SHENZHEN, China -- In 2009 China became the world's largest vehicle market. Now China aims to be the world's largest electric-vehicle market as well.
The government is pouring money into electrified vehicles in hopes that domestic companies will be able to leapfrog foreign competition.
But industry observers say that achieving that goal is far from certain. The right combination of market demand, government planning, and technological capability have to come together.
"The current situation is not as strong as generally believed or implied by the government's targets," Long Nanyao, vice chairman of consulting firm InterChina in Beijing, wrote in an e-mail. "China still has a long way to go."
The next decade is crucial. The government has pledged 100 billion renminbi, or $15 billion at current exchange rates, over the next 10 years to develop electrified vehicles.
Government strategists seem to prefer EVs and plug-ins because foreign companies have a lock on other hybrid technologies, says Mike Dunne, with Dunne and Co., an investment advisory firm in Hong Kong.
The government's plan calls for 5 million EVs and plug-in hybrids to be on the road by 2020.
If Chinese automakers don't develop such vehicles, the government will "urge" them to do so, says C.C. Chan, who advises the Chinese government on EV strategy. But government urging or not, most of China's automakers are commercializing hybrids first because that technology is already commercially viable.
Delphi sees hybrids dominating the China market through 2015, says John Absmeier, platform manager for electronic controls for Asia Pacific at the Delphi China Technical Center in Shanghai. But, Absmeier adds, fleet sales will predominate
No private market?
That points to one problem: currently, there is no significant private market in China for EVs. Despite generous government purchase incentives of up to $9,000 per vehicle, only a handful of consumers have bought an EV. The high price, lack of recharging infrastructure, and "general fears that the EV technology is still too immature," are behind the slow consumer uptake, said InterChina in an April 2010 report.
The government is concerned that its efforts to promote the sector are ineffective. Officials at a recent meeting in Beijing debated how to best disburse the $15 billion investment, says Chan, the government adviser.
Some small, inexperienced companies are applying for funding, he says. But some high-level officials question whether China should rely on outside technology, InterChina's report said
Domestic firms lack essential EV technologies, such as battery management systems and heat reduction systems for large battery packs, InterChina said. Production technology--producing millions of batteries at consistent quality levels--lags in China, Chan says. And "a foreign battery lasts longer," he says.
Chan doesn't see those flaws as fatal. The quality gap between Chinese batteries and others is shrinking, he says.
Speaking in early November at an electrified vehicle symposium in Shenzhen, Tsinghua University professor Ouyang Minggao said that for China to reach its targets for electric vehicles, "we need international cooperation." Ouyang leads government-funded new energy vehicle projects.
Many foreign battery companies are already working with Chinese automakers. Among them: A123 Systems of Massachusetts and SAIC Motor produce lithium batteries; Ener1 subsidiary EnerDel and China's Wanxiang EV will produce battery cells; and Johnson Controls-Saft supplies batteries to Chery Automobile.
All are betting that China's EV sector will be big. They aren't alone.
John Du, director of the General Motors China Science Lab in Shanghai, says that China's EV market "for sure won't take off overnight."
But, Du adds, "At the high level," China's leaders "all agree the new energy vehicle is the future."
(Source: Automotive News)