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China lags world in EV tech; concentrate on the components urges an expert!

January 31, 2014

Anyone who believes that the Chinese government and other players in the policy-making process have complete agreement on the readiness of China’s domestic companies to produce globally-competitive electric vehicles, or in how to bring them to that level, need only read the diverse commentaries that appear in the Chinese press to know that is not true.

Unlike the past, when debate was hidden behind closed doors and only the official line appeared in public, China’s media world is now filled with vibrant debate on topics so long as those topics don’t threaten the government’s hold on power.  The EV industry falls into that category. Saying Chinese companies aren’t globally competitive is unlikely to produce social unrest, and there are plenty of opinions about their readiness on display.

This PHEV by SAIC was on display at last years auto show but how much of the technology was developed by SAIC?

This PHEV by SAIC was on display at last years auto show but how much of the technology was developed by SAIC?

I recently read an excellent blog on that topic posted by  Professor Wang Binggang, the team leader of the National Coordinating Office for Clean Vehicle Action (I confess not to know exactly what that is or where it falls in the whole power structure, but it seems to be associated with the 863 plan.) This is the link but for some reason is doesn’t work….

Wang argues that China lags the global industry in the quality of its electric vehicles and that the real weakness is in the supply chain.  He also draws a comparison with producers of China’s “traditional” i.e. internal combustion engine vehicles, who concentrated on producing the vehicle as a whole and thus have to rely on foreign companies for key technologies.  Wang makes an excellent point. Is the entire development process in China stymied because of a lack of indigenous innovation or maybe just an unwillingness to take the time to innovate?

But let me start from the beginning. The beginning of Wang’s blog post, that is.  He lays out the EV production numbers for 2013, which are dismally low though a big increase on 2012.  China produced 17,533 new energy vehicles in 2013, up 39.7 percent on-year.  That included 14,243 battery-electric vehicles and 3,290 plug-in hybrid electric vehicles.  As for sales, in 2013 NEV sales totaled 17,642, up 37.9 percent on-year.  That included 14, 604 battery-electric vehicles and 3,038 plug-in hybrid electric vehicles.   Production of regular hybrid vehicles in 2013 was 14,463; sales were 15,101 units.  (regular hybrids are not consider “new energy vehicles.”)

It seems China has had some success in the regular old hybrid bus world.  It ranks number one worldwide in the number of hybrid buses on the road.  China’s hybrid bus technology has reached world levels, Wang says.  But hybrid technology is mature technology and in the area of electric vehicle innovation there is a big gap between China and the rest of the world, he says.

Wang traces this lack of innovation back to China’s weakness in tradition vehicle research and development.  Indeed, though China’s domestic automakers have been producing cars for decades, those who do not have foreign partners still rely on foreign suppliers for technology such as automatic transmissions (okay, some Chinese OEs claim to have indigenously-developed ATs. But they trail foreign ATs by a long way…).  And Chinese automakers who partner with foreign OEs generally rely on the foreign partner for certain complex systems.

This reliance on foreign partners is probably the underlying cause of Wang’s next reason for China’s slowness in developing EV technology:  Lack of investment in research and development.  Despite the policies to promote electric vehicle development in China, investment has been slow and it lacks good products. So the policies are “empty words,” says Wang.

He then falls back on that recent favorite towering example of how to develop electric vehicle technology:  Tesla. “Everyone is talking about Tesla these days,” says Wang.  “I really favor this way of thinking.  There are lots of things we should study about Tesla.”   He indicates that the structure of U.S. society is more likely to produce innovation, so maybe there is a bit of revolutionary thinking here.  Hmmm.

The main point is: Elon Musk was able to start an automotive company basically from scratch.  Now that Tesla EVs are being sold in China, country’s policy makers seem obsessed with Tesla’s road to success. I read that China is considering allowing non-automotive companies to jump into the EV sector because that could facilitate the rise of a Chinese Tesla.  I won’t go into the merits, or lack thereof, of that position.  But as one article I read pointed out, non-automotive companies are already jumping into the EV business by buying a shell automotive company.

But I digress.  The main point of Wang’s blog is that China should concentrate more on developing the components that go into an EV than on producing the entire EV.  “Electric and hybrid vehicle’s most critical technology is in the components,” says Wang.  In China, the battery industry is the area where development has occurred most quickly, says Wang.  But our battery technology is still not as good as a “great country’s.”  Wow, those are fightin’ words. But true.  As Wang points out, China’s battery producing companies still have to rely on foreign technology for many aspects in production and testing.

Finally, Wang discusses local protectionism and how that has hindered the development of indigenous EV technology. The latest NEV policy does call for 30 percent of NEV bus purchases by local government to be from a company outside of that area. But local protectionism still exists, says Wang, in the form of technical and permitting requirements that effectively keep all but local brands out of the market.

If local companies don’t face outside competition, they don’t have to innovate, says Wang, and fall farther and farther behind technologically. “We ought to operate according to the principle of equal competition in order to provide development opportunities for competitive local products,” Wang concludes, “thus promoting at the same time the rapid maturation of our new energy vehicle industry and its global competitiveness.” Wow, good stuff. Now let’s see if anyone is listening.

5 Comments leave one →
  1. Bill Fisher permalink
    February 12, 2014 9:36 pm

    I think this was one of your better articles in a while Alysha. I really enjoyed it because I could relate to the shortcomings of the Chinese Auto Industry as a whole when discussing it’s lack of innovation and reliance on foreign partners and suppliers. That said, the industry has developed to the point where innovation is almost an empty promise in any case. Todays vehicles are sophisticated machines whose design and engineering have become a partnership between auto manufacturers and suppliers. Any vehicle on the road today is the result of engineers from Magna, Tower, Lear, Johnson Controls, etc. in concert with those of the manufacturer. I think that rather than look within for innovation, the Chinese have wisely taken advantage of a mature supplier base whose expertise has hastened their growth into vehicles that can compete on the world stage. Once they finally conquer the problem of poor materials and look beyond the Chinese and Third World market and get serious about making vehicles that are globally relevant they may finally have the time and incentive to develop some of their own innovations. When it comes to Electric vehicles, they are very well versed in building the batteries. It’s the battery management systems and the surrounding vehicle where they still suffer. They will continue to do that until their industry has matured to global market ready products.

  2. Brian Lee permalink
    February 19, 2014 5:27 am

    I tend to disagree with you, Bill, although I wish not to offend, on the chance of success for Chinese OEMs to ever develop the technologies which they need to become self sufficient automakers rather than merely providing the labor and factories for the transplants. If one is familiar with what “joint development” really means when a Chinese OEM decides to develop key engine or transmission technologies with a transplant, it will be clear why after the next new contract designed engine, the Chinese side will have no more capabilities for the next contract engine compared to 10 years before two cycles ago. The contract expenditure is viewed as just an opportunity to siphon off 5% of the contract. Typically, the Chinese side consists of no more than a “program manager” pushing deadlines while the Western side does all of the work. Occasionally, a son of a connected cadre is sent on a 3 month vacation to the West for some undefined task, with no ‘before’ nor ‘after’ the trip. In the end, it would be like trying to play a card game with 4 cards missing the other 48. This is very different from the sincere, dedicated efforts by Hyundai between 1993-2007 to truly learn how to design competitive cars. HKMC finally did it when they opened and hired the core experience from the Big 3 during the recession of 2002-2004 to staff up their tech center in Detroit.

    • Bill Fisher permalink
      February 19, 2014 7:03 am

      Well Brian, you touched on something that rings true for me with your Hyundai reference. I am the guy that used to say “friends don’t let friends drive Hyundai” and now I am on my second Genesis and hoping to be the first U.S. customer to own the 2015 Genesis when it arrives. I’ve already ridden in one courtesy of John Krafcik and seen it in person in the new Hyundai Fountain Valley Hdqtrs and think it’s amazing. I am probably their biggest fan so you’ve scored a few winning points with your comments. But the time will come when they do get serious and they will eventually come here, learn the right way and get their product in the game. Frankly I don’t see any of their product as ready for our market yet. But you’ll know their serious when they have a real working engineering center here in the U.S. Great comment, sir.

  3. brian permalink
    March 12, 2014 2:40 pm

    Great article but I was under the impression that BYD was ahead in EV development and technology.The fact remains most americans and chinese don’t have trust in EV’s. Unless all chinese governments (state and local) all drive EV’S/Plug in hybrids its not going to happen.You havw to lead by example

  4. March 14, 2014 5:02 pm

    @Brian China is not ahead. It is behind. Chinese EV makers must buy or license important technologies such as battery management systems from foreign suppliers. Chinese automakers are also not good at integration. BYD talks a big game but hasn’t allowed its EVs to be independently tested. They are not more advanced than those in the west.

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