How China wants to lead the world market for electric cars
China's automotive industry is bypassing further refinement of the combustion engine and is instead aiming to blaze the trail for electric and hybrid vehicle technology. To reach this goal, the government is counting on massive tax incentives and subsidies. The study entitled "Powertrain 2020 – China's ambition to become market leader in e-vehicles" describes the actions being taken by the Chinese government and outlines scenarios for the future e-mobility markets. By 2020, the global market share for electric vehicles (EVs) and hybrid vehicles (PHEVs) will be between 9% and 10%; in countries such as China, it could be as high as over 50%. The markets for batteries, motors and other components will experience similar outstanding growth: by 2020 they will expand to EUR 20 to 50 billion annually, and in the following decades to more than EUR 100 billion. At the same time the competition will become more and more cutthroat. To succeed, manufacturers must take the necessary steps now. They have to cut costs, secure market share, expand business models and form strategic partnerships.
"When it comes to electric and hybrid cars, China is challenging the automotive industries in the Western industrial countries," says Wolfgang Bernhart, Partner in the Automotive Competence Center at Roland Berger Strategy Consultants. "The technological head start that Western manufacturers have with conventional powertrains is tough to overcome – and the Chinese realize this. But the race for electric mobility is just getting underway." The share of electric or partly electric vehicles will increase in all automotive markets. This means a corresponding increase in the market for powertrain components. The volume of that market is expected to reach EUR 20 to 50 billion by 2020 – and that figure is expected to rise. To help the Chinese manufacturers tap this market, the Chinese government is providing subsidies and tax incentives to stimulate the development and marketing of "new energy vehicles". Their goal is to make the Chinese automotive industry a technology pioneer of future electric powertrain systems.
Pole position for China's electric car manufacturers
The Chinese manufacturers have already gotten off to a good start, thanks to certain advantages: A majority of the raw materials needed, such as lithium, is processed in China and is therefore available at low cost. In addition, cheaper labor provides Chinese manufacturers of lithium-ion batteries with cost benefits of about 30%. This means that the prices of the batteries themselves are distinctly lower. Because this market is becoming a volume market, economies of scale and scope are critical. China already has considerable production capacity for li-ion batteries and is investing heavily in expanding its production as well as R&D for new battery technologies. For example, Chinese manufacturers have developed a new lithium-iron battery, which is more reliable, lasts longer and is better for the environment.
Besides battery technology, Chinese manufacturers are also well positioned for motors. They have already developed successful, high quality permanent magnet synchronous motors. Because China has 80% of the world's available neodymium – a raw material needed for permanent magnets – these motors cost significantly less than those produced by non-Chinese competitors. "When you take all these facts into account, China's goal of becoming the technology leader in e-mobility seems absolutely realistic," says Bernhart. "This is a wake-up call for the traditional automotive powers. They have to act fast: car makers and suppliers need new business models, they have to reduce costs and form strategic partnerships to achieve a competitive size. Western governments are being called upon to actively support new technologies and production methods."
"When it comes to electric and hybrid cars, China is challenging the automotive industries in the Western industrial countries," says Wolfgang Bernhart, Partner in the Automotive Competence Center at Roland Berger Strategy Consultants. "The technological head start that Western manufacturers have with conventional powertrains is tough to overcome – and the Chinese realize this. But the race for electric mobility is just getting underway." The share of electric or partly electric vehicles will increase in all automotive markets. This means a corresponding increase in the market for powertrain components. The volume of that market is expected to reach EUR 20 to 50 billion by 2020 – and that figure is expected to rise. To help the Chinese manufacturers tap this market, the Chinese government is providing subsidies and tax incentives to stimulate the development and marketing of "new energy vehicles". Their goal is to make the Chinese automotive industry a technology pioneer of future electric powertrain systems.
Pole position for China's electric car manufacturers
The Chinese manufacturers have already gotten off to a good start, thanks to certain advantages: A majority of the raw materials needed, such as lithium, is processed in China and is therefore available at low cost. In addition, cheaper labor provides Chinese manufacturers of lithium-ion batteries with cost benefits of about 30%. This means that the prices of the batteries themselves are distinctly lower. Because this market is becoming a volume market, economies of scale and scope are critical. China already has considerable production capacity for li-ion batteries and is investing heavily in expanding its production as well as R&D for new battery technologies. For example, Chinese manufacturers have developed a new lithium-iron battery, which is more reliable, lasts longer and is better for the environment.
Besides battery technology, Chinese manufacturers are also well positioned for motors. They have already developed successful, high quality permanent magnet synchronous motors. Because China has 80% of the world's available neodymium – a raw material needed for permanent magnets – these motors cost significantly less than those produced by non-Chinese competitors. "When you take all these facts into account, China's goal of becoming the technology leader in e-mobility seems absolutely realistic," says Bernhart. "This is a wake-up call for the traditional automotive powers. They have to act fast: car makers and suppliers need new business models, they have to reduce costs and form strategic partnerships to achieve a competitive size. Western governments are being called upon to actively support new technologies and production methods."
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