Development of New Energy Vehicles in Shanghai
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I. Current situation
New energy vehicles (including electric, hybrid vehicles and fuel cell vehicles) are expected to play a leading role in the future of the automobile industry. Globally, industry forecasts indicate that the sale of electric vehicles will account for up to 25% of annual new auto sales by 2025. Among the major countries promoting new energy vehicles, China is singled out as having the most potential for growth1, with an estimated annual demand of 350'000 new energy vehicles by 2012.
According to a recent survey, there are currently over 10'000 new energy vehicles on the road in 25 major cities, 10% of them having been purchased for private use2. Over 100 power stations and 4'500 fast charging poles have been put into place in these cities. The vehicles are estimated to have driven over 330 million kilometres.
Despite these encouraging figures, several factors have slowed the growth of demand for new energy vehicles. First of all, with the fast development of traditional auto industries in recent years, its contribution to local GDPs has been increasing and has become an important contributor to local tax income and employment. With the auto industry connected to dozens of other industries, these are also feeling the positive effect of this growth. Furthermore, though the Chinese public is increasingly familiar with the advantages of new energy vehicles through auto exhibitions and advertisement, the demand just isn't here yet for mass production. In addition, the considerable financial implications and investment needed to promote the required R&D of the new energy vehicle industry, made local governments reluctant to take serious and concrete measures in the past years, even though the advantages of new energy vehicles have been promoted for years.
With the support of the National 12th Five Year Plan (2011-2015), the State Cabinet is determined to further develop environmental friendly industries, including the new energy vehicle industry. China is eager to take a dominant position in the new industry. Moreover, Green GDP has replaced pure GDP achievements as a way to assess the performance of officials, encouraging various incentive measures to be taken by local governments respectively. Encouraged by financial support from both the central and local governments, the industry has been injected with new vitality.
1. Governmental level support
In the 12th Five Year Plan, China has signalled its intention to shift from policy of maximizing economic growth to balancing growth with environmental sustainabilityThe Plan indicates that China will place great priority to seven emerging strategic industries, which are clean energy, alternative energy vehicles, energy conservation and environmental protection, information technology, bio-technology, high-end equipment manufacturing and new materials. To accomplish the ambition of raising the proportion of these seven industries to 8% of China's GDP by 2020, financial and preferential tax policies will be implemented by the central government to support these industries.
Additionally, energy autos will get more orders from the government and public umber of pure electric vehicles are already serving the cities as public buses, governmental shuttle buses and taxis. By 2012, new-energy cars and buses will account for more than 30% of newly-purchased vehicles by the government and public agencies in some provinces.
2. Environmental pressure
The world's energy consumption structure has been posing great threat to the global environment. Thus, gradually replacing traditional energy sources with new energies has been an irresistible trend and that also in the automobile industry.
The current Chinese coal fire-led energy consumption discharges relatively high greenhouse gas emissions and is projected to remain so for a significant period of time, due to the existing energy consumption structure. As for petroleum fuels, its price and non-renewable nature has resulted in concerns on the long-term availability of oil.
Due to the rapid urbanization process of China, energy consumption and CO₂ emissions caused by urban transportation are increasing quickly. Transportation means are actually the fastest growing consumers of fossil fuels and source of CO₂ emissions, and 23% of the global CO₂ emissions are produced from the fuel combustion of vehicles.
3. Technological breakthrough
The technological improvement of core components of new energy vehicles such as the battery and motor, allows for mass application. The battery is the key component of the car and accounts for 30%-50% of daily driving costs. New technologies make it feasible to charge the battery up to 70% within 10 minutes while the normal charging process takes at least 3 hours. This new technologies however shortens the battery life. Currently, the normal charging process is used for over-night charging in residential communities. The next expected breakthrough will be the widespread use of the new fast charging process without the battery getting damaged.
In order to take a leading position in the emerging industry, the Ministry of Industry and Information Technology is ready to invest CNY 100 billion (US$15 billion) over the next 10 years to support R&D and production of new-energy automobile3, of which CNY 50 billion (US$ 7.5 billion) for R&D and industrialization and CNY 50 billion (US$7.5 billion) in subsidies for consumers and infrastructure. This incentive policy will strongly encourage manufacturers to support R&D and improve core technologies.
III. Barriers & challenges
1. Network of charging infrastructures to be intensified
The biggest barrier to the spreading of new energy vehicles is the lack of charging infrastructures. The expansion of both electric and plug-in electric hybrid cars relies on the city's fast-charging network. Shanghai has built 6 charging stations and over 100 filling piles, which mainly served the pure electric buses inside the Expo site. This year, the Shanghai government will have about 7-10 stations and 400 charging piles built across the city in the residential communities, near public transportation terminals and hubs, and close to parking lots of office buildings.
Currently, financially subsidized by the government, the stations mainly depend on the national electric grid resources. State Grid4 plans to invest CNY 14 billion (US$ 2 billion) during the 12th Five Year Plan period. However, Sinopec and Petro China5 are interested in grabbing the market and extending on their own the network of charging facilities to their existing gas stations, and making it of most convenience to public users.
2. Market acceptance
Governments and car manufacturers have invested a lot of time and money trying to educate consumers about the ecological advantages of new energy vehicles. These, displayed every year at car exhibitions, attract much public attention and interest.
For most of the consumers, their initial thought when picking their first car is normally the brand and performance instead of its environmental impact. However, those already owning a conventional car are the ones favoured by marketers.
The comparatively high price and maintenance costs of this new type of vehicle are further concerns taken seriously by potential consumers. Additionally, the price of a new energy car is often close to three times as much as the conventional version with a gasoline engine. The fact that new energy vehicles are comparatively weaker over long distances is yet another concern to potential customers.
3. Standards to be unified
China has not yet launched national standards for batteries and charging devices of new energy vehicles. Without unified standards, the products made by different manufacturers are incompatible with each other and potentially cause inconveniences for the end consumers in their daily use.
IV. Shanghai Prospects and future
1. Local policies
Crowned as one of China's most important auto industry bases, Shanghai is home to the production plants of Shanghai Volkswagen, SAIC Motor (Shanghai Automotive Industry Corporation), Shanghai General Motor and many others, which together create a sophisticated atmosphere for promoting new vehicles.
According to the development plan for Shanghai's new-energy industry, the city will have an output value of CNY 30 billion (US$ 4.5 billion) and a production capacity of 100,000 units for new energy vehicles by 2012.
On June 1 2011, the Chinese government announced a pilot program to subsidize private buyers of electric, hybrid and other new-energy cars in five cities (Shanghai, Changchun, Shenzhen, Hangzhou and Hefei) with an amount of up to CNY 60,000 (US$ 9'000) per car.
Meanwhile, Shanghai provides a one-off subsidy of CNY 20'000 (US$ 3'000) to 40'000 (US$ 6'000) for individual buyers. Apart from that, an extra subsidy of CNY 2,000 (US$ 300) per kilowatt hour of electricity will be given to reduce the daily driving cost.
2. Shanghai Jiading Auto City
Shanghai's Jiading District, located in Northwest of Shanghai, enjoys the reputation of being Shanghai's Auto City. It is not only that Jiading has a long-term cooperation with Volkswagen, it also has an Auto Museum, Auto Exhibition Centre and Formula 1 Circuit to consolidate its strength in developing the automobile industry.
At the beginning of 2011, Shanghai was designated the China (Shanghai) Electric Vehicle International Model City. The Test Driving Centre, displaying 6 different brands and testdriving eight different models of new energy cars, is situated in Jiading District and was officially put into operation in April 2011.
3. Chery Automobile R&D Center
Chery Automobile is one of the Chinese automobile manufacturers who started the development of new energy vehicles at an early stage. Chery invested in a new energy automobile R&D base in Jiading District, with its construction under way since March 2011. The base will cover 233'000 m2 and cost CNY 1 billion (US$ 149 million), focusing on research and development of complete vehicles and core parts of new energy vehicles.
4. Other major manufacturers
Other auto manufacturers have carried out ambitious plans to boost their production of new energy vehicles. As the largest rechargeable battery manufacturer of the world, BYD not only has the largest global market share for Nickel-batteries, handset Li-ion batteries, cell-phone chargers and keypads. BYD started in the auto business in 2003 and has become a global pioneer in the field of new energy vehicles. Besides that, BYD has focused on the research, development and manufacturing of a wide range of new energy products, including the charging facilities, energy storage systems and solar energy stations.
SAIC Motor, headquartered in Shanghai, has set a five year plan to realize the production capacity of 300'000 new energy vehicles by 2015. Dongfeng Motor Corporation, one of the three giant auto makers in China, plans to produce 11'000 new energy vehicles by 2012.
The future for the new energy vehicles is bright although there are still difficulties ahead. New energy vehicles will embrace opportunities with the rising petrol prices as well as the popularity of environmental friendly ideas among the public.
Mrs. Min XU
Consulate General of Switzerland in Shanghai
1 According to the National Key Lab of Auto safety and energy conservation of Tsing Hua University, China will surpass the States in the number of auto number with a total of 250 million vehicles by the year of 2020.
2 Source: China Ministry of Industry and Information Technology
3《Development Plan for Energy Conservation and New Energy Automobiles Industry》(2011-2012)
4 State Grid Corporation of China (SGCC) is the largest electric power transmission and distribution company in China and in the world.
5 Sinopec Group and Petro China are two major state-owned companies in China monopolizing the Chinese petroleum market.
General of Switzerland
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