China's electric vehicle goal stuck in slow lane

The Australian - China's goal of being a global leader in electric cars and hybrids is stuck in the slow lane, plagued by the high prices, limited model choice, poor operating range and dearth of recharging stations that have also delayed widespread market acceptance in the US and Europe.

According to new research by McKinsey, electric vehicle ownership in China has fallen “far short of projections” and the required infrastructure to service plug-in cars, such as easily accessible charging stations, has not been created.

In the latest McKinsey Quarterly review released this month, the global consulting firm said China had fallen from third place in July 2010 to fifth place in January 2012 in overall electric-vehicle readiness, behind Japan, the US, France and Germany.

It said that even with heavy subsidies in China, battery electric vehicle (BEV) prices remained high for consumers and there were less than 10 BEV or hybrid models available.

The country’s charging infrastructure was limited, despite a goal of having 400,000 charging points available by 2015. McKinsey cited the example of China’s biggest city, Chongqing, where there were only 150 charging stands at the end of 2011 for a city of 30 million people.

It said the State Grid Corporation (the national power provider) and China Southern Power Grid between them built only about 16,000 charging stands in 2011.

Under its New Energy Vehicle Development Plan announced in June 2010, China aims to have 500,000 combined hybrid and electric cars on its roads by 2015 and 5 million by 2020, when it wants to have annual production capacity of 2 million units.

But only about 9000 electric vehicles and plug-in hybrids were sold in China last year, of which about 5600 were cars and the remainder were buses and municipal vehicles.

That compares with 18,000 full electric and 269,000 hybrid sales in the United States in 2011 and 7500 EVs and 450,000 hybrids in Japan, where the Toyota Prius continues to dominate the hybrid market. Honda also has strong hybrid sales.

Globally, 2012 is seen potentially as a breakthrough year for electric passenger cars, as models such as the Nissan Leaf, Mitsubishi iMiEV and GM Volt/Opel Ampera hybrid become more widely available. China’s own EV manufacturers range from the Warren Buffett-backed BYD firm, which makes the e6, to “neighbourhood EV” brands such as Flybo and Zap, and hybrids from mainstream makers Chery, Geely and SAIC. There are also a host of Chinese joint ventures with global makers such as VW, BMW and Ford.

Recent research from clean technology consultancy Pike Research also has found that China’s plug-in electric vehicle production will likely fall well short of the government’s ambitions over the next few years.

Pike forecasts that China’s plug-in EV market, which includes both battery EVs and plug-in hybrids, will expand at a compound annual growth rate of 60 per cent from 2012 to 2017, when annual sales will exceed 152,000 units.

Even so, that figure represents less than 1 per cent of the total light duty vehicle market in China.

Pike’s research director John Gartner said earlier this month that the Chinese government initially had overestimated consumer demand for EVs, and has since made adjustments to its incentive policies.

“Many members of the emerging middle and upper classes prefer imported vehicles with nameplates from the United States or Germany – especially larger sedans in which owners can sit comfortably while their drivers navigate China’s often congested roads,” Gartner said.

Overall, the Chinese auto industry produced 18.5 million passenger cars and commercial vehicles last year – more than the US and Japan combined -- and is on track to top 19 million in 2012.

In China’s 12th five-year plan, covering the period 2011-15, one of the key goals outlined for the country’s “new energy automobile industry” is to focus on the development of plug-in hybrid electric vehicles, pure electric vehicles and fuel cell automobile technologies.

Allied with this is the fostering of advanced battery technology, including greater use of lithium-ion batteries. That should mean increased demand for lithium and for a range of rare earths that go into the various electric motors found in pure EVs, hybrids and conventional vehicles.

While market acceptance may have not reached initial expectations, there is no doubt China will become one of the biggest – if not the biggest - EV markets of the future.

US research consultancy IDTechEX says China has the greatest market potential and points out that already about 90 per cent of the world’s electric vehicles are made in China, mainly for use in China. While most of the media focus is on passenger-car sized EVs, the production reality is that the majority of China’s EV output is in e-bikes, e-scooters and light electric delivery vehicles.

In its new report, Electric Vehicles 2012-2022, IDTechEX says that the 35 million EVs expected to be sold globally in 2012 will rise 3.6 times to nearly 129 million in 2022, driven by e-bikes. It says the market value will grow twice as much, as larger and more expensive vehicles take up EV technology. The market share of hybrids will continue to rise.

That is largely in line with figures in BP’s Energy Outlook 2030, released last month.

It said the global vehicle fleet, covering both passenger cars and commercial vehicles, would grow from about 1 billion now to 1.6 billion by 2030, with about 500 million of the new vehicles being registered in non-OECD markets – primarily China and India.

BP said that of the 1.6 billion vehicles in use by 2030, it expected 69 per cent (1.1 billion) to be conventionally powered, with 4 per cent (64 million) as battery EVs, 11 per cent (176 million) as full hybrids, and 16 per cent (256 million) as mild hybrids.

But while conventional vehicles would remain the majority on the road, BP said that in terms of new car sales they would be overtaken by hybrids. It predicted annual vehicle sales in 2030 of about 100 million units, made up of battery EVs 8 per cent, full hybrids 22 per cent, mild hybrids 34 per cent and just 36 per cent for conventionals.