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Compressed natural gas seems to trump electric vehicles in China, for now

November 9, 2013

I recently attended (and moderated a panel at) the Clean Truck and Bus Summit in Shanghai.   Of course the first topic that came to my mind was electric vehicles.   But this conference looked at the full range of alternative fuels. And one that was discussed much more than electrification was compressed natural gas, or CNG.

CNG is abundant, cheaper than diesel, and cleaner burning than diesel or gasoline.  But the growth of a CNG fleet in China faces one of the same obstacles that growing an EV fleet faces, namely lack of a refueling infrastructure.  There are also supply questions – China is just beginning to try to get at its plentiful natural gas reserves. China is estimated to have the largest reserve of shale gas in the world at 1,275 trillion cubic ft. But that gas is deeper and tighter than reserves in the U.S., and China lacks the technology to recover it.   China’s state-own petroleum companies have been on an acquisition spree, however, buying western companies that do have that technology.   The U.S. has plenty of natural gas, and could selling some of it to China could help our trade deficit with China.   That might occur but there are, as always were China is concerned, political objections.

Then there is the actual supply in China of vehicles that run on CNG.  There are few passenger vehicles.  The number of commercial vehicles is also still small though growing.   But that is less of a barrier than those listed above, according to my industry friends.  Commercial vehicle manufacturers such as Navistar are eyeing the CNG segment as are Chinese truck makers.

CNG has advantages as a fuel over electric vehicles in the pollution area, as well,  at least in the near to medium-term.  It is more clean-burning than gasoline or diesel.  While electric vehicles don’t produce any omissions, in China the electricity to charge them is largely produced by burning coal, defeating the purpose where cleaning up the air is concerned.

Boosting the number of CNG vehicles on the road would also help reduce China’s dependence on foreign oil, a huge concern of the Chinese government.   But a large-scale switch to CNG might simply transfer that dependence to imported natural gas, at least until China is able to get at its natural gas reserves, which are trapped in shale formations.   Still, that seems a short-term issue rather than a systemic one.

Estimates of the size of China’s CNG vehicle fleet by 2020 suggest that most feel those obstacles will be overcome.  WAYs Consulting, based in Guangzhou, estimates that China will rank number one in the world in ownership of CNG vehicles in China by 2020 at 3.5 to 4.5 million vehicles.  CNG will be more popular in some provinces than others, however.  WAYS forecasts that by 2015, when the total number of CNG vehicles in China will be 2.3 to 2.5 million vehicles, 10 provinces will have more than 100,000 CNG vehicles.  The standouts include Xinjiang and Sichuan at more than 400,000 each and Shandong at more than 300,000.   As for infrastructure, WAYS figures there will be up to 5,000 natural gas stations in China by 2020.

Consultancy ATKearney  is more bullish on CNG in China than on electric vehicles, though CNG fueling infrastructure is still a major constraint to developing the market for CNG vehicles, Bill Ding of ATKearney told the Clean Truck and Bus Summit.  Ding compared the technology and customer acceptance for CNG, battery-electric, and hybrid medium-duty and heavy-duty commercial vehicles.  CNG wins against both BEVs and HEVs.   The technology is mature and customer acceptance high with CNG, said Ding.

On the other hand, battery electric vehicle technology for trucks is not mature and there are lots of doubts about both the technology and charging infrastructure, he said.  As for HEVs, though there has been investment in hybrids because of government support, the battery and battery control technology gap in China is still large compared to other places, he said.  Customer acceptance is therefore low.

Growing the number of “clean” medium-duty commercial vehicles is crucial because they accounted for nearly half of the NOX emissions in China in 2011 and 61% of the PM emissions, according to ATKearney. Still, HEV commercial vehicle sales will top those of CNG units in 2020 in both the medium and heavy duty segments, according to ATKearney.

It forecasts the market for medium duty HEV commercial vehicle sales at 850,000 units in 2020.  The medium-duty CNG truck market is forecast to be 710,000 units in 2020 and the market for battery-electric units will be zero.  Yep, that’s right, zero.

The market for battery-electric drivetrain sales will for some reason be a bit bigger in 2020 in the heavy-duty truck segment, at 5,000 units.  Hybrid electric heavy-duty sales in 2020 are forecast to be 360,000 units and CNG sales 200,000.

If these forecasts turn out to be true, there is a clear opportunity for suppliers of components to produce CNG-powered commercial vehicles.  There will also be a market for components that convert gasoline-powered vehicles to CNG.

And there are already signs that municipal governments like CNG.  Beijing plans to have 5,000 CNG-powered taxis by 2015 and 7,000 CNG-powered buses.  And I’m sure there are many other examples that I just don’t know about.

Does this mean CNG will replace electrification in China? Hardly.  Merely that it is a more suitable solution in the near term to achieve the government’s goals of reducing dependence on foreign oil and having cleaner air.

One Comment leave one →
  1. Lawrence permalink
    December 11, 2013 3:55 pm

    In recent years, here are a few of the CNG-fitted passenger car models and their manufacturers;
    Dongfeng Peugeot Citroen Elysee, in 2005
    BYD F-3 dual fuel, in 2006
    Chery Tiggo 3, for export, in 2007
    Geely CK-1 and Vision models, in 2008
    Chang’an Zhixiang sedan in 2009
    Hafei Saibao V around 2008 may also have been dual fuel ready.
    Back in the last decade, Landi Renzo Autogas systems of Italy, was doing conversion work for a number of Chinese carmakers.
    On both sides of the pond it looks like customers are not yet willing to give up their luggage compartment space, or have to hunt for a filling station.

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