What a difference a few years makes. In 2013, the year the latest NEV policy was issued, electric vehicles – including pure electric and plug-in hybrid electric – were a huge presence at AutoChina. This year electrification was still a big presence – but it was much more subtle. That is because the central government, local governments, and automakers are starting to understand the limitations of the technology. Despite those limitations, however, China’s central government is sticking to its plans for expanded electrification.
I stand by my past predictions that the place where widespread electrification will be seen in China is in fleets, especially municipal government fleets. The technology will make sense for fleets, and even if it doesn’t, Beijing has told local governments to electrify their fleets. So there. But electrified vehicles of all kinds will still be part of the consumer selection as well. They have to be.
The takeaway: Electrification in China is growing but let’s not get ahead of ourselves. Plug- in electric vehicles will be a part of China’s car parc, and given the forecast size of China’s light vehicle market, that will mean equal a lot of plug-in electric vehicles ( including pure electric and plug-in hybrid electric). Indeed, China will likely be the biggest PEV market in the world. But there isn’t going to be a wholesale move to electric vehicles.
Dazed but electrified
As usual, I was a bit dazed my first day at the show. I had flown in two days before and was still very sleep-deprived. And just when I had the old venue down, Shanghai moved the show to a huge new venue on the other side of the river in Hongqiao. I was lost a lot.
On the positive side, the show was not at all crowded this year. For one, the venue is enormous. But also the organizers were clearly more successful this year at limiting attendance to press and industry folks instead of family, friends, and just about anyone else who had any connection to someone who should be there on media days.
One thing that was clear is that foreign automakers are betting that plug-in hybrid electric vehicles will be the type of passenger EV that sells in China in the near term. There were a lot of clues: Cadillac chose the Shanghai show for the global debut of its 2016 Cadillac CT6 sedan PHEV. This was handy; GM can please the Chinese government while also showing off a cool-looking luxury car. Volvo, which is a Swedish/Chinese blend, debuted a plug-in hybrid electric version of its S60L sedan. Peugeot and BMW also showed new PHEVs. And that is just the foreign brands.
China’s domestic automakers also had a bevy of electric vehicles in their stands.
Qoros, the company that seems to be always on the verge of putting out a nice car, introduced an in-your-face PHEV, the Qoros 2 concept. BYD, the current star of the PHEV passenger car segment in China, showed a near-production version of its Tang PHEV compact SUV. There were many others, of course. But I was too dazed to note them all.
SAIC isn’t giving up on pure-electric vehicles. BAIC had a big display devoted to electrification, combined with connected car technology. Connected car was a big theme at the show, by the way, but I’m not going in to that here.
Besides a new version of its small e50 all-electric vehicle,
SAIC also showed (among other models) an all-electric van – I think this will be where we see more all-electric models in China. They can be used for municipal and other fleets, and won’t face the same issues finding charging as consumer EVs will since the vans will return to a set location each night.
Non-automotive firms such as Google and Apple are talking about getting into the car manufacturing business, and Chinese tech firms are doing the same.
Pateo, whose CEO is my old friend Freeman Shen, debuted its concept of a fully-connected electric vehicle.
So electrification is still advancing in China. And it seems many smaller cities in China are still looking to create their own little green technology park, including companies with electric vehicle technology. That’s what I gather from my sources at companies in that sector. So there are still government dollars, and central government goodwill, to be had where pure electric and plug-in hybrid vehicles are concerned.
Now let me get in a shameless plug for an old friend. Many of you likely know Yale Zhang, an analyst and industry consultant extraordinaire. Yale knows China’s automotive market up close and personal. He’s a local guy and has been following the industry for decades.
His company, Auto Foresight, has begun to issue a bi-annual electric vehicle report. I dare say this will be one of the most accurate overviews of the market available. The first report has been out since March; the next one will be out in September.
Here is a link to the contents. I don’t know about you, but I have a really hard time keeping track of the always-evolving NEV policies in China. This report looks like a great way to keep track of that, and see how automakers – and consumers — have responded.
I look forward to referring to it as a handy guide. If you make inquiries about the report, tell them Alysha sent you.
A friend in China recently asked me for my thoughts on the electric vehicle sales numbers in China. I realized I hadn’t thought about them much! That’s odd for one who blogs about China and electric vehicles, but then I haven’t been posting much lately. Alas, other, better-paying tasks have been taking up my time. My friend’s question was a good one, however, and I decided to answer it with, finally, a blog post.
It’s fair to say that China’s new energy vehicle policy (which includes battery-electric, plug-in hybrid electric, and hydrogen fuel-cell vehicles) has been consistent if not entirely realistic. The numbers put forth in the original policy in 2010 were completely unrealistic. That has since been modified several times.
As in many countries, there isn’t much demand for NEVs in China without government subsidies. China’s subsidy policy was also unrealistic, to the extent that it was limited in its time frame. It’s easy to see when the last policy ended – just look for a huge dip in NEV (and let’s face it, we’re only talking about BEVs and PHEVs, collectively plug-in electric vehicles or PEVs, for now) production numbers.
Why have NEV production and sales numbers suddenly spiked again? Because in late 2014 the government confirmed its subsidy policy for PEVs. Automakers aren’t interested in producing NEVs without assurance that the government won’t “reward” them. Of course, they also face pressure from the central government to produce NEVs, but they resist that pressure by only paying lip service to such production until it becomes clear there is government financial backing.
So, what were the NEV sales figures for January-February (sales figures in China for the first two months of the year are generally reported as one number because the Chinese New Year holiday moves around and has a big impact on numbers for the month in which it falls.)?
In January and February, 12,853 NEVs were produced in China, and 12,440 were sold. Of that, 6,519 BEVs were produced and 5,996 were sold. As for PHEVs, 6,334 were produced and 6,444 were sold. Those are pretty small numbers considering 4 million light vehicles were sold in China in the first two months of 2015 according to LMC Automotive, including 3.46 million passenger vehicles and 571,465 light commercial vehicles. But the NEV sales are a big jump over 2014, when year-end sales for BEVs were 45,048 units and for PHEVs 29,715 units.
The big jump in 2015 numbers is still a far cry from the volumes China will need to reach its target of a cumulative 336,000 units produced and sold in 2015. That is a bit more realistic than the original target of 500,000, however. The production target for 2020 is still two million units, and total number of NEVs on the road by then is still five million, as near as I can figure.
Targets aside, let’s consider the sales numbers for the first two months of 2015. Who were those sales to? What kind of vehicles were sold? Key questions. I doubt consumers did much of the buying. I’ll bet a lot of them were sold to municipal fleets. That doesn’t really matter. I have long maintained that the primary market in China for PEVs will be municipal fleets, including buses, taxis, and passenger vehicles. Still, I’d love to see a breakdown of the sales.
Meanwhile, with some certainty regarding the central government’s policy support continuing, China’s state-owned automakers have gone bonkers over PEVs. But their strategies differ markedly, as my twin ChinaEV, the Chinese website at http://www.chinaev.org, points out in a March 31 story. It looks at plans by Beijing Auto (BAIC), SAIC, and Guangzhou Auto to introduce a cumulative 25 new NEV models over the next three years. BAIC focuses on battery-electric passenger vehicles and delivery trucks; SAIC focuses on PHEV passenger cars, with “more emphasis on vehicle performance and mileage”; and Guangzhou Auto plans both BEV and PHEV passenger car launches.
Of course, pricing and especially more public charging posts will be key contributors to consumer sales for all these models, if they all make it to market. And since local governments own all three, you can bet that the local governments will be making some NEV purchases.
I’m headed to Shanghai in a few weeks to attend Auto China, among other things. It will be interesting to see how prominently NEVs figure in the stands this year. That also fluctuates based on policy. I’ll report back.
Around five years ago, I remember John Du, head of GM’s China Lab in Shanghai, telling me that there was no going back on China’s plans for NEVs. “The train has left the station,” he said. Well, turns out Du was correct, but that train is like the slow train I once accidentally bought a hard-seat ticket for in China about 15 years ago. This was labeled at “kuai che,” or “fast train.” In reality, it was very slow. It stopped at every town. What should have been a 2.5 hour trip took five hours. But I got there. I should have taken the “tebie kuai che,” it turned out (“especially fast train”).
China’s NEV train is a kuai che. But it will eventually get there.
I used to think that only in China did every tom dick and harry company want to go into the electric vehicle business. I was wrong. The latest “Tesla fighter?” Richard Branson. Remember that even Elon Musk realized that making a car is tough, Richard….
Elon Musk said he would banish range anxiety with an app. Don’t think his method would go over big in China since there aren’t Tesla recharging stations everywhere. This app would just cause more anxiety, as one KBB analyst points out!
Karl Brauer, senior analyst for Kelley Blue Book’s KBB.com:
“Incorporating charging locations into a vehicle’s navigation system and trip planning is an excellent feature, but it’s also not new or innovative. The Nissan Leaf offered this feature when it was introduced back in 2010, and nearly every electric car offers it today. Knowing where an electric vehicle charging location is and having enough energy to get to that location are two different issues. It sounds like the Model S will be more capable of alerting the driver when he or she is nearing that threshold, but I’m not sure these warnings equate to eliminating range anxiety. One could argue such aggressive warnings will only remind drivers how critical it is to get to a charging stating before draining the battery pack. And this situation remains a much bigger deal in an electric car than one powered by gasoline or diesel fuel, where a roadside assistance organization can deliver a gallon of fuel and usually get you going in a matter of minutes.”
Matt DeLorenzo, managing editor for Kelley Blue Book’s KBB.com:
“This solution to range anxiety reminds me of Ettore Bugatti who responded to one of his customer’s complaint that his car was hard to start in cold weather. He reportedly said ‘If you can afford a Type 35, then surely you can afford a heated garage.’ In other words, Musk is giving the buyers of his luxury car an app that says ‘don’t drive too far from one of my chargers.’ As for his comment about driving 10 hours and wearing a diaper, obviously he never has taken a road trip of any length. If you take a conventional car, you can drive 10 hours and stop for gas in that time, which takes about 5-10 minutes. In a Tesla, best case scenario, is enforced stops of at least a half hour or more (and what if the charger is in use, then it will take even more time). I think the range anxiety is complicated by the fact that recharging adds additional time to what is already a long road trip.”
One thing I can say about BYD, it’s becoming consistent. That’s good. The Chinese automaker learned some lessons from the blunders when it first tried to enter the U.S. market. It has stuck to its strategy of selling its electric buses here for the time being. But I learned from BYD executives at a recent event here in Los Angeles the company still has its eye on the retail EV market, as well.
Yesterday I attended an event meant to show off BYD’s new articulated battery-electric bus. The 60 footer, billed as “the world’s largest battery electric vehicle,” was nice. I’ve come to expect that from BYD buses. Of course I’m not driving them so can’t speak to performance. But they are always spacious, well finished, and of course quiet.
This bus, which we took from Union Station in downtown Los Angeles to City Club, a fancy venue on a high floor of another downtown location, wasn’t quiet however. It was quite loud, a result of being packed with people, from reporters to sustainability consultants to labor issue professionals to bankers. All but the journalists had played or are playing a role in BYD’s effort to build and promote e-buses here in California.
BYD has had some success in getting small numbers of its e-buses into municipal fleets for demonstration and testing. Five of them will start operating in the Los Angeles municipal fleet this year. BYD buses are also trolling the roads in Mexico, Chile, Edmonton, and Sydney, among other locations. And in January in New Orleans at a trade show, BYD unveiled a long-distance electric bus that could go a claimed 190 miles on a single charge.
What about the 25-bus Long Beach Transit contract that BYD had apparently landed only to have it snatched away because BYD had not filed the correct paperwork related to the federal funding Long Beach would have used for the purchase?
BYD re-bid for the contract. “Long Beach is in the final stage of evaluating bids,” said BYD’s new VP of sales, Macy Neshati, whom I spoke with at the event. “We’d really love to see that come together.”
The demo bus we took to City Club was a 60-ft articulated pure electric vehicle. An articulated bus is two 30-foot buses connected by an accordion-like section. According to BYD, the articulated bus holds 120 passengers and can go 170 miles on a single charge. “Proudly designed and built in the United States of America,” said the promotional material.
Neshati said the 60-ft. articulate buses will cost around $1.2 million each. A 40-ft. bus costs around $800,000, he said.
Electric buses have been around for quite some time, but they have been slow to catch on. Why, I asked Neshati? Bus companies are risk-averse, he said. They worry that the technology is “new” and that the companies will go out of business. That’s why government subsidies are needed.
“We try to explain to them that there is no risk” working with BYD, he said. “We are not a startup. We have the resources and the capital.”
Nonetheless, government funding is still the secret sauce to get contracts, and BYD has several funding applications in progress with the California Energy Commission, said Neshati.
Is Berkshire Hathaway the secret sauce for BYD’s retail distribution?
So, BYD’s bus business seems to be going okay. What about electric passenger cars? That is where BYD got off to a rocky start here in the U.S.
When BYD opened its North American headquarters here in Los Angeles in late 2011, it planned to build a dealership network and sell the e6 pure electric crossover.
But the vehicle was not ready for prime time in the U.S. market. Its fit and finish were not up to U.S. consumer standards, among other issues. So BYD put those plans on hold to concentrate on selling its electric buses here in the U.S. To that end, it opened a manufacturing plant in Lancaster, Calif. in 2013.
So, I asked both Neshati and Matthew Jurjevich, market research analyst with BYD America Corp., what’s up with retail sales of PEVs here in the U.S.? They gave me slightly different answers but both confirmed that BYD still plans to sell passenger EVs here.
“We are keenly interested in being able to bring an all-electric car (to the U.S.) market, with a mix of plug-in hybrid electric” cars as well, said Neshati.
Jurjevich wouldn’t speculate on what kind of vehicle would get here first, though he did point out that BYD’s philosophy has always been to bring affordable cars to market. But he did say retail sales are “100 percent on our road map.”
BYD should have a number of models to choose from in coming years. Its first electric vehicle, the pure-electric e6, sold poorly. It seems to have been relegated to taxi fleet status for now. But it is working on an improved BEV, it seems.
Meanwhile, its new plug-in hybrid electric (PHEV) models have proven popular in China. Final figures aren’t yet available, but 2014 sales of the Qin PHEV sedan were expected to be around 15,000 units, said BYD. According to LMC Automotive, BYD sold 437,725 light vehicles in 2014, down 14 percent compared to 2013.
It expects its Tang PHEV SUV, launched in January, to sell very well, and more PHEV SUV models will follow, BYD has said.
Those models might appeal to U.S. drivers. But distribution is the 800-pound gorilla. BYD started to set up a dealership network here in the U.S. in 2012 but shelved that plan. Now, however, the U.S. media is full of speculation that Berkshire Hathaway Automotive, Warren Buffett’s recently-acquired dealership group, will distribute BYD vehicles in the U.S. Buffett bought 9.9 percent of BYD’s Hong Kong-listed company in 2008.
I asked both BYD execs about using Buffett’s dealerships to sell BYD cars. “That is 100 percent speculation,” said Jurjevich. As for Neshati, he said: “At this point it is all speculation.”
I don’t see BYD cars being sold at Berkshire Hathaway dealerships here in the U.S. within the next 2-3 years. I don’t think they are ready for the U. S. market, frankly. But I may be wrong. I’m going to check them out at the Shanghai Auto Show in April.
Western media was all a flutter over the latest new energy vehicle production numbers out of China. Okay, production of NEVs did increase immensely. But let’s put those numbers in perspective. For one, they are production numbers, not sales. Secondly, they represent less than one percent of all vehicle sales in China.
Still, judging from the models on display at the Guangzhou Auto Show automakers have gotten the message that they need to offer new energy vehicle choices to Chinese consumers. There were plenty of NEVs there. As in the past, of course, they could be just for show, not for volume production.
First the numbers. According to the China Association of Automobile Manufacturers (CAAM), in November China produced 3,540 passenger battery-electric vehicles (EVs), 1,640 commercial EVs, 2,469 passenger plug-in hybrid electric vehicles (PHEVs), and 1,977 commercial PHEVs. That’s a total of 9.626 plug-in electric vehicles in November. Yes, a ten-fold increase over the same month in 2013 but still a tiny drop in a large sea.
Sales figures hadn’t been released at the time of writing, but let’s consider who is buying PEVs in general. The Chinese media, which is somewhat more realistic about the market than many foreign media outlets, quoted the assistant general manager of the BAIC New Energy Co. as saying only about 65 percent of the PEVs it sold were to private consumers. The rest were government buyers or BAIC employees. The APEC meeting in Beijing helped boost PEV sales, said the BAIC manager.
I think that customer base is probably similar for many PEVs, that is, mostly governments and related individuals. However, some cities in China are offering special considerations to PEV buyers such as no registration fee. A CAAM official was quoted as saying consumer interest in PEVs might be a bit higher in cities that offer those perks i.e. a higher percentage of buyers may be consumers.
Shanghai, for example, offers free registration to PEV owners. That’s quite a perk when a license plate can cost nearly 100,000 RMB. (Shanghai auctions off a limited number of plates each month). BYD”s Qin PHEV seems to be the biggest beneficiary of the preferential policy. BYD sold 1,700 units in November and 1,212 of those were sold in Shanghai.
That has caused some annoyance among non-PEV owners in Shanghai, however. It seems that the Qin PHEVs, which have a 70 kilometer all-electric range, are running on regular old gasoline 95 percent of the time. If that is the case, grumpy non-Qin owners have asked, why should Qin owners get free plates?
The BYD model has nonetheless remained the darling of some central government advisors and officials. Ouyang Minggao, head of the automotive engineering department at Tsinghua University, at a conference on December 11 praised PHEV technology and singled out the Qin as a fine example. A few months ago Wan Gang, minister of science and technology, also praised the Qin.
Ouyang noted that some have complained that PHEV owners are mostly using gasoline to power their vehicles. But he put the fault squarely on the lack of charging stations rather than the technology.
To be sure, that is one problem. But not one that will be solved any time soon.
A plethora of PEVs
There were plenty of plug-in electric vehicles, both EVs and PHEVs, at the Guangzhou Auto Show, held in that south China city in late November. Thanks to WAYS Consulting in Guangzhou for the information regarding the various electrified models at the show.
There were some 29 EVs on display there including models by domestic, foreign, and joint venture companies. Their range varied from a low of 100 km (62 miles) for an EV produced by Leahead (领志) to a high of 310 km by a model produced by MAXUS (大通). Leahead is a sub-brand produced by the Guangzhou Toyota JV. MAXUS is a sub-brand of SAIC that produces vans. So you can see that all variety of producers have their EV to show off.
In the PHEV segment there were some 16 models on display. Interestingly, all but six were produced by foreign brands. Of those six, three were the BYD Qin, Tang, and Shang, variations on a theme. So let’s say all but four were foreign brands.
I think that is because a PHEV is much harder to produce than a pure EV. As an executive at a foreign supplier pointed out to me, most Chinese automakers can’t produce a PHEV on their own.
Regular old hybrids are gaining some traction in China, it seems. Automakers will need to have some hybrids in their mix to meet the stiff 5l/100 km standard by 2020. Still, local automakers have been slow to launch HEV models. There were only 12 on display in Guangzhou. Of those, five carried a Lexus badge.
So, what is my conclusion regarding the current state of China’s PEV market? It is oddly similar to the U.S. market. Still very little demand from consumers but automakers are being pushed to produce PEVs by regulations and stiffening fuel economy standards.
As in the U.S., demand will grow very slowly but at some point will speed up. As in the U.S., the timing of that depends on battery technology (which means price) and on charging infrastructure. China’s central government may be able to prod and incentivize local governments to install charging. But they won’t be able to speed up technology so consumers will remain reluctant to buy PEVs for some time to come.
Last year eight states in the U.S. signed a Memorandum of Understanding calling for cooperation among the states, and alliances with the private sector to speed up deployment of plug-in electric and fuel cell vehicles in their states. The goal is 3.3 million zero-emission vehicles, or ZEVs, on the road by 2025.
The plan works with carrots rather than sticks. There are not quotas, rather the state governments are buying PEVs themselves, offering rebates to buyers, and building charging infrastructure. The Beijing Municipal government is studying that cooperative model, especially California’s measures to promote ZEVs, Yunshi Wang, China Center director at the University of Davis Institute of Transportation Studies told me recently.
“They want be China’s California,” says Wang.
The Beijing Municipal government is already working to expand the use of new energy vehicles in its borders. New Energy Vehicles refers to plug-in electric vehicles and fuel cell vehicles. But things aren’t moving quickly enough, apparently. The Beijing government wants to make raise the profile of its NEV plan by linking with California, says Wang.
California accounts for more around 40 percent of all plug-in electric vehicles purchased in the United States. That is partly because its citizens tend to be more “green” than those in many other states. But those tendencies are magnified by state policies supporting ZEV ownership and requiring automakers who sell cars in the state to produce and sell ZEVs here.
Those policies often come out of the California Air Resources Board, usually referred to as CARB. It is a high-level state government body that works on improving California’s air quality. The Institute for Transportation Studies at UC Davis works closely with CARB. In China, a similar role is played by the China Automotive Technical Research Center, or CATARC, located in Tianjin, a coastal city near Beijing.
“CATARC provides intellectual support to the National Development and Reform Commission and the Ministry of Information Industry Technology,” says Wang. The UC Davis Institute for Transportation Studies China Center at UC Davis works closely with CATARC. Indeed, in September the ITS and CATARC signed an agreement to help speed the commercialization of PEVs and fuel-cell vehicles.
CATARC also suggests to the central government some new ideas for developing the new energy vehicle segment, he says.
For example, the Tesla-inspired idea of allowing non-automotive companies to produce new energy vehicles originated at CATARC. (Any company in China wanting to produce vehicles of any kind requires a permit from the National Development and Reform Commission.) “Existing automakers, especially plug-in vehicle makers, are strongly opposed,” says Wang.
CATARC is also promoting allowing wider usage of low-speed electric vehicles, especially in provinces such as Shandong and Jiangsu, where there are companies that produce LSEVs (especially Shandong, where it is hard to throw a rock without hitting an LSEV maker).
As for the city of Beijing working more closely with California, CATARC is talking with the city’s Science and Technology Commission about it and the Commission is “very positive” about the idea, says Wang.
Beijing vs. California: Okay, they aren’t exactly alike
To be sure, Beijing is unlike California in many ways. The government structure is very different, naturally. And Beijing’s population is not known for being exceptionally green in their thinking (though there are of course greenies in Beijing).
Also, as an attendee at a lunch presentation I gave last month in Hong Kong for Macquarie on China’s NEV sector pointed out, Beijing’s climate is very different from California’s, or at least from Southern and Northern California, where EV ownership is concentrated.
Beijing is much hotter in the summer – making car air conditioning use a necessity if one has it – and winters are much colder ergo heaters are needed. That drains a PEV battery
But like California, Beijing has set NEV goals. It aims to have 200,000 NEVs on its streets by 2017. Of that, 50,000 will be public vehicles, 150,000 privately-owned. Among the public NEVs will be some 10,000 taxis. Half of mail and sanitation trucks will be NEVs. (This is more aggressive than the central government call for 30 percent.)
Beijing has allocated license plates that will go to NEV owners free of charge, and that bypass the municipality’s registration lottery. Beijing also has its own subsidies on top of the central government subsidies.
So Beijing already has some policies that are similar to California’s, says Wang. But the Chinese city is looking at how California’s policies have been implemented and considering some tweaks to its own, as well as additional perks such as high-occupancy lane stickers to NEV owners and the like.
China’s capital city favors one technology over another – Beijing’s policies are more focused on battery-electric vehicles, says Wang, and perhaps fuel-cell vehicles in the future.
As for plug-in hybrid electric vehicles, the municipal government worries that owners of those vehicles are mostly driving on liquid fuel rather than using the battery capacity, says Wang. The lack of a widespread charging infrastructure is seen as the culprit. (This is also a concern of other city governments such as Shanghai. It nonetheless subsidizes PHEVs at near the same rate as BEVs.)
The ITS at UC Davis also aims to work with other cities in China on new energy vehicle policies, says Wang. For example, he wants to work with the Shanghai International Auto City (see my November 5, 2013 on SIAC’s EV efforts) to see how much time the PHEVs there run on pure electricity, who is driving and where, and what their expectations are. That will help the government know where to place charging stations, he says.
Adds Wang: “You can’t blame PHEV drivers (for not running on pure electricity). If there is an appropriate charging infrastructure, there will be no problem. You need to provide infrastructure so you don’t force drivers to use the gasoline engine.”