New energy vehicles are one of China’s seven strategic emerging industries. Unlike its other “new energy” counterpart industries, NEVs, and electric vehicles in particular, are still waiting for commercial breakthrough.
China’s clean energy targets are usually just temporary placeholders. Targets for wind and solar power installed have been met, surpassed, and updated numerous times. New research from Bloomberg New Energy Finance (BNEF), however, suggests that China’s 2015 and 2020 targets for electric vehicle (EV) rollout will not be met due to “weak capability throughout the supply chain.” China has become a dominant force globally in wind and solar manufacturing and deployment; their supply chains are capable albeit recently consolidated with wavering demand in an oversupplied market. So why is that EV’s may not find similar success?
China’s medium to long-term development plan for renewable energy had a 2010 wind target of 5 gigawatts (GW) installed and a 2020 target of 30 GW. China had already surpassed this 2020 target by 2010, with 31 GW of grid connected wind. Knowing the target would be surpassed early, China updated its target to 100 GW by 2020…or rather by 2015. Well now, BNEF forecasts that China will hit 100 GW slightly before 2015, while Greentech Media predicts that China will have more than 150 GW of wind capacity by 2015. In solar, an original 2020 target of 1.8 GW was updated to 20 GW, but that also was temporary. Facing weakened demand abroad for solar modules, China has increased the near-term 2015 target to 35 GW. Although China continues to face problems with grid connection and grid purchase of energy produced from all of these wind and solar farms being constructed, the fact remains that China is hitting its targets about 10 years early and increasing its targets by at least fivefold based on revised expectations of industries that have grown mature supply chains and reduced costs precipitously.
In the field of EV’s, China apparently skipped the setting of meaninglessly small targets that would need to be later upgraded. They have set a target for production and sales of EV’s to reach 500,000 by 2015 and 5 million by 2020. Actually, China may find that this target will need a downgrade not an upgrade, if the industry does not make some serious changes. BNEF predicts sales of only 1 million by 2020.
Even with generous consumer rebates offered for EV’s, sales numbers are dwindling. In the second quarter of 2012, apparently only 235 EV’s were sold in China. BNEF estimates “just 13,000 EV’s were sold between 2009 and 2011, including buses and public utility vehicles.” BNEF cites lack of consumer interest, lack of charging infrastructure, and lack of technological expertise as the three main factors plaguing the Chinese EV industry.
Lack of consumer interest is easy to understand. Just take a look at Exhibit A above, the “QQ EV” from Chery. Would you want to drive this toy? Kandi’s 28E looks equally as bad. China’s new car consumers want status in their vehicle purchase. They are not going to find that from these second-tier manufacturer EV offerings.
BYD’s main EV offering, the E6, is more attractive, perhaps one reason why BYD recently got pimped out with a Zayed Energy Future Prize nomination in Abu Dhabi. Even if the car is attractive and affordable, a number of fires and accidents with electric vehicles in Shenzhen and Hangzhou have been well-reported in the media, decreasing consumer interest in EV’s further.
Forbes reports that a research institute under China’s State Council has published a white paper addressing how Chinese consumers might more quickly adopt EV’s. Given that battery costs are not coming down very quickly (a point echoed in last week’s interview with Richard Muller), the white paper suggests a business model of cheaper, swappable batteries. It also suggests fleet purchases, rental services, and local government promotion as the main near-term avenues for EV adoption.
Indeed, business models will likely play a critical role in the fate of the Chinese EV industry. While BNEF suggests that China needs to import foreign technology expertise to improve the industry’s prospects, I’m not sure that expertise exists yet. EV sales in the U.S. are nothing to write home, not even reaching 0.5% of total vehicle sales in 2012, and again, that’s with the generous rebates. Charging infrastructure, high battery costs, consumer interest, and business models remain wild cards in all EV markets globally. They just happen to be more pronounced in the immature Chinese market.