Eying NEVs, China aims to move up manufacturing value chain

By Li Hong Source:Global Times Published: 2018/2/14 11:43:07

Facing an unprecedented chance to leapfrog other industrialized economies, China is expected to move rapidly and consistently up the manufacturing value chain in the coming years. The country will soon take the pole position in massive new-energy vehicle (NEV) production and help usher in a new age of emission-free modern transportation. 

Through leveraging its huge market size and an efficient centrally driven economy model, China has outpaced others in invigorating industrial upgrades.

In addition to high-speed bullet trains, ubiquitous mobile payments and robust penetration of the Internet of Things (IOT), NEVs will be the next area in which the Chinese government aims to be the world leader and eventually outpace traditional vehicle producing powers including Germany, Japan and the US. 

The government has come out with a package of favorable policies to incentivize NEV development, production and consumption, including subsidies to NEV makers and tax breaks for buyers.

To support NEV sales, some Chinese economists are asking the government to make 2035 or even earlier the watershed year to start banning the sale of gasoline-powered vehicles in the Chinese market. 

In 2015, China overtook the US as the world's largest NEV market. Currently, China has more than 1.6 million NEVs on the road, the China Association of Automobile Manufacturers said at the end of 2017. 

It estimated NEV sales would rise 40 percent to 50 percent in 2018 to exceed 1 million units. NEV sales last year reached 777,000. 

Nearly all analysts believe the future of carbon-free transportation lies in NEVs. As battery costs decline and countries turn away from internal combustion engine cars, the most aggressive outlooks see NEVs making up one-third of the global fleet by 2040 and one-half by 2050. 

Observers claim that China's interest in NEVs serves a much broader effort to improve its air quality. China's top leadership has vowed to build a country of "ecological civilization," a task mapped out at the 19th National Congress of the Communist Party of China in October 2017. The country also aspires to become a global leader in restricting fossil fuel use, reducing carbon emissions and fighting climate change. 

As a result, analysts forecast an ambitious NEV promotional drive is in the making in China, with the number of electric cars and plug-in hybrids expected to account for about 50 percent of all car sales by 2030. 

Looking ahead to 2040, the International Energy Agency estimates that China will capture 40 percent of the world's NEV market, becoming the dominant force of emission-free vehicle production in the world. The forecast has prompted some strategists in the US to call on policymakers there to lead the transformation of the US car industry, lest it leave the next generation of vehicles in the hands of China.

Now, China is at the forefront of this melding of new industries, thanks to the pressure placed on its businesses to make advances in technology, and a distinctive regulatory approach that gives Chinese companies a freer hand at innovating new products and services.

Chinese experts are urging the government to increase funding for research and development of new and innovative auto technologies, and pour financial support behind massive charging stations around the country, for technological advancement and market maturation will ensure the country always stays at the forefront of the transportation revolution.

Take recharging as an example. By 2020, the distance an electric car can run is expected to rise to 600 kilometers (km) on one charge from the current 250 km to 300 km. 

As market demand for electric cars surges, Chinese companies are urged to secure supplies of lithium, a key battery component of the vehicle's batteries. Now, up to 20 lithium processing and battery factories are being built in the country. 

Experts have suggested the government will continue to develop laws to favor NEVs. Local laws and ordinances have played a huge role in speeding up the transition from gas-powered to electric cars. In Shenzhen, South China's Guangdong Province, a local law mandates that all public buses should be emission-free by the end of 2018, making it the first city in the world to have an all-electric fleet. In Beijing, city officials aim to replace all 69,000 of its taxis with electric cars by 2020. 

Last year, there were 22 carmakers around the world that each produced more than 10,000 NEVs, and 11 of them were Chinese companies, according to media reports. Among the largest producers, BAIC BJEV, BAIC Group's electric car production arm, saw its sales in 2017 double to 103,200 vehicles, while BYD sold 113,669 NEVs last year. 

Foreign car manufacturers have realized that China is now the hottest market for NEVs and vowed to compete at any cost. Volkswagen has announced a $12 billion plan to set up NEV plants in China and sell 400,000 NEVs in 2020, while Ford may develop its own line of electric cars in China, which would be exported to the US market later.  

Chinese NEV makers should be ready to encounter heated competition on a global scale. Although China's manufacturers will not lag behind their foreign peers, and may even lead them technically, they need to build better brands that suit the demands of a wide array of consumers in different markets. 

The author is an editor with the Global Times. bizopinion@globaltimes.com.cn


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