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Upgrade China's Auto Industry by Developing Electric Vehicles
2009-07-27
Gao Shiji, Zhang Yongwei & Wang Qing
The recent adoption of the auto industry promotion plan by the State Council is a strategic measure taken by China to cope with the global financial crisis and promote industrial upgrading. The measure is absolutely necessary and timely. It will quicken China's catch-up efforts in the area of fuel oil vehicles (in this respect, we suggest the purchase tax for the compact cars with engine capacity being below 1.5 liter be waived so as to encourage the development of fuel-efficient vehicles and help the local-brand compact vehicle producers to accumulate funds for technological development and scale expansion). At the same time, we should realize that the auto industry around the world is moving toward a new age that will highlight energy-efficient and new-energy vehicles. China's auto industry promotion strategy should accommodate both near-term growth and long-term development. While quickening technological advance and independent innovation in the field of traditional fuel vehicles so as to fully meet both domestic and foreign demands, China should actively develop new-energy vehicles and new technologies so as to make breakthroughs, form new advantages and pursue a true growth of China's auto industry.
I. Global Auto Industry Is in a Phase When Different Technological Paths Compete and Coexist with Each Other and Energy-Efficient and New-Energy Vehicles Represent the Direction of Industrial Development
For more than two decades, the multinational auto giants have been developing energy-efficient vehicles and new-energy vehicles along different technological paths. These vehicles can be classified into three major categories: advanced diesel vehicles, non-conventional fuel (such as biological fuel) vehicles and electric vehicles. Electric vehicles include fuel cell vehicles and rechargeable cell vehicles. In turn, the rechargeable cell vehicles can be classified into hybrid electric vehicles (HEV) that cannot use external power source to recharge, plug-in hybrid electric vehicles (PHEV) that can simultaneously use fuel oil engines and external plug-in recharging, and the pure electric vehicles (EV) that can only be plugged in for recharging.
The European automakers represented by Germany have made important breakthroughs in the diesel vehicle technology. Noted for low oil consumption and less emission, this technology has been rapidly used in cars. Currently, the ratio of diesel cars to newly-added cars has been rising rapidly, accounting for 50% of all cars sold.
The Japanese automakers have been mainly devoted to the development of hybrid vehicles and fuel cell vehicles. In particular, two models of hybrid vehicles, namely Toyota Prius and Honda Insight, became the first to be industrialized. By the end of 2008, over one million Prius vehicles had been sold around the globe. But judging from the lifecycle product production and use, Prius is not so remarkable in energy-saving and environmental efficiencies and still relies on oil.
The European countries, the United States and Japan have made sustained investments in developing the fuel cell technology and they all have presented the prototypes of their fuel cell vehicles. But as they have failed to make fundamental breakthroughs in the fuel cell technology and related cost, they are facing huge obstacles in economic efficiency and do not have conditions for mass commercial application in the short run.
Non-conventional fuel (such as biological fuel) vehicles have been mass used in various parts of the world (such as in Brazil). But they are subject to the impact of factors such as raw material production (competing with human beings for food and land), cost, economic efficiency, and the power efficiency of mixed fuels, and can hardly replace the vehicles powered by traditional fuels in an all-round way.
Thanks to the technological breakthroughs in the capacity and safety of lithium cells in recent years, the technologies of plug-in hybrid electric vehicles and pure electric vehicles based on lithium cells have scored rapid development. In particular, the continuous driving mileage in pure electric mode of plug-in hybrid electric vehicles already can meet the demand of most consumers in daily driving. And the low-emission engines can generate power when cell power is insufficient and can supply additional power when driving at a high speed. This can ensure users to ride a relatively long mileage when ground recharge infrastructure is unsound.
There are three main factors impacting the development of electric vehicles: technical performance (safety and continuous driving mileage), economic efficiency (initial purchase cost and use cost), and convenience efficiency (whether recharging or cell changing can be conducted conveniently and rapidly). Currently, the plug-in hybrid electric vehicles have the best prospect for commercial application. Automakers such as Toyota, Nissan and Mitsubishi in Japan, GM in the United States and Renault in France have all intensified their technological research and product development for plug-in hybrid electric vehicles and pure electric vehicles, and have publicly announced that they would introduce commercial products in the next two years. The BYD in China became the first company in the world to formally introduce commercial plug-in hybrid electric vehicles (double-mode F3DM) at the end of 2008 and exhibited at the Detroit Auto Show in mid-January 2009 the pure electric vehicle E6 to be introduced in the market in 2009. Many automakers in Japan, the United States and Europe have also exhibited the prototypes of plug-in hybrid electric vehicles and pure electric vehicles to be introduced to the market.
The initial purchase cost of plug-in hybrid electric vehicles is relatively high, but their use cost is low and the total lifecycle cost has been reduced below the level of fuel oil vehicles. After they reach the stage of mass production, their purchase cost will become far lower. Andy Grove, former Intel President, has repeatedly said since 2008 that it was high time for the United States to develop electric vehicles in a big way. In his 2008 campaign program, President Barack Obama explicitly said the United States should have one million plug-in electric vehicles by the year 2015. On October 3, 2008, U.S. Congress added to its economic stabilization act the detailed provisions that the Federal Government would provide classified and graded subsidies for plug-in electric vehicles. The direct support from the Federal Government would be as much as one billion dollars. Earlier, the U.S. Department of Energy had invested heavily in the lithium ion research and development. Other developed countries have also introduced a host of stimulus measures to encourage and expedite the advent of clean automobiles.
2009 is expected to be the take-off year for electric vehicles, during which various types of electric vehicles will gradually enter the market. However, it will take a long time for new-energy vehicles to comprehensively replace fuel oil vehicles. According to Andy Grove's calculation, it will take 10 years for electric vehicles to account for 5% of the 250 million vehicles in the United States even if ten automakers will sell them at the current annual sales turnover of Toyota Prius. But if oil prices continue to rise and if the government introduces even stricter requirements on environmental pollution, greenhouse gas emission and auto energy efficiency, the relative use cost of electric vehicles will be even lower and such vehicles can rapidly enter a virtuous cycle of “demand growth – production expansion – rapid cost decline and constant technological maturity and improvement – further sales growth”. In that case, electric vehicles will be popularized sooner.
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