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The moment of truth for transportation electrification

China EV market: think differently

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Infrastructure and business model issues in transportation electrification in China

Think Differently

Infrastructure and business model issues in transportation electrification in China

Burning Issues

The country’s very different EV structure and capacity create different product, business model and implementation challenges and solutions.

The Chinese session struck a sober tone, as participants wrestled with an ongoing chicken/egg dilemma: how to line up all the moving parts of a huge and complicated market in its infancy.

The country’s very different structure and capacity create different product, business model and implementation challenges and solutions, they said, with the Government and state-owned utilities playing a powerful role as both catalyst and coordinator.

Technical solutions will help, participants said, but appropriate business models and the base infrastructure are the foundation for a successful Chinese EV industry.

When the cost, range and confidence code is cracked for lower-income, first-time buyers in one-car households, sales will take off more quickly, they said.

"This market is different. And it will not develop by itself. It needs to be pushed, operated, integrated, until the whole ecosystem works together."

Beijing session participant

China’s role as both the world’s biggest EV supplier and as a market with very active government involvement has perhaps pushed these upstream supply issues more to the forefront than elsewhere.

EVs are a national priority to help cut CO2 emissions and foreign oil dependence as the Government grapples with the soaring energy demand and pollution that has come with blistering economic growth.

But China’s car market is saturated, and China’s key buyers are slowing down as the global economy slows. Participants noted that of the 10,000 EVs sold in China in 2010, just 800 were passenger cars (most were state-backed buses and cabs, and small, low-speed, lead-acid battery-powered vehicles).

Think Differently

Within these constraints, Chinese EV makers must work overtime to have 1 million EVs on the road by 2015, as envisioned in the 12th Five-Year Plan.

Mixed views on government, industry progress

Participants had mixed views about true government and industry progress. Some pointed to big policy moves, such as:

  • China’s National Development and Reform Commission regulating key components for new energy vehicles and foreign investing
  • The 50% limit on foreign ownership (foreign battery makers are thus cozying up to domestic ones to access the market)
  • First-tier OEMs like FAW, SAIC and Dongfeng investing in and working hard on EVs

But others suggested that action has lagged announcements.

"With a strong push from very powerful, very influential institutions and the right technology, the market will develop much more quickly than that of other countries. The world needs to be ready for this market."

Beijing session participant

Burning Issues

The burning issues include:

  • Insufficient standardization
  • Still-insufficient battery performance (batteries must charge in half the time, and go much further)
  • Scant collaboration between OEMs and utilities to build the required infrastructure (plus workable business models to make the whole ecosystem profitable)
  • No-to-slow EV consumer adoption because of the high cost and limited range for China’s many low-income, one-car families.

"When transformative technology arrives, the market will develop much more quickly than elsewhere. So the country can’t be ignored. China will be a leader for both R&D but also in business model development."

Beijing session participant

Resolving these issues related to the move from experiment to execution could push the industry forward. Potential solutions include:

  • Stronger government regulations, guidance, action and investment
  • Transnational collaboration on R&D, business model development and implementation
  • Material battery and power train technology improvements to cut costs and build scale.
  • Showcasing cities with successful fleet, consumer and infrastructure stories to build confidence, support, sales and investment

The business model is slowly taking shape, but cross-sector partnerships will be crucial to spur demand and for smooth execution, they said.

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