Let a million EVs bloom
China wants to electrify its car fleet—and lead the global race to manufacture EVs
If, a decade from now, the automotive industry looks back it might see 2018 as the year when battery-powered cars turned a corner and lived up to their hype: not just admirable but pricey curiosities, but genuine competitors for the internal-combustion engine. If so, not one will miss the role China played. India won't have been a laggard either.
Under pressure from Chinese regulators concerned about the health consequences of rampant levels of pollution, the world's major automobile manufacturers will from next year unveil the first wave of new electric vehicles (EVs) and their hybrid-powered cousins [HEVs]. They will be cheaper, technologically more advanced than today's models. And while they'll be rolled out first in China, many will—like the solar panels, mobile phones and virtually any other bit of high-tech kit these days—be configured for global sale.
Germany's VW will release its first all-electric car in China in 2018, and expects annual sales of "at least 400,000" within two years, rising to 1.5m by 2025. GM plans to introduce a full panoply of low-to-zero-emission vehicles under its Buick brand. Less ambitious than VW, GM nonetheless thinks Chinese buyers will hoover up 150,000 units a year. Also from 2018, Ford will start selling a Mondeo Energi hybrid, built with state-owned partner Chang'an Automobile. Nissan is developing at least one all-electric model for China.
Simultaneously, a resurgent Volvo under the ownership of China's Geely automotive group will develop its first pure EV, an economically priced saloon aimed directly at world markets.
"It will be for global export," the marque's senior vice president for research and development, Henrik Green, told journalists at the Shanghai automotive exhibition in April. One of the most bullish "new energy" manufacturers, Volvo is aiming to sell 1m all-electric and hybrid vehicles each year in China by 2025.
Clean air, clean profit
China's leadership has ulterior motives in promoting low-emission transport. Regulators are demanding that from next year eight in every 100 vehicles rolling off manufacturer's assembly lines must be EVs or HEVs, rising to 10% just a year later, and then to 12% a year after that.
"It's clear that China wants to take a leading role globally in terms of the regulatory environment and electrification," said David Schoch, Ford's president for Asia-Pacific, on the side lines of the Shanghai show.
That's why most of the foreign car-makers with plants in China are required to develop EVs in partnership with domestic manufacturers, ensuring that China gets in on the ground floor at the start of what is widely predicted to be a global boom. According to a recent study by McKinsey, a consultancy, by 2030 the global share of EVs could range from 10-50% of new sales. "Adoption rates will be highest in developed dense cities with strict emission regulations and consumer incentives [in the form of] tax breaks, special parking and driving privileges, discounted electricity pricing et cetera," it predicts.
ExxonMobil, taking the oil industry's view, predicts that just 15% of all cars on the world's roads will be hybrids by 2040. In the US, EVs will account for just 10% of new sales.
1.5m - VW's target for annual EV sales in China by 2025
At first glance the industry's predictions of millions in Chinese sales seem optimistic. In the first quarter of 2017, sales of EVs fell compared with the same period last year, down by 4.4% to 55,929 units. The more affluent Chinese prefer gas-guzzling SUVs—their sales soared 21% to 2.4m in the same period.
But technology and economies of scale are moving gas. So far, the only EVs on the Chinese market are home-grown models led by battery-manufacturer BYD, which sold 96,000 subsidised EVs last year. Prices for EVs peak at around $36,000 before the government handouts. Although subsidies are reducing, BYD president Wang Chuanfu isn't concerned: "We have reached the point where economies of scale in production will allow for more affordable prices."
The bigger the marque, the more it can gain. Ford's Schoch, for example, predicts that prices of batteries will decline in proportion to the increase in the volume of production until the point where EVs become competitive with Ice-powered vehicles. "That will create a market pull rather than the government forcing action," he foresees.
Meanwhile, technology is trying to tackle buyers' "range anxiety". Like most other EVs, Chinese-manufactured hybrids need to be recharged after 75-95 miles, a major deterrent to sales. VW's upcoming electric Golf will be released in China with a range of 185 miles and the company has a 300-mile version on the drawing board. Buick is working with state-owned Shanghai Automotive Industries to produce a new Velite 5 hybrid with a range of 466 miles (62 miles on battery alone) at a starting price equivalent to $38,600.
On top of that, in February the Chinese government announced ambitious plans to reduce range anxiety by installing 100,000 public charging stations to go with 0.8m new privately owned ones by the end of this year.
If domestic manufacturers have judged the market right, China is ready to embrace high-end EVs as well as economically-priced models. Unlike in Europe where manufacturers such as BMW have full order books for models like its i8 sports car, China has no such market at present. But automotive group Qiantu will start in late 2017 small-series production of the K50 supercar priced at the equivalent of $108,000, comparable to the cheapest Tesla Model S. Formula E racing team NextEV plans to build half a dozen of its new NIO model costing $1.2m apiece.
As NextEV founder William Li told AFP at the Shanghai show, there's an unsatisfied market for exotic EVs, and not just in China. He expects to break into America within the next three years.
Remember when India was going to be the new oil-demand juggernaut? In a surprise commitment to zero-emission transport, the country's prime minister Narendra Modi plans to outdo even China with an audacious plan to have only electrically powered vehicles on the roads as soon as 2030.
Don't doubt the scale of the task. EVs now make up just 1% of India's fleet of 200m vehicles. The country has just one domestic EV manufacturer—Mumbai-based Mahindra Reva produces three models including the e20, whose 48-volt lithium-ion battery gives the urban hatchback a range of 75 miles.
Over the next 13 years the government plans to electrify everything from rickshaws to commercial vehicles and buses. Cars will come last. The implications of the scheme for the nation's refineries are profound because most of their output is earmarked for the transport sector, including the compressed natural gas that powers much of the public transportation in the big cities.
Compounding the challenge, India's oil companies have abruptly been forced to speed up their $46bn conversion to lower-emission BS-IV fuel following a Supreme Court ruling in late March that made the use of BS-III fuel illegal from April, 2017, as well as banning the registration of vehicles that are not BS-IV compliant from the same date.
As law firm SS Rana & Co explains, the order, which followed a petition filed by environmental activist MC Mehta, effectively makes the use of BS-IV compulsory nationwide. "[It's] a landmark judgement aimed at curbing vehicular pollution," writes the firm in a note.
As it embarks on its EV future, India apparently intends to adopt the radically different route of battery-swapping, according to a report in late April in India's Economic Times. Manufacturers will get tax breaks to produce EVs that will be sold without batteries. According to the government's sums, this will make most vehicles—two and three-wheelers, cars, trucks and buses—up to 70% cheaper than otherwise. Vehicle users will hire the batteries from stations that will also replace them with recharged ones in a process taking about two and a half minutes. In the start-up phase India intends to import cells for batteries until it develops its own battery-manufacturing industry.
This article is part of a report series on Electric vehicles. Next article is: Electric vehicles—the great unknown