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China official EV plan short on details, long on optimism. Good news is that China has a plan.

July 13, 2012

China’s State Council finally released the official “Plan for the Development of the Energy Efficient and New Energy Automotive Industry (2012-2020)” last week.  The plan is dated June 28, 2012 but the complete document wasn’t posted immediately.  That delay means little since the plan mainly reiterates what Wen Jiabao said in April.

And like that April announcement, this Plan is a bit disappointing.  By focusing on the production side of the equation rather than the market side, the Plan shows that China’s government still hasn’t figured out how to actually get Chinese to buy the vehicles after they are produced, or they don’t think that is important.   The emphasis on using foreign technology whenever necessary shows that on the production side the government has recognized there are serious shortcomings in China’s domestic industry.  At least, however,  the Plan shows that the government is still set on growing China’s EV sector—even if it doesn’t quite have a good way to do that.

There are already plenty of stories out there about the Plan.  Just in case you haven’t read any of them, a few details.  Cumulative production and sales of battery electric and plug-in hybrid electric vehicles will reach 500,000 units by 2015 and 2 million by 2020.  That’s a pretty big leap given that only around 5,500 were sold in 2011 despite government subsidies of up to 120,000 RMB in some cities.  The latest  Plan talks about building out infrastructure and admits that China is woefully behind in that area, as well. (This might be an eye-opener for those silly people who write about how China has a huge EV industry and infrastructure, for some reason believing it does just because the government said a few years ago it was going to….).

To be sure, the Plan does give lip service to all the right areas needed to build out an EV industry and market, and the Plan may seem detailed after a cursory reading.  It stresses the need to build an aftersales service network and a charging network.  It says China needs to explore both battery swapping and charging stations as network models, as well as fast and slow public charging stations.  It mentions the load on the electrical network as a concern.  The Plan mentions the need to deal with recycling of batteries.  It says standards will be out by 2013.  It mentions the need for financial policy support for electrification of public fleet.

On the consumer side,  there will be experiments in consumer subsidies to boost demand, it says.  The plan even mentions trying out battery rental.  China needs to build out financing, insurance,  logistics, and a second hand market for new energy vehicle, it says.  The report goes into technical details such as: By 2015 BEVs and PHEVs should have a maximum speed of at least 100 km/h (62 mph).   Battery power should be 150W/kg at 2 RMB/Wh $0.31/Wh) with a cycle life of 2,000 or more than 10 years.  The electric drive system power density should be 2.5 Kw/kg at a cost of 200 yuan/kW. By 2020, the battery module should have a specific energy of 300 Wh/kg or more.  (Thanks to Green Car Congress for these technical details; it would have taken me forever to translate them.)    Okay, my eyes are glazing over.  I read the original Chinese version of this report, straight from the State Council website.  Anyone who has read these Chinese plans knows there is A LOT of repetition.

Sounds great, right? The Chinese government is finally getting down to business with the EV sector.  But wait a minute.  Weren’t a lot of these goals announced a few years ago?  How much progress has been made?  (Answer: Very little)  The lack of details on how to boost the market is telling. Purchase subsidies have done little to attract buyers. (Though giving the money straight to the consumer rather than to the OE might help…)  And how is it going to get cities to build out infrastructure?  The Plan also ignores regular hybrids though at one point not too long ago the government seemed to be warming to them as an interim step.   And though fleets are where China should be concentrating its electrification, efforts there is little about fleet electrification in the report aside from a few throw away lines about subsidizing public vehicle electrification.

Nonetheless, I am encouraged by this plan.  What is does show is that the Chinese government continues to be serious about supporting the EV sector.  And rather than simply dictate how charging networks, financing, etc. should develop,  the Plan says that China will try different models to see what works best.  That is a great approach if politics don’t get in the way.  That is a big if, naturally.  Competing interests in China have very different ideas about how vital elements such as charging standards should develop.  If China shares the data from its experiments, the entire global industry will benefit.  Again, kind of a big if given China’s reluctance to share that kind of information.

Foreign suppliers with EV technology should be encouraged by the Plan.  China has finally admitted (well, Wen Jiabao actually said this months ago) that China’s domestic companies don’t have the all technology needed to grow the sector.  So the Plan is full of references to foreign cooperation and using foreign technology.  Now, if China can just resist mandating that foreign companies provide technology as a price of entry.  I talk to a lot of smaller EV drivetrain companies here in the U.S. and they are all signing deals with Chinese companies.  A good example of such an agreement—one that I’m pretty certain will bear fruit—is Wanxiang EV’s agreement with Smith Electric to produce electric buses in China.  I talked with Bryan Hansel, CEO of Smith Electric (a full blog on that soon) a few days ago and he said that Wanxiang approached Smith about using Smith’s pure electric drivetrain technology about a year and a half ago.  Initially sides were just talking, but when Smith came out with an electric school bus Wanxiang was suddenly interested in full JV, said Hansel.  (There is big push to make school buses safer in China.  Smith had that technology as well as an electric drive train, so working with Smith was killing the proverbial two birds with one stone.)

There are many other examples out there. Will some of those deals fall through? Definitely.  But the fact that the Chinese parties are looking for technology in the U.S. means they see the government’s policy as lasting.  Can China get it right with the EV sector? Well, it sure ain’t gonna hit the numbers this plan lays out.  And there are so many vested interests in China trying to get their way with how the system is built out that it could yet flounder.  But as I’ve written before, China makes policy by using the “crossing the river by feeling for the stones” method.  This Plan is one more stone to feel for as it crosses the EV river.

2 Comments leave one →
  1. July 17, 2012 7:39 pm

    You said,”The emphasis on using foreign technology whenever necessary shows that on the production side the government has recognized there are serious shortcomings in China’s domestic industry”
    I feel that considering their history our Chinese Neighbors are expecting to manufacture much of the pieces for other countries manufacturing and then with others paying for the designing and factory tooling investments will allow copyining and manufacturing components for internal Chinese use at a very economical price compared to the unwary manufacturer expecting their patents to be respected.

  2. July 17, 2012 11:21 pm

    I disagree. The technology needed to produce electric vehicles–especially the BMS and other electronic controls–is very complicated and difficult to copy. So even if a Chinese company does attempt to copy it (and this will certainly happen), they are not likely to succeed. If a U.S. company choses its Chinese partner well, that partner will also have a vested interest in protecting the intellectual property however. Chosing the right partner is the best safeguard against intellectual property theft. In any case, if you advocate avoiding the China market because of the reason you state, then you are extremely short-sighted.

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