percent compared with vehicles powered by internal-combustion engines. Local mobile emissions of both carbon monoxide and nitrogen oxides could fall by roughly 99 percent and 50 percent, respectively."1

Even with all of the ambitious plans and strategies set out by the Chinese government, electric vehicles have failed to take off.  Several reasons could be the cause of this:

  • The amount of demand is far below what was hoped.

    "Government-sponsored subsidies have failed to stimulate consumer demand. Electric-vehicle buyers in Shenzhen got 120,000 renminbi per vehicle for battery-electric passenger cars—some of the country’s highest subsidies—but automakers sold only about 600 such vehicles there by 2011."2

  • The necessary infrastructure needed to produce quality lithium-ion batteries has not materialize.

    "The Ministry of Science and Technology had called for the construction of more than 400,000 charging piles by 2015. Yet the State Grid Corporation of China (the national power provider) and China Southern Power Grid combined built only about 16,000 charging piles in 2011."3
  • Lack of qualified vendors producing lithium-ion batteries in profitable economies of scale has been widespread.
  • "Despite investments totaling nearly 10 billion renminbi ($1.57 billion) in battery R&D by Chinese automakers and suppliers, few Chinese vendors are qualified to provide electric-vehicle batteries to the auto industry."4

Click here for expanded view

Technology companies around the globe, particularly in America, are still continuing to branch out and form partnerships in China. According an article published on GigaOm, some of the companies which recently partnered with Chinese firms include: Boston Power, Coda Automotive, PowerGenix, Smith Electric Vehicles and Brammo.

McKinsey&Company believes the chances of China benefiting from electric vehicle technologies are enhanced if China embraces Range-Extended Electric Vehicles or REEV's.

"This bridging technology would give the industry time to develop an ecosystem mature enough to support the mass production of battery-electric vehicles."5


Source: RPMGO.com

China is nowhere near the point that it projected for 2012 just three years ago.



1,2,3,4,5:  McKinsey Quarterly: Recharging China's electric-vehicle aspirations



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