Based on Solidiance’s forecast, there could be between 2 to 4 million green cars on the roads in China by 2020, given a 5-10 % penetration rate of the Chinese Electric Vehicle Market. This China Market Intelligence whitepaper reviews the drivers and barriers to growth in the China Electrical Automotive sector and covers the issue of electrical batteries as well.

1. Electric Vehicles
in China
–Are They Worth
the Hype?
A Paper on the Growth
of the Chinese Electric
Vehicles Market
中国 September 2011

2. Government Support
Will Alleviate Gaps
Between ICEs and
EVs2010
10
contents
Price Premium Appendix A:
The Future for Electric Comparison of
Vehicles in China for EVs Remains
Too High for Most Petrol and Electricity
Seems Bright: PricesElectric Vehicles
Consumers
01 11&12
in China –Are They
Worth the Hype?
Advantage #1: China’s
Growing and Largely When Would Fuel 23
Untapped Automotive and Electricity Prices
Credits
Make EVs Cheaper
24
Market
per Kilometer?
02 13&14
Advantage #2: The
Extent of Support Where Will the
from the Chinese Chinese EV Industry
Government Be in 2020?
03&04 15-18
The Role of the Could Some Auto
Government Is Crucial Manufacturers Be Too
to Give the Industry Optimistic?
Direction
19&20
05 In the Interim,
But Growth Will Not Be Hybrids are the
All Smooth-Sailing Bridge between
ICEs and EVs
06&07 21
Government Support Summary
Will Alleviate Gaps
Between ICEs and EVs 22
08
The Need For a Flexible
Charging Infrastructure
09
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3. The Future for
Electric Vehicles
in China Seems Bright:
Electric vehicles, it seems, are the way of the future. China appears to believe so. The Chinese
Contemporary electric vehicle (EV) technology has government looks set to develop the
always seemed to the everyday consumer innovative industry, pledging to finance infrastructure
and ahead of its time, yet lacking in accessibility and and research into EV technology;
practicality. But has this finally changed? Along with automotive manufacturers also seem
the green movement that has been increasing in certain, with many forming joint ventures
momentum across the globe over the past years, with domestic automotive companies, like
it seemed only natural that the market would seek General Motors and Shanghai Automotive
out a more environmentally-friendly alternative Industry Corporation (SAIC), to break into
to traditional internal combustion engines (ICE). the market.
Industry players have been experimenting with
gasoline alternatives through concept cars powered The plan is certainly ambitious for the
by hydrogen fuel cells and bio fuel as two examples. Chinese government – to have 500,000
to 1 million green cars (including
electric and hybrid cars and buses)
Are electric vehicles the answer to by 2015, thereby decreasing average
the call for green technology that fuel consumption by 30% among new
is also commercially viable? cars1. Yet, if we were to consider the
sales of the Toyota Prius (a dismal 1,500
to 2,000 in 2009) as a benchmark in
China for the market of environmentally
friendly, electric vehicles, the future
for electric vehicles in China does not
seem especially optimistic.
So what might the factors
be that account for such
confidence in pure EVs?
And is the Chinese EV
market indeed worthy of
its hype?
1: China Association of Automobile Manufacturers
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4. Advantage #1:
China’s Growing and Largely
Untapped Automotive Market
Passenger Cars per 1000 People, 2007
In 2009, China had only
approximately 57 car owners 600 566
for every 1000 people in its
500 463 451
population while already being
400
the largest auto market in the
world. The potential for growth 300
248
in the Chinese market to reach 200
car ownership levels similar to 113
100 57
developed countries like the
0
Germany and the US where
Germany UK US South Singapore China
there are at least 9 times more Korea
passenger cars per 1000 people
Source: World Bank. Figures for China are dated 2009.
should not be underestimated.
In fact, the Chinese With growth of the market fueled largely by first-time car
owners, many industry players are convinced that it will
automotive market be easier for the growing Chinese market to leapfrog
is expected to grow traditional ICEs, instead embracing “green”cars –both
pure EVs and hybrids –more readily than matured auto
at a rate of 10%
markets. Indeed, it is encouraging that approximately 60%
every year in the of Chinese consumers “wouldconsider”buying an electric
next decade. car, far outpacing respondents in US (12%) and Japan
(5%) (see graph).
70%
60%
Respondents expressing interest in
China
“definitely” or “most likely as soon as it
50%
is available” purchasing
40% Italy a pure electric vehicle, 2010
30% Source: Ernst & Young, Global Automotive Center survey
20% France
Germany
10% UK US
Japan
0%
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5. Advantage #2:
The Extent of Support
from the Chinese Government
The Chinese government is highly supportive For a 3-year trial (from 2010 to 2012) in 5
of the development of the domestic EV cities in China: Changchun, Hangzhou, Hefei,
market – they are committed to the goal Shanghai and Shenzhen, $147 million will be
of placing 500,000 to 1 million electric and invested in research and development for
hybrid cars and buses on the roads by EV technology, in addition to $737 million to
2015, and have pledged substantial funds subsidize EV purchases.
to finance their plans.
The Chinese government has also pledged
long-term support for the industry, investing
$192 million in the alliance of 16 state-owned
enterprises involved in various segments of
the EV industry, including power providers and
R&D institutes. A further $14.7 million will be
invested in the research and development of
energy-efficient technology by 2012 .
Such continued
government support
will help build a strong
ecosystem for the EV
industry in China, and
in doing so, create the
foundations for the growth
of the industry past its
initial emergent stage in
the coming years.
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6. While it is unlikely that consumers would switch to
EVs en masse in the next decade, strong government
support will help lay the foundations to facilitate
industry growth. The demand for EVs will be sustained
by manufacturers and power grid companies which
innovate and provide products and services aligned
to the preferences of consumers. Thus, government
support in facilitating such development is crucial, and
the advantage of the Chinese market is the enthusiasm
Advantage #2: of the government in doing so.
The Extent of As represented in the diagram of the EV industry
ecosystem on the right, government intervention in
Support from the Chinese market targeted at power grid companies,
OEMs, and R&D institutes will help encourage constant
the Chinese
innovation in technology and enable the provision of a
charging infrastructure, thereby creating a conducive
Government
environment for growth.
EV Industr
yE
cos
ys
Source: Solidiance
te
m
Government
Consumers
Distributers
Raw
Materials
Suppliers R&D
Institutes
Power Grid Original
Equipment
Companies
Manufacturers
(OEMs)
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7. The Role of the
Government Is
Crucial to Give the
Industry Direction
The need for a
A Short Introduction
well-defined road map
ECOtality is a leader in EV
technology, and aims to help
- An interview with Mr. Peter Nimmo,
introduce EVs in countries across CEO ECOtality Australia
the globe. Besides R&D and
the manufacture of EV charging
equipment, an aspect of their For a sustainable EV industry, ECOtality believes that
business is assisting governments all facets of the EV ecosystem have to grow together:
to build an integrated “EV Micro- developments in vehicle technology, increased knowledge
Climate Infrastructure” through about consumer choice and preferences, the establishment
bringing together and supporting of a comprehensive charging network that is also flexible
different sectors of the industry, in dealing with power needs, and necessary government
including OEMs, energy providers, legislation to guide the EV industry all have to come together.
and charge operators.
ECOtality has entered the Chinese Hence, the Chinese government needs a well-defined road
EV industry through establishing a map to guide the development of its EV industry, and which
joint venture with Shenzhen Goch requires the collaboration of various government units and
Investment Limited to manufacture industry players.
and assemble EV charging
equipment. ECOtality China notably And on that note, even though the Chinese government is
secured a $300 million credit line in enthusiastic in developing the industry, they are, in the words
March 2010 to finance its expansion. of Mr. Nimmo, “not as far progressed as they want to be”.
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8. But
Growth
While foreign companies have been collecting
data in regions like North America and thus
Will Not Be
have the expertise of doing so, the current
challenge is for foreign companies with that
expertise to overcome cultural barriers to
All Smooth-
enter China.
Sailing
All things considered, there are multiple
facets of the EV ecosystem that have to be
addressed and developed simultaneously to
build a sustainable EV industry tuned to the
needs of consumers. The efficacy of such
an effort is contingent first on the successful
This road map first has to be collaboration of industry players and Chinese
preceded by a study of consumer policymakers, and second on data collection
driving patterns and preferences. To on consumer preferences.
enable the sustainable development of the EV
industry, Chinese policymakers need such data
to establish efficient infrastructure tuned to the It will be challenging to attempt to change
needs of consumers (e.g. to locate adequate our reliance on ICEs over the past 100
charging stations at convenient locations) and years in just 10 years. There needs to
improve driver experience. be a cultural shift away from petrol use,
and also changes in the entire auto
Such data, which could be obtained though
industry, including infrastructure and
working with tertiary and R&D institutes, will
legislation.
then give policymakers direction to address
support issues. For example, how should we
react to the increased load from charging EVs We are talking about a
on the power grid? paradigm shift.
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9. But Growth
Will Not Be All
Smooth-Sailing
Adoption Barriers for EVs
Source: Solidiance
Affordability Limitations of Issues of
of EVs Infrastructure Convenience
- Price of - Lack of - Limited range
battery packs comprehensive of EVs
charging network
restrictions on
-Network has to spontaneous
be tuned to or long drives
consumer
choice and
preferences
EVs:
5%-10%
penetration
rate in
2020
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10. Government Support
Will Alleviate Gaps
Between ICEs and EVs
Issue 1: Due to their familiarity with gasoline In addition, this also means that the
engines, consumers feel more at ease with convenient use of EVs is limited only to
the reliability of traditional ICEs driving within cities, preventing drivers
from taking impromptu or long-distance
Among EV models scheduled for sale in China, the range drives. The reliance on special charging
of electric cars varies from around 120km to 300km. stations also implies that before drivers
This range would theoretically be feasible for city travel, adopt EVs, a comprehensive network
since the typical urban Chinese commuter travels for of such charging stations has to be in
short distances averaging only 25 km and, during peak place to convince them of their ability to
hours, at low average speeds due to gridlock. charge their vehicles at a place and time
of their convenience.
However, the consumer’s concerns of convenience,
especially given the price premium of EVs, are hard to Source: General Motors
change in the short-run.
The government’s response to the need
for a comprehensive charging network is
encouraging for the market…
State-run State Grid Corporation of China has invested 250 billion yuan ($37 billion)
to build 75 charging stations and 6,209 charge points across 27 provinces by the
end of 2010. if paired with the use of a new quick-charge technology which allows
for the EV battery to be fully charged in approximately 15 minutes, drivers could
possibly extend the range of their EVs within a day.
Source: State Grid Corporation of China
… but is not without its limitations
1 2 3
Is there land Will the power Will the
available grid be able infrastructure
for charging to sustain the suit consumer
stations? additional load? behavior and
preferences?
Source: Solidiance
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11. ECOtality wants to give consumers
flexibility and choice within the
charging network…
- An interview with Mr. Peter Nimmo,
CEO ECOtality Australia,
continued
A successful and sustainable infrastructure network not only
has to be accessible, but also flexible enough to cater for
consumer behavior and preferences.
The
Need For
We have to consider the consumer’s choices with respect
to how, where, and when they plug into the grid, and also
a Flexible the possibility of offering different payment options. Just as
how an ICE driver may select different grades of petrol at
Charging a pump, an EV driver could have the option of paying for a
quicker but more expensive charge, or a slower but more
Infrastructure affordable one.
… as well as create an infrastructure capable of
reacting to patterns of power consumption
Plugging in to charge EVs would increase the load on
power grids, and flexibility in power allocation would be
a more sustainable and efficient method of providing for
that increase as opposed to increasing overall energy
production.
Image: Paul Martin Eldridge / The charging infrastructure needs to be able to react
FreeDigitalPhotos.net
to changes in patterns of power consumption by
controlling the amount of power directed towards
charging EVs. For example, during periods of peak
energy use, power stations could reduce power
directed towards charging EVs and restore it only
after there is spare capacity.
/ 090
01
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12. Issue 2: Developing battery technology and
small scale production mean that prices of
EVs are not yet competitive with ICEs
Batteries may make up “up to 75%” (McKinsey) of the
price premium between traditional ICEs and electric
drive vehicles (i.e. hybrid and pure EVs), and it will
take time before new technology and manufacturing
methods are developed for production costs to reach
a more affordable level ( the Chinese government has Image: Salvatore Vuono / FreeDigitalPhotos.net
announced $149 million in subsidies for the research
Government
and development of EV technology to help speed up
the process). Currently in 2010, the industry average
cost for a battery is about $650 per kWh – the battery
pack of the electric Chevrolet Volt, for example, costs
approximately $600/kWh. For a typical 20 kWh battery, Support Will
that would mean a cost of $13,000. Even after trial
subsidies at 5 cities, Changchun, Hangzhou, Hefei, Alleviate Gaps
Between ICEs
Shanghai and Shenzhen for purchases of EVs, at
current levels of technology, EVs are still considerably
and EVs2010
more expensive than ICEs.
2010 – 2012
Trial Subsidy Program
• 5 billion RMB set aside for direct
subsidies to manufacturers
• Pure EVs with battery capacity > 15kWh:
• Subsidy of 3,000 RMB per kWh
• Capped at 60,000 RMB per EV
• Plug-in Hybrids > 10kWh:
• Subsidy of 3,000 RMB per kWh
• Capped at 50,000 RMB per vehicle
• Hybrids <1.6L
• Subsidy of 3,000RMB
Source: China Ministry of Finance Source: McKinsey, Electric Shock Electric Cars
/ 101
01
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13. Price Premium for
EVs Remains Too High
for Most Consumers
Consider BYD’s E6, BYD’s first EV, with pre-sale price set at
300,000 yuan ($44,248). After a government subsidy and a
Shenzhen city government subsidy of 60,000 yuan ($8,850)
each, the E6 would cost about 180,000 yuan ($26,548). To Some of the hybrids
consider what this implies to majority of potential car buyers and electric cars
in China, BYD’s F3, ranked first by sales volume in China in
look pretty cool,
the first five months of 2010, with 138,000 units sold, costs
only 60,000RMB ($8,800). but they are too
expensive. I’d
As China is still a developing country, the price of a car forms rather spend less
a large proportion of an average consumer’s annual income.
Hence, majority of potential car-buyers in China are price
money on a reliable
sensitive, and the mass adoptability of an EV given today’s gasoline car
prices is unlikely. Based on 2009 figures, the average annual -Huang Jihai, 51, who bought
income in cities was about 18,858 yuan ($2,781) in 2009, his daughter a General Motors
making an E6 about 2 times the average annual salary of Co. Chevrolet Cruze as a
urban dwellers in China. wedding gift.
Source: Bloomberg
In addition, potential car owners are able to purchase an ICE
with better specifications for the price of an EV. Indeed, for
approximately the same price as the BYD E6, consumers
may instead choose the Buick Excelle GT, which features
A Selected
1.8-liter fuel efficient engine, and is sold for 189,700 yuan
($28,000) in China.
Look at Car
Prices in China, 2010
50
45
USD, in thousands
40
35
30
25
20
15
10
5
0
BYD E6: Subsidies BYD E6: Buick Honda Fit Chevrolet BYD F3
Full Price Subsidised Excelle GT 1.3L Sail 1.2L 1.5L
Price 1.8L Sedan
Sources: General Motors, NY Times, and various news articles
/ 112
01
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14. Price Premium for
EVs Remains Too High
for Most Consumers
The problem for manufacturers is that prices may
only fall when there is sufficient demand for EVs
among Chinese consumers. This demand would
increase scale of production, allow for economies
of scale and create incentive for research institutes
to innovate. Yet, the current problem is that demand
is impeded by high EV prices, and will only grow
when prices fall.
Current levels of subsidies are inadequate to make
EVs affordable for the masses. For that to be
achieved, battery technology first has to approach
an affordable level, and manufacturers also have
to be able to reduce production costs through
increasing their scale of production.
/ 123
01
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15. When Would Using assumptions for battery
Fuel and
technology as outlined in Appendix A,
we get the following :
Electricity Prices Cost per km, ICE = Cost per km, EV
Make EVs Fuel cost per km = Cost of charging
per km + battery depreciation per km
Cheaper Per y
=
x
+ 0.065
Kilometer?
12.41 5
where x = price of electricity,
To convince consumers to switch to EVs, and y = price of petrol
the cost of driving an EV per kilometer
has to be less than that of a traditional Hence, depending on the respective
ICE. While the price premium of an EV is prices of electricity and petrol in each
substantial, including the price of the battery Chinese province, we will be able to
in the upfront cost of the EV is similar to predict whether it will be cheaper to drive
including the price of tanks of petrol in the a traditional ICE or an EV per km using
cost of a traditional ICE – hence, a better the above model, as well as identify the
comparison of cost would be to look at the relevant price levels at which an EV will
cost of driving each kilometer. be cheaper to drive for 1 km.
Price of Petrol ($ per liter)
y x
= + 0.065
12.41 5
EVs more
affordable
per km
Traditional
ICEs more
0.81 affordable
per km
Price of Electricity ($ per kWh)
Source: Solidiance
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16. When Would Fuel and Electricity Prices
Make EVs Cheaper Per Kilometer?
Using prices in Shanghai as an example, where the cost of: Image: Idea go / FreeDigitalPhotos.net
93 octane petrol = $1.01/liter (6.87 RMB/liter),
and electricity = $0.09/kWh (0.61 RMB/kWh), At existing levels
of technology
We find that the cost per km, ICE <cost per km, EV, which makes it (i.e. cost and range
cheaper for a driver in Shanghai to drive a kilometer in a traditional of batteries), petrol
ICE than an EV.
prices are currently
With electricity prices in China at between $0.07 and $$0.20 per too low to encourage
kWh, petrol prices will have to be greater than the range of $0.99 Chinese drivers to
and $1.36 per liter for EVs to be more affordable than ICEs. switch to EVs.
Price of Petrol
y x
($ per liter)
= + 0.065
12.41 5
1.03
1.01
Traditional
ICEs more
affordable
0.81 per km
0.09 Price of Electricity
($ per kWh)
Source: Solidiance
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17. Where Will the Chinese EV
Industry Be in 2020?
Growth Drivers:
Consumer demand for EVs are highly
dependent on factors which affect the
convenience and affordability of EVs
in relation to traditional ICEs.
Hence, in the future, the successful establishment of Consumer preferences will also influence
a comprehensive, convenient, and flexible network buyers to accept certain levels of price
of charging stations, as well as the availability of premium over ICEs, further encouraging
adequate subsidies, will directly boost demand. demand.
In addition, since convenience and affordability are The extent of growth of the EV industry in
consequences of the level of EV technology, there China in 2020 will therefore depend on the
is a need for competition within the market and development and interaction of the above
constant innovation to encourage the manufacture mentioned factors.
of more efficient and affordable vehicles.
Government
Subsidies
to Increase
Affordability
Convenient, Consumer
Flexible, Preferences for
Charging Environmentally-
Infrastructure friendly
Technology
Competitive
EV EV Constant
Innovation and
Demand
Market R&D
Source: Solidiance
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18. EV Sales:
Based on predictions by industry players and Chinese policymakers,
new vehicle sales will grow at an average rate of 10% in the next
decade, and a total of 38.8 million new vehicles are predicted to
Where Will be sold in China in 2020. Following that, estimated growth will
then slow down to an average of 8% between 2020 and 2030.
the Chinese Optimistic auto companies foresee a 10% penetration rate of EVs
EV Industry among all new vehicles sold in 2020, while other industry players
Be in 2020?
predict a 5% penetration rate as a more realistic possibility.
Predicted EV sales in China are shown in the table to the right.
New Vehicles Sales
Forecast Beyond 2020 an estimate
90
80
70
Total #
60 of vehicles
sold
In Millions
50
# EVs sold
40
(optimistic)
30
# EVs sold
20 (realistic)
10
0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Source: Solidiance
Predicted EV Sales: Numbers are given in millions
2020 2030
Total vehicle sales (Predicted): 38.8 Total vehicle sales (Predicted): 100.6
Realistic 1.94 (5%) 8.38 (10%)
Optimistic 3.88 (10%) 25.13 (30%)
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19. Where Will
the Chinese
Therefore, we predict EV sales in China to EV Industry
Be in 2020?
be between 1.94 million and 3.88 million in
2020, possibly rising up to between 8.38
million and 25.13 million in 2030.
Predicted # of EVs sold
30
25.13
25
20
in millions
15 Realistic
10 Optimistic
8.38
3.88
5
1.94
0
2020 2030
Source: Solidiance
High targets are possible with
infrastructure at the right places and
with proper support
-Mr. Peter Nimmo, CEO ECOtality Australia
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20. Battery Manufacturers:
Where Will the
Chinese EV
Industry Be in 2020?
As previously mentioned, the industry average in 2010 for the cost
of manufacturing a battery pack is $650/kWh. From developments
in battery technology as well as increases in economies of scale
among battery manufacturers in the coming years, industry players
expect an approximate 5% decrease in cost every year, or a 40%
decrease by 2020.
In other words, battery costs would be approximately $389/kWh in
2020. Assuming an average battery capacity of between 16 kWh
(e.g. SAIC E1, 140 km range) and 60 kWh (e.g. BYD E6, 330 km
range), and using forecast figures for EV sales in 2020,
We predict that the battery
market for pure EVs alone in
China will be worth between
$28.7 billion and $57.4
billion in 20201.
1. Using average battery capacity = 0.5(16+60)=38, lower estimate = 389*38*1.94 million,
higher estimate = 389*38*3.88 million
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21. Could Some Auto
Manufacturers
Be Too Optimistic?
The EV industry could be said to have high Hence, could some auto manufacturers be too
barriers to entry due to the high initial investment optimistic in their views of the Chinese EV market?
capital required. Costs like expenditure for
research and development, and the constant While the Chinese government is making a large
innovation required for the first few years of the effort to speed up the process of research and
industry might convince other auto companies development through research subsidies and
to jump on the bandwagon later to leapfrog grants, it remains that new technology has to be
available technology. While EV technology has discovered and developed before EVs may be
been approaching commercial feasibility, much widely affordable. In addition, the reliability of the
development still has to be made to achieve a network of charging stations has to be established
certain level of convenience and affordability and the concerns of consumers regarding range
with which consumers are comfortable with also addressed, before consumer preferences shift
before EVs may become appealing to the towards EVs – both of which will only occur in the
masses and start to be profitable. long-run.
Electric cars will continue to offer the
end-user less perceived versatility and
convenience when compared
to their liquid-fueled
competition
-Tom De Vleesschauwer,
Global Insight Analyst
Source: Business Week
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22. Could Some Auto
Manufacturers Be Too Optimistic?
Geely’s strategy is to focus
on traditional ICEs, while
developing a diversified
range of new energy vehicles
-An Interview with Mr. Victor Yang,
Case Study: Director of Public Relations
Geely
Holding
Mr. Yang has indicated that in the coming 2
decades, Geely is focused on developing the
technology of ICE vehicles and improving the
Group efficiency of engines through the use of turbo
engines and lightweight car components.
Hence, Geely’s focus remains on ICEs, which
Geely believes will continue to constitute most of
the auto market in China. But the manufacturer
Geely: A Short Introduction
remains interested in getting a head start in the
EV industry, and has released 6 new hybrid and
Geely established its auto pure EV models in the 2010 Beijing Auto Show.
manufacturing business in 1997, and
has grown to become the one of the top For EVs to make up 5% of new vehicle sales
ten largest auto manufacturers in China. in 2020 is, in his opinion, “achievable”, but
Notably, Geely also purchased Volvo in widespread adoption is not highly probable until
early August 2010. issues about the practicality and affordability of
EVs are addressed. In particular, the availability
Geely is looking at breaking into both of excess capacity of Chinese power plants and
domestic and foreign EV markets. land for the construction of large-scale charging
The electric version of its affordable, infrastructure are of concern. As these issues,
compact model, Panda, will be available as well as the mass affordability of EVs are not
in China end 2010, and will also be sold likely to be solved soon, Mr. Yang believes that
in European markets as Nanoq. the growth of the EV market will be limited in
the next decade.
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23. There is an electric In the Interim, Hybrids
vehicle “fever” in are the Bridge between
China… but hybrids
are more workable.
ICEs and EVs
-Mr. Victor Yang,
Director of Public Relations,
Geely Holding Group
Light hybridization
is the answer for
most cars.
-Dr. Karl-Thomas Neumann,
Chief Officer for Electric Traction,
Volkswagen Group
The two current limitations
of EVs, convenience and
affordability, suggest that plug-in
hybrids are a more commercially
feasible approach to EVs.
Auto manufacturers seem also to acknowledge this – most
EV manufacturers currently in the Chinese market are also
releasing new plug-in hybrid models. These plug-in hybrids
are more affordable and come with fuel tank range extenders,
which will allow for flexibility in driving before a comprehensive
network of charging infrastructure is put in place. In addition,
charging plug-in hybrids will be less demanding on power grids
than pure EVs.
Hence, incumbent OEMs may use plug-in hybrids to bridge the
different stages of development in a company’s product line
while remaining innovative and developing EV technology for
the long-run.
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24. Summary
The sustained development of the EV industry in China depends on
the existence of a supportive ecosystem to address growth drivers of
the industry and generate demand for EVs among consumers. That
is, the acceptance of EVs depends on the ability of charging service
providers, OEMs, and the government to provide a convenient,
comprehensive, and flexible charging infrastructure and affordable
EVs to influence consumer preferences.
While there is strong government support to develop the EV industry,
these factors – the existence of a convenient charging infrastructure
and the affordability of EVs – are adoption barriers holding back the
widespread adoption of EVs in the next decade.
For the above mentioned reasons, we predict for the
Chinese EV market a 5% to 10% penetration rate in 2020,
or a demand for between 1.94 million and 3.88 million
EVs, and a battery market worth between $28.7 billion and
$57.4 billion in 2020.
Since we have admitted that these adoption barriers will
only be addressed in the long-run, auto manufacturers
could look at plug-in hybrids in the meantime to bridge the
shift from traditional ICEs to mass adoption of pure EVs in
the Chinese market.
While companies like Renault have jumped onto the EV bandwagon
and are attempting to establish market share through entering the
Chinese EV market early, others like Geely have opted instead to
diversify their range of vehicles, pursuing energy efficiency through
developing not only EVs, but also hybrids (the Geely Stop and Go
system saves fuel at traffic lights and during congestions), as well as
light-weight, efficient traditional engines.
It is too strong an assertion to make that the Chinese EV market,
with a modest 5% penetration rate 2020, is not worth its hype. In
the long-run, once these adoption barriers are better addressed, the
EV industry will grow at a much higher rate. Hence, industry players
should not neglect the development of EVs in the Chinese auto
industry. The sheer size of the Chinese auto market would mean a
potentially large EV market and growth opportunities for firms in every
segment of the EV manufacturing and distribution chain.
Electric Vehicles in China – Are They Worth the Hype? Solidiance ... 22
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25. y x
= + 0.065
12.41 5
Price of Petrol ($ per liter)
EVs more
affordable
per km
Traditional
ICEs more
0.81 affordable
per km
Appendix A:
Price of Electricity ($ per kWh)
Source: Solidiance
Comparison of Petrol and Electricity Prices
Assume a 60kWh battery, with 2,000 charge cycles,
and 300km range (BYD E6 battery), with $650/kWh production cost.
Assume also that average fuel efficiency of cars in China = 12.41 km/l
Let x = retail price of electricity, and y = retail price of petrol
Assume that we are comparing two otherwise identical vehicles, hence
the difference in depreciation of car and powertrain between the ICE and the EV are negligible.
Cost per km, ICE = Cost per km, EV
Fuel cost per km = Cost of charging per km + battery depreciation per km
y x ⁕ 60 650 ⁕ 60
= +
12.41 300 2000 ⁕ 300
y x
= + 0.065
12.41 5
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26. CHINA
INDIA
INDONESIA
Solidiance is a dedicated Asia B2B SINGAPORE
THAILAND
marketing and growth strategy consulting
firm with offices across the region. Our
company is fast growing and currently has
seven offices in Asia including China, India,
Indonesia, Malaysia, Singapore, Thailand,
and Vietnam. Solidiance’s DNA is to help
VIETNAM
multinational clients to understand the
emerging Asia market landscape, profile
industries and competition, size markets, Damien Duhamel
segment customers, analyse distribution Managing Partner
channels, boost sales, prepare investment
feasibility studies, identify suppliers, review Julienne Chan
potential joint ventures/acquisitions and Brand Architect
deliver market entry and growth strategy DID: +65 6408 8206
in Asia. Solidiance’s industry focus is on
industrial applications, technology and Research: Siya Yang
healthcare. For more details please check:
www.solidiance.com Design: Shya S
www.solidiance.com
Electric Vehicles in China – Are They Worth the Hype? Solidiance ... 24
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