Still Young: China’s New Energy Vehicle Industry

W hy is China so eager to develop its new energy vehicle industry? First let’s hear what Ge Yuan， Investment Director of Origo Partners PLC said at the 2011 Global New Energy Vehicle Conference held on January 5 and 6， Beijing. “China has grown into the world’s largest auto market since 2009， putting pressure on the nation’s environment and energy security. The world’s second largest carbon emitting nation now imports more than half of the crude oil it consumes. 60% of the oil was used for transportation，” Ge said. Yes， final goal of new energy vehicle development: ease environmental pollution and enhance energy security.

Actually， China is an early and hard-working bird in the field. Its new energy vehicle industry started in 2001 when the Ministry of Science and Technology launched the “863 Program” or “State High-Tech Development Plan”. The new energy vehicles at that time already included hybrid， electric and fuel cell ones. A more powerful development plan and subsidy program was launched in February 2009， under which an electric vehicle could get a subsidy as high as 60，000 yuan， hybrid 50，000 yuan， and fuel cell 250，000 yuan. The Ministry of Science and Technology and the Ministry of Finance later started a program aimed to put 1000 new energy vehicles into operation in ten cities every year.

A real picture

After more than a decade of development， how’s the industry now? It’s worth noticing that China’s new energy industry is highly reliant on its government support. Since the government launched the subsidy program for the development of new energy vehicles in 2009， many corporations have started to foray into this field. Local governments have also been active in promoting the utilization of new energy buses and public service vehicles. However， quite a number of new energy vehicle projects were set up only to get government subsidies. Huge amounts of funds were not used as they were intended to.

By the end of 2011， about 13，000 new energy vehicles were put into operation， and most of them are buses. New energy vehicles are mainly used for urban transportation. The private car market is yet to be tapped into. Chinese car maker BYD launched the E6 electric car in October 2011. How it will be welcomed by the market remains to be seen.

By the end of October 2011， 9，268 new energy buses were driving in China， realizing 38.15% of the nation’s target of 24220 units， according to a report released by D1EV.com， the host of the 2011 Global New Energy Vehicle Conference.

“About 8，000 units of the new energy buses are hybrid， 2，000 electric，”said Liu Ling， deputy chief engineer of Hunan CSR Times Electric Vehicle Corp.

“There are over 100 charging stations for buses nationwide， which could charge about 3000 cities buses，” said Liu， “The infrastructure is not mature to support the large-scale utilization of electric buses.”

Standards on charging for new energy vehicles were unveiled at the end of 2011. Good news for those manufacturers. Li Zhongdong， Chairman of Huan Yu Group in Henan province said the standards would help enterprises cut costs on manufacturing and

research development. He called on the government to release standards on battery in an early time.

Problems ahead

It is widely agreed among industry insiders that new energy vehicles in China face the following major problems: high cost， immature battery technology， and local protectionism.

“New energy vehicle industry is still in its infancy. High cost is the biggest obstacle to the commercialization of new energy vehicles”， said Fu Yi， deputy manager of Pu Tian New Energy Corp. Fu added that the immature battery technology is another big obstacle to the development of new energy vehicles. His company is working on technological breakthroughs while waiting for the maturation of the battery technology.

Fu’s concern was echoed by Zhao Bo， Director of the Electronic Information Department of the Ministry of Industry and Information Technology.“Immature battery technology is an international problem facing the industry. Current batteries are not reliable， stable， or durable enough for the largescale commercialization of new energy vehicles，” said Zhao.

Local protectionism prevents free market competition. “Local protection and intervention have actually cut the market， and impeded the spread of advanced technologies in the nation，”Ge Yuan told the China’s Foreign Trade reporter.

Outlook :)

“New energy vehicle is a very promising industry in the long term. And there is huge market potential. However， the industry is still in an initial stage. It will take at least 3 to 5 years before it starts to take off，” Ge Yuan told the reporter.

“Electric vehicles are the direction of future development. But they are difficult to commercialize in the short term， because of the limitation of the battery technology. Extended-range electric bus is a viable solution， since it extends the mileage of the electric bus and saves on petrol at the same time. Hybrid vehicle is necessary as a transition from traditional vehicles to electric ones，” explained Ge.

“Renting batteries and compatibility of charging and changing batteries would be the right way to go， since it is convenient， reduces the cost of the vehicle， and solves the problems concerning the maintenance， duration and extension of mileage of battery，”said Wei Zherui， General Manager of China Aviation Lithium Battery.

“Battery is the key determinant of the cost of electric vehicles. According to famous experts on battery at Lawrence University， the performance of battery improves 3% to 5% year on year. Significant improvements would be made to the stability， duration and cost of battery in the next 10 years，” said Wu Zhixin， General Manager of Qingyuan Electric Vehicles in Tianjin city.

Wang Qingsheng， General Manger of Dongsheng Energy Technology Company， a power battery maker in the City of Weihai， was optimistic that in the next 3 to 5 years， the battery capacity would double， and the price be halved， which would transform the electric vehicle industry significantly.

However， insiders agree that in the foreseeable future， the development of new energy vehicles in China still rely on government support. Liu Ling suggested that the Chinese government should formulate standards on battery and supporting facilities; strengthen support for electric vehicle battery technology; introduce stable， long-term de- velopment plans and subsidy program for hybrid vehicles.

:( for foreign partners though

The huge market in China is very attractive to foreign new energy vehicle makers too. But it is very difficult for foreign companies to tap into this market.

Even though major Chinese car makers cooperate with foreign companies in the development of some technologies， they prefer independent research and development when it comes to new energy vehicles， in order to get the sizable national and local subsidies.

“Besides Chinese car makers are not as far behind their foreign counterparts in new energy vehicles technologies as they are in traditional technologies，” Ge Yuan told the reporter.

Liu Tongbo， London City’s chief representative in China， said that the development of electric vehicles is based on electric vehicle technology， charging technology and infrastructure network. The charging network requires an enormous amount of investment. When the infrastructure is not there， it is difficult for Britain’s advanced technology holders to make good progress in China.