According to a recent forecast from the World Bank, China will overtake the US to become the world’s largest economy in terms of GDP. Already the second largest, China has well and truly emerged as a global economic powerhouse, but completing its ascent to the top of the table will focus even more attention on it. With a rapidly growing middle class and increasing pressure to diversify its economic base to capitalise on domestic opportunities, the country must take on a leading role in developing new markets.
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A prime candidate for it to take with both hands is the development of electric vehicles and the charging infrastructure required to establish them as widespread transport option. A recent report by Bloomberg quoted two individuals close to the issue, who spoke on the condition of anonymity, as saying that the Chinese Government will shortly unveil plans to invest 100 billion Yuan ($16bn) to build electric vehicle charging points across the country in order to provide a base on which to boost the use of electric vehicles.
A public platform to support EV growth
While specifics on the plan, such as which cities and regions it will target and what models of vehicle the charging points would be compatible with, are yet to be revealed, the disclosure on the amount of funding is the latest in a line of events to suggest that China is looking to make itself the major market for electric transport. On the public side, the government has already provided tax breaks to domestic EV manufacturers BYD and Kandi Technologies Group as part of its attempts to cut carbon emissions and boost environmental sustainability.
At the same time, the private sector has also stepped up its efforts in trying to boost activities in the Chinese market. Tesla Motors, the leading electric car manufacturer, has also started building a presence in China. The company, chaired by PayPal co-founder Elon Musk, has already established factories in the country and is expected to build a minimum of 30 charging stations by the end of 2015, while also broadening its sales network.
In contrast to its overall strategy of focusing on the hybrid and hydrogen powered car markets, Toyota has announced that it will launch a sub-brand in China through its Guangzhou-Toyota joint venture in order to target young, eco-conscious consumers in the country. The brand, known as Lingzhi in Chinese and Leahead in English, is set to launch its first production car, believed to be based on the successful Toyota Yaris, at the 2015 Guangzhou Motor Show having previously unveiled a concept car at the 2013 show.
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By GlobalDataPrivate investment to drive the market forward
With the government seemingly ready to step from incentivising market development through tax breaks to providing state investment to establish charging infrastructure and the private automotive sector increasing efforts in the country, all eyes are on how things develop in China.
Tesla’s Supercharger network of solar-powered chargers for electric vehicles aims to prove that renewables can rule the road.
According to Wang Chuanfu, founder, chairman and CEO of BYD, the country’s largest domestic EV manufacturer, some of the issues encountered three years ago, including some consumer concern over potential radiation, have begun to ease. He said: "Since the beginning of this year, governments have issued lots of policies, indicating their determination to push forward with the development of new-energy vehicles. Now the question is not whether to do it but how to do it."
Chuanfu added: "The next three years will see a boom in electric vehicles, just like what happened to e-commerce ten years ago and the Internet 20 years ago. But what’s different is that in addition to the commercial drive, the development of new energy cars relies on more government push."
While the perceived funding package for EV charging points serves to strengthen confidence in public sector support for developing the market, the inconsistency of policy across China’s cities remains a point of concern for BYD, as Chuanfu explained: "We will only participate in some cities, but cannot in many other cities. We are not even included in the discussions. Every city has a new-energy-vehicle promotion office. Only with their approval can we join the meeting and have the opportunity to get involved in the construction. Cities have promised to produce local protectionism but it will take time."
Obstacles along the road to success
While the high level of competition between the country’s districts and cities can boost activity in the sector, the administrative burdens associated with gaining access and operating pose a threat to it that must be addressed as part of an overall strategy to develop the market. At the same time, one of the major challenges to advancing EV development in China is establishing robust standards for charging technology and ensuring consistency across regions.
For David Reeck, a former executive at GM China, this is an area that China has not focussed enough attention on. "By the end of the year China will realise it has really messed up", said Reeck. John Kua, a consultant specialising in the Asian electronic vehicle market, is also adamant that more must be done on the standards.
"China will [have]to play catch-up game to align their standards to be at least compatible with current US, Japan or EU standards. This crucial point seems to have been marginalised in the past five years of excitement to promote local EV innovation in China during the government’s engagement with industry players and the scientific community, as evident from the various charging connector types used by local manufacturers all over China", he said.
Increased involvement from established players in developed markets may suggest that the country is addressing the discrepancies around its technology and standards. Leading power and automation group ABB recently launched the first general type of DC charger compliant with the China GB standard. The Terra 53 Z, launched in August, will be available at public charging stations, EV fleet parking lots and service stations and will be compatible with a wide range of cars and other EVs.
Setting a new course for the national grid
The large-scale roll-out of EV transportation across China would of course have a significant impact on its national grid, with the charging platforms needing to be plugged in to the network and the power used by the vehicles increasing demand for electricity. In order to deliver the extra capacity required, the government has opened up the market for private involvement, enabling the likes of Tesla to commit to building charging points.
According to Zhu Boshanm, general manager at Tacter Investment Consulting, easing entry could lead to further outside investment on the generation side, too. He said: "Allowing private capital in charging stations means the opening up of the electricity distribution side, while supporting smaller-scale power units to integrate into the state grid will allow more private units to participate in power supply."
In addition to widening the scope for investment in the grid, the EV market may also be used to change the way electricity is distributed by using the vehicles to transmit power where it is needed.
A research project led by Southampton University and supported by the China Electric Power Research Institute and academics in Huazhong and Tsinghua, is currently looking into the feasibility of vehicle to grid (V2G) operation where the electric vehicle network is used to distribute electricity across the grid.
Speaking at the launch of the three-year collaboration, project lead professor Suleiman Sharkh said that V2G could "transform energy generation and transport in years to come".
The team of researchers will be working to assess issues such as whether the overcharging of the vehicles might damage battery life or if it causes inconvenience to drivers. While at very early stages of research, V2G distribution could offer China a new method of moving energy to where it is needed most.
A MIT study has found the health cost savings of climate change mitigation policies greatly out-weigh the cost of the policy’s implementation.
Still in its infancy in comparison to petrol powered cars, the EV market is yet to find the market that will ‘make’ it.
The $16bn in public funding would be a major step forward and send a clear sign that China is open to further investment, but as Kua explained, public incentive only goes so far: "Such initial funding and subsidies should never be a blank endorsement, but are meant only to jumpstart the industry".
In order for its ambitions to be realised, the pot of private money from the likes of Tesla, Toyota and BYD, will need to increase and the market take hold.
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