Local governments should complement efforts to promote use of electric vehicles

Updated: 2014-11-18 07:32

By Huw Andrews(China Daily USA)

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If you were trying to create conditions for electric vehicles to flourish, then you might end up with a country like China.

It is the world's largest vehicle market, and it has a massive urban population, with all the traffic and pollution challenges that this entails. China needs and wants hybrid and pure electric cars, collectively called xEVs. It also has a growing xEV industry and infrastructure, and its consumers might be more disposed to adopt xEVs than those in other countries.

 Local governments should complement efforts to promote use of electric vehicles

A potential buyer examines an electric vehicle on display at an auto show last month in Beijing. Between 2015 and 2020, as many as 520 types of xEVs are expected to be launched globally. Chen Ming / For China Daily

The last time that electric propulsion was a competitor for car drivetrains was in 1900 or so.

Back then, rapid innovation of the internal combustion engine and the petroleum infrastructure killed off electric propulsion for mass applications.

Today, volatile oil prices, urban pollution, traffic congestion, technological advances and a real sense of corporate opportunity mean that electric propulsion is again a viable alternative, so much so that the tipping point for rapid adoption of xEVs could be as soon as 2020.

Between 2015 and 2020, as many as 520 types of xEVs are expected to be launched globally.

Those vehicles may be only a minority of manufacturers' products, but the large range of vehicle types forecast to go on the market is evidence of the industry's rapid evolution, commercial experimentation and broader acceptance among consumers.

Globally, the strategic supply bases and partnerships necessary to develop and manufacture these vehicles have already largely been established.

Top-tier suppliers have the business rationale and research and development strength to protect their current positions with auto producers and look for future advantages.

Industrial and semiconductor companies are developing new applications in the actual vehicles and the charging infrastructure.

China's car manufacturers are heavily committed to developing xEV technology and products.

Local governments should complement efforts to promote use of electric vehicles

The country also has a capable and rapidly expanding auto supply base and a near-monopoly on rare earth minerals, which are essential for the magnets in high-performance electric motors.

PricewaterhouseCoopers research suggests that by 2020, at least 6 million electric powertrain vehicles (including hybrids) will be produced each year globally, amounting to 5 to 6 percent of 2020 global vehicle production.

At the high end of the estimate range, volumes could be twice this number. Either way, these volumes represent many billions of dollars of long-term commitment from the industry and governments.

Challenges remain to the widespread adoption of xEVs. The current range of pure EVs is limited, charging can be inconvenient and consumers have concerns about premiums and uncertain expenses.

Additionally, some governments are struggling to provide incentives while others are trying to protect their indigenous xEV players.

Some of these challenges are being addressed through advances in technology, manufacturing and vehicle integration.

Batteries, power electronics and e-motors, for example, represent about 40 percent of the cost of a pure EV and somewhat less for a hybrid.

PwC estimates that by 2020, costs for these items will have fallen about 40 to 50 percent.

The current cost premium of a pure EV is about $10,000, but we estimate that this will decline to about $3,000 by 2020.

The most complex part of the EV equation remains the charging and servicing infrastructure.

Slow charging, which can be added to existing infrastructure, is cheaper to install but takes many hours while fast charging requires significant infrastructure investment.

This explains why hybrid and plug-in hybrid EVs remain the preferred types.

Charging infrastructure forecasts depend heavily on government policy and consumer adoption rates for plug-in hybrids and pure EVs. PwC has forecast that by 2020, approximately 427,000 public charging points will have been established in the United States, 407,000 in China and 381,000 in the European Union. That will promote adoption.

But consumer experience ultimately is the key to adoption, and here China may already have an advantage. Millions of urban consumers already use e-bikes, and this year Chinese producers will turn out about 30 million e-bikes.

As these consumers trade their bikes for cars, they may adopt electric vehicles more readily than people in other countries.

Local governments in cities such as Shanghai, accustomed to promoting e-bikes and banning gasoline scooters, need only make a small switch to promote xEVs.

The author is PwC China Innovation leader

(China Daily USA 11/18/2014 page15)

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