How Chinese Electric Cars Will Rise to Power
The specter of Chinese electric cars taking over the world has been raised for the past couple of years. In April 2009, I outlined a couple of reasons why that might not happen so fast. At this very moment, cars (gas or electric) are too expensive for most Chinese consumers. The quality is still way below global standards, and government support for electric cars is still haphazard.
Yet, after speaking with Oliver Hazimeh, director of the global e-Mobility practice at PRTM, I can see why U.S. and European carmakers should have something to fear after all.
Public Transportation and Fleets First
The number of electric cars currently on Chinese roads is minimal. Don’t expect it to stay that way for long. Government-sponsored test programs will not be like those in other parts of the world, according to Oliver. “It’s a different mindset. It’s not like some of the cities you see here in the U.S. or even Europe, where people say we have 20 cars and maybe next year it’s 100,” Oliver said. Instead, test fleet vehicles will roll out by the thousands or tens of thousands. “They are going very rapidly to learn as much as they can from those pilots to understand driving and technology behaviors. They are on a much faster adoption curve.” Oliver cites previous Chinese incentives resulting in a whopping 100 million electric scooters in China.
In addition to fleets—such as taxis and buses—the incentives will be equally placed on public transportation projects. Why does this matter? Because public transportation will become the preferred way to get between big cities, mitigating concerns about limited range of electric cars. Unfortunately, in the U.S. we have such a weak public rail and bus system that drivers expect—and in many cases actually need—a vehicle with longer range. But if most electric cars are designed for urban use, then you can make them smaller.
So, according to Oliver, we shouldn’t look too closely at the current Chinese electric cars, like the BYD e6 or BYD F3DM. Based on his conversations with Chinese officials, Oliver believes compact or mid-size vehicles will roll out at first—but as public transportation takes hold, the size of Chinese electric cars will get smaller, making them more affordable for average consumers.
Drive Down the Costs and Bring Up the Quality, Fast
That’s only the beginning of the cost reductions. The big savings will come when the Chinese EV industry scales up. “Six or seven years down the road, when you have enough of these vehicles and the technology out there, and you drive the cost curves down, the vehicles will be much more cost competitive,” Oliver said. Imagine: there are 150 million cars on Chinese streets today, but that will steadily grow to 500 million by 2050.
At the same time, Oliver sees a lot of consolidation in China’s EV industry. “The Chinese government is starting to channel the money to more preferred suppliers and solutions,” Oliver said. “That’s just starting. It’s hard to say who are the winners and how they will pick.” Right now, it’s a crazy quilt of joint ventures and start-up projects. With consolidation, manufacturing and deployment of electric cars will go into overdrive—cutting costs and improving quality.
“Right now, [Chinese cars] are not quite ready from quality, and fit and finish,” Oliver said. But he points to the rapid progress in quality that companies like Hyundai have managed in recent decades. “There’s no reason to believe that Chinese couldn’t do the same thing with the amount of resources they put into developing not only the battery technology, but the car technology,” he said. Oliver mentioned that BYD alone has about 5,000 engineers working on automobile components and systems.
Here They Come
PRTM believes that EVs and plug-in hybrids will reach about 10 percent of the Chinese new car market by 2020—about the same market penetration that PRTM forecasts for grid-connected vehicles for the U.S. By that time, or as early as 2015, China will be producing way more electric cars than anybody in the world, and those vehicles will be high quality, safe and very affordable. They won’t be luxury cars, but expect parity with most cars in today’s dealerships. At that point, an alternative distribution system—maybe via a big box store—could emerge. Game over? (Of course, that depends on a number of factors, including how much government support is sustained by the U.S. government.)
Don’t expect the takeover to happen overnight. But the pieces are starting to come together. “This is not a one-step process,” Oliver said.
Listen to the whole interview below.
New to EVs? Start here
What Is An Electric Car?
Before we get going, let's establish basic definitions.
A Quick Guide to Plug-in Hybrids
Some plug-in cars have back-up engines to extend driving range.
Electric Cars Pros and Cons
EVs are a great solution for most people. But not everybody.
Eight Rules of Electric Vehicle Charging Etiquette
Thou shalt charge only when necessary. And other rules to live by.
Seven Things To Know About Buying a Plug-In Car
A few simple tips before you visit the dealership.
Eight Factors Determining Total Cost of Ownership of an Electric Car
EVs get bad rap as expensive. Until you look at TCO.
Federal and Local Incentives for Plug-in Hybrids and Electric Cars
Take advantage of credits and rebates to reduce EV costs.
Guide to Buying First Home EV Charger
You'll want a home charger. Here's how to buy the right one.
Electric Car Utility Rate Plans: Top Five Rules
With the right utility plan, electric fuel can be dirt cheap.
The Ultimate Guide to Electric Car Charging Networks
If you plan to charge in public, you'll want to sign up for charging network membership (or two).