Report: China-U.S. transport race hinges on resources

The U.S. can't compete with China's lithium supply and billions in government backing, but has advantages in other key areas, says Accenture report.

Candace Lombardi
In a software-driven world, it's easy to forget about the nuts and bolts. Whether it's cars, robots, personal gadgetry or industrial machines, Candace Lombardi examines the moving parts that keep our world rotating. A journalist who divides her time between the United States and the United Kingdom, Lombardi has written about technology for the sites of The New York Times, CNET, USA Today, MSN, ZDNet, Silicon.com, and GameSpot. She is a member of the CNET Blog Network and is not a current employee of CNET.
Candace Lombardi
3 min read

The Chinese government has committed $15 billion over the next 10 years to the electric vehicle (EV) industry alone, while the U.S. Department of Energy spends $4 billion a year on research and development for a wide variety of energy-related tech.

The figures paint a portrait of two countries with vastly different approaches to growing industries and jobs, according to an Accenture report released today, "The US and China: The Race to Disruptive Transport Technologies," (PDF) which parses out the advantages and disadvantages each country has right now in the realm of alternative vehicles and fuels.

China has been keen on taking proven innovative technology, then backing it financially and with government mandates to turn it into an industry. It's that money and governmental control which may give the country an advantage in building a global EV industry.

China also has rich deposits of lithium, a key ingredient in many EV batteries. Because of this, the country is already a leading global manufacturer of lithium ion batteries for electric and hybrid-electric cars.

Sixty percent of the United States' rechargeable battery imports already come from China, Japan, and Korea. The U.S., as its EV industry grows, will have to import almost all lithium ion batteries, or the lithium needed to make those batteries, from Asia and Latin America, according to Accenture.

So what does the U.S. have to compete against China's lithium, money, and government control? To put it succinctly: brainpower, strong intellectual property laws, and agricultural expertise.

The Accenture report predicts that rather than one alternative fuel reigning supreme, the world will see an increase in transport fuel diversity.

Unlike China, the U.S. has strong intellectual property laws and a record of upholding and protecting intellectual property rights, which encourages private investment in research and development, something the report says has a direct effect on innovation.

Biofuels are a good illustration of that point. The U.S. currently has a strong biotechnology industry that is improving biomass and biofuels technology and is developing a proven track record of success. It's leading to lucrative licensing of the technology, expansion of U.S. biotech companies, and international investment from foreign companies, according to Accenture.

The U.S. also happens to be the largest producer of corn in the world with an estimated 30 percent of its yield going into ethanol production. Yield improvements and domestic surpluses are even expected to rise in coming years due to recent agricultural innovations. And yet, for various reasons, the U.S. will likely not hang its hat on ethanol. Instead, it's leveraging that agricultural expertise and capability to invent and produce yet more alternative fuel options.

Companies, for example, are experimenting with algae for biofuels and butanol or sugar for biodiesel. China, in contrast, seems to have focused solely on using cellulosic ethanol to replace gasoline, and has no real plan for an alternative to diesel, according to the report.

Of course, the two countries also have vastly different situations when it comes to supply and demand.

U.S. car ownership is at a plateau, so an increase in the purchase of EVs coupled with greater use of biofuels could lead to a 30 percent reduction in gasoline and diesel use in the U.S. by 2030, if the VMT (vehicle miles traveled) stays the same, according to the report. That change will be an adjustment for the U.S. economy as oil-related industries like oil refineries may find themselves displaced.

China by contrast will not have to adjust to a large displacement, because it is in the infancy stage of personal car ownership, and, therefore, has no real legacy structure in terms of fuels. Accenture predicts that the amount of cars on China's roads will more than double to 200 million between now and 2020, causing growth in all areas of transport fuel. Because of this car boom, China's massive addition of alternative fuels and EVs will merely serve to compliment its growing domestic need for more oil, according to Accenture.

"This is a significant difference for the players in the markets--in the United States, there will be clear winners and losers; in China, in the context of high growth, there are only winners and bigger winners," said the report.