Electric vehicles in China: An industry is born

Earlier this year, Wan Gang, China’s minister of science and technology did the unthinkable when he ditched the comfort of a chauffeured Audi limousine for a cool blue e6 electric sedan produced by the Shenzen-based automobile and battery manufacturer BYD Co. Ltd.

But extreme times call for extreme measures.

According to Michael Liu, a senior market analyst with the international research consultancy IHS Automotive, sales of electric vehicles (EVs) in China reached about 3,000 units in the first quarter, which is likely to translate into a little over 10,000 units sold for the whole year.

And while that’s not a bad number for China’s income levels, it is paltry compared to the more than 53,000 EVs sold in the United States last year, and far from the numbers China needs to be hitting to attain its ambitious goal of 500,000 clean-energy vehicles produced annually by 2015, and five million by 2020.

Pike Research, the clean tech consultancy, which is now part of Navigant, estimates China will only sell 45,000 EVs in 2015 and 152,000 in 2017.

Wan to the rescue

In many ways, EVs could not have found a better backer than Minister Wan, who used the e6 in March to shuttle between sessions of the National People’s Congress in Beijing. He also held a series of press conferences to tout the position that, through electric mobility, China can reduce its dependence on oil imports and improve air quality in large cities.

(For our coverage of China's big city traffic problems, see China and air pollution in China.)

One of the most popular ministers in the new cabinet, Wan is a seasoned professional in the automotive field and enthusiastic proponent of clean technologies. After obtaining a doctorate in engineering from the prestigious Clausthal University of Technology in Germany, he spent almost a decade working at Audi AG’s R&D. He helped develop the Audi A4 and also engrossed himself in fuel cell research.

He returned to Shanghai in late 2000 as head of Tongji University’s research into automobiles powered by electricity or hydrogen cells, and, in 2004, was promoted to the university’s presidency. In 2007, he was named minister of science and technology, the first minister in more than half a century appointed from outside the Chinese Communist Party.

Slow progress

Although China is desperate to steer its swelling coal-fired, oil-guzzling economy toward cleaner technologies, uptake has been glacial. Even so, domestic and foreign manufacturers of EVs have been piling into the sector, believing things will eventually turn around.

Daimler has formed a joint venture with BYD and plans to launch a new electric vehicle, Denza, next year, initially in the Chinese market. More than 200 engineers from Daimler and BYD have teamed up to design and oversee production of this state-of-the-art, four-door luxury sedan.

The Shanghai-based SAIC Motor Corp. Ltd. has launched a series of hybrid and electric cars, while Honda and Toyota have each introduced hybrid automobiles in the Chinese market. And Elon Musk’s Tesla Motors, after opening a service center in Hong Kong, now has plans to unveild a dealership for its premium-class electric sedans in the Chinese capital.

Daimler is investing in the new venture “due to the strong government support for the overall development of the electric vehicle industry in China,” says an executive at the Beijing headquarters of Daimler Greater China Ltd. who spoke on condition of anonymity because she was not authorized to speak with the press.

Daimler realizes that it will take time for the electric vehicle market to expand in China, but “sometimes you have to invest in a future concept,” the executive adds.

BYD already produces a hybrid car, the Qin, that has an advanced telematics system and access to cloud-computing platforms, and the Denza is likely to come equipped with leading-edge telematics features.

(For more on EVs, see Telematics and emerging electric vehicle technology, part I, Telematics and emerging electric vehicle technology, part II, Telematics and electric mobility, part I and Telematics and electric mobility, part II.)

Government EVs

Still, strong government support will be essential for the wider adoption of EVs.

Minister Wan’s publicity stunt sent a clear message. Most Chinese leaders, at the level of minister and above, today travel by chauffeur-driven Audi limousines.

What's more, in late 2012, BYD delivered 12 of its e6 electric cars to the central government, as part of a pilot program to test adoption of EVs by central state organizations. An additional 11 EVs came from other OEMs.

The pilot covers 11 organizations, including the State Council, the Ministry of Science and Technology, the National Development and Reform Commission, the Ministry of Industry and Information Technology, and the Ministry of Finance.

What would also help is extending state subsidies not only to EVs and plug-in hybrids – the current policy – but also to the broad range of hybrids that are a lot more common, Liu of IHS says. Investment in charging stations is also needed.

Municipal support

Municipal authorities are also starting to move things along.

In Beijing, the authorities have approved free registrations for electric cars, while purchasers of vehicles with conventional combustion engines have been relegated to entering a lottery each month to try to obtain a coveted permit.

Shanghai and other Chinese megacities are mulling similar programs, but most industry insiders and analysts are forecasting the next big push for clean-energy vehicles will be spearheaded by fleet operators of buses and taxis, many of them government-owned.

In Shenzhen, which borders on Hong Kong, the local government provides a $9,800 subsidy on each electric vehicle, matching the central government’s subsidy. BYD has already launched 800 model e6 electric taxis in Shenzen, along with 200 electric buses.

In January, it also delivered 500 electric police cars to the Shenzhen Public Security Bureau, and the virtually silent vehicles are expected to help officers carry out stealthy missions.

Similar pilot programs promoting the use of electric buses and taxis are also being carried out in Changsha, Shaoguan, Xi'an and Baoji, according to BYD. In mid-May, BYD deployed an initial fleet of electric taxis in Hong Kong, as part of the city’s wider program to create a zero-emission, zero-pollution model for the rest of Asia.

Writing in a 2009 article for the United Nations Environment Program, Wan reaffirmed China’s commitment to clean energy.

“China has made vigorous efforts to explore and promote new energy … and clean energy vehicles,” he wrote. “Since the beginning of the 21st century, it has systematically initiated a series of major new energy research and development projects including on electric vehicles.”

Pledging to continue increasing support for the use of electric vehicles in public transport systems across China’s biggest cities, he stated: “We are now at a turning point — moving from the fossil fuel age towards renewable and clean energy. We are also at a juncture — evolving from industrial civilization towards ecological civilization.”

Kevin Holden is a regular contributor to TU.

For all the latest telematics trends, check out Insurance Telematics USA 2013 on Sept. 4-5 in Chicago, Telematics Brazil & LATAM 2013 on Sept. 11-12 in Sao Paulo, Brazil, Telematics Japan/China 2013 on Oct. 8-10 in Tokyo, Telematics Munich 2013 on Nov. 11-12 in Munich, Germany, Telematics for Fleet Management USA 2013 on Nov. 20-21 in Atlanta, Georgia, and Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco.

For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.

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