CHINA MOVES ON BATTERY CARS

China Vies to Be World’s Leader in Electric Cars
Keith Bradsher, April 1, 2009 (NY Times)

SUMMARY
An aggressive transition to battery electric vehicles (BEVs) is being pushed from the highest levels of the Chinese government.

The implication is that Detroit’s struggling Big 3 automakers will face significant competition in its transition to BEV manufacturing and marketing.

China, aware that it is too late in coming to the internal combustion engine (ICE) auto market to effectively compete with the U.S., Japan and Germany, is smartly moving to the budding, wide-open BEV marketplace. No automaker yet has a handle on plug-in vehicles, though Toyota’s success with the Prius gives it an edge.

General Motors (GM) could be the first major to showrooms, with its Chevrolet Volt plug-in hybrid electric vehicle (PHEV) due in 2010. The Volt’s state-of-the-art lithium-ion, rechargeable battery will be manufactured by LG Chem of South Korea. The car will be assembled in Michigan.

Nothing less than survival may be at stake. GM's financial difficulties are well known and, with the Obama administration's latest engagement, the new President's political future could ride on the success of the Volt. China's government has a similar commitment to battery-driven transportation. The competitive opportunity, jobs, exports, reduced dependence on oil imports and emissions-free transportation that will come from success in the BEV marketplace could be a lynchpin or a lynch noose for the enormous emerging economy already sick with air pollution.

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A 2008 McKinsey report indicated that moving to BEVs would cut China's greenhouse gas (GhG) emissions 19% - but the change would be most impactful in urban areas where GhGs and other pollutants are the worst.

To get to such emissions cuts, the Chinese government is sponsoring R&D projects, is offering $8,800/vehicle subsidies to fleets and government agencies in 13 major metropolitan regions, and the national grid operator is building charging stations in Beijing, Shanghai and Tianjin. There will soon be tax credits and other incentives as well.

China’s goal: 500,000 BEVs manufactured yearly by 2011. In 2008: 2,100 were manufactured.

Projected for Japan and South Korea together by 2011: 1.1 million BEVs/year. For North America: 267,000 BEVs/year.

The U.S. Department of Energy (DOE) has a $25 billion R&D program for BEVs and battery technology and will get $2 billion more from the recent stimulus package.

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The Chinese marketplace may suit BEVs better than the U.S. marketplace. 80% of Chinese car buyers are just now buying their first car and so are less likely to have expectations based on ICE performance. Chinese car use is over short distances, often in heavy traffic and at slow speeds, all factors which do not put BEVs at a disadvantage to ICEs.

Despite problems with the charging, cost and safety of the lithium-ion battery, China is throwing money, people and energy at the problem. Example: BYD Auto has 5,000 car engineers and 5,000 battery engineers at work. Most live in 15 yellow, 18-story apartment buildings at the BYD headquarters in Shenzhen. Beginners earn less than $600 a month, including benefits.

Nevertheless, the first BEVs to hit the Chinese market will be twice the price of ICEs before the subsidy. Economies of scale could bring costs down somewhat but the question of how BEVs will sell is unanswered.

The government remains wisely committed to making China the world leader in the BEV market and continues to supply funding.

From kbb via YouTube

COMMENTARY
The Chinese government seems to be in agreement with the most forward-thinking in the world of personal transportation: The future of the car is electric.

While President Obama's backing of GM is tentative and he allows the threat of bankrupcy to hang over the car company's head, the Chinese government may see no other option than making it in the BEV marketplace. China's restive population has heretofore traded authoritarian control to its government in exchange for economic growth. With the worldwide financial downturn, the government’s side of the bargain is faltering and many of its leaders worry about social unrest and political backlash. With economic failure, a system dependent on dirty coal and imported oil that has produced dreadful pollution and widespread public health problems may not seem an equitable bargain to China's billion outsiders.

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Premier Wen Jiabao demonstrated his seriousness about BEVs with his recent appointment of Wan Gang as Minister of Science and Technology. Wan was an Audi engineer in Germany. The first non-party member in 30 years to be appointed Minister, he was promoted from the job of chief scientist on China’s BEV research program.

Challenges for the BEV in China: (1) Most urban Chinese live in apartments and may not be able to readily charge vehicles overnight. (2) Lithium ion batteries in cell phones and laptops are widely known to have performed poorly whereas the fact that the problems came from lithium-ion cobalt batteries and not the more stable lithium-ion phosphate batteries used in BEVs is not yet widely known. (3) Car batteries will be expensive, making cars more expensive in a poor population.

The response of the marketplace is what has always stopped BEVs. The coming 2 years will either be a transportation revolution or doom the world to the evils of ICEs. And the choice will be in the hands of a consumer right now showing ever more reluctance to spend. But is it possible the economy will start turning upward just as BEVs hit the showrooms, unleashing pent-up demand?

Will it charge China first? (click to enlarge)

QUOTES
- David Tulauskas, director of China government policy, General Motors: “China is well positioned to lead in this…”
- NY Times: “When [Tianjin-Qingyuan Electric Vehicle Company] puts its entirely battery-powered Saibao midsize sedan on sale this autumn, the body will come from a sedan that normally sells for $14,600 when equipped with a gasoline engine. But the engine and gas tank will be replaced with a $14,000 battery pack and electric motor…That means the retail price will nearly double, to almost $30,000. Even if the government awards the maximum subsidy of $8,800 to buyers, that is a hefty premium. Large-scale production could drive down the cost of the battery pack and electric motor by 30 or 40 percent, still leaving electric cars more expensive than gasoline-powered ones…”