Why China Isn’t Ready For Electric Vehicles


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By 2020, auto analysts expect more than 2 million electric vehicles to be sold every year. That’s a huge leap from the 113,000 electric vehicles that were sold in 2012. It’s also why China has set its sights on trying to win this “new energy vehicle” sector by 2020.

China’s track record is formidable. It launched successful bids to compete in wind turbines, solar panels and personal electronics. However, there are a number of structural problems in how the government and economy work that make it unlikely that a Chinese competitor to Tesla, the Chevy Volt or even the Toyota Prius will emerge any time soon.

image via VW

image via VW

The persistent fragmentation of the Chinese automotive industry is a big weight around the neck of an aspiring Chinese electric vehicle, or EV, maker. In the U.S., a hundred car manufacturers in 1914 dwindled to a dozen in 1924, three of which controlled 90 percent of sales. Capitalist forces don’t function as well in China. Out of dozens of Chinese car companies, my analysis shows 20 companies hold a market share over 1 percent, their headquarters spread out across a full third of the provinces.

The central government agenda has long wanted to consolidate Chinese auto companies, but local governments resist. The industry employs millions of Chinese, brings in significant research money and can be very lucrative. This is the problem: the Chinese central government has played a large role in shepherding other industries to international domination, funneling funds to the state-owned enterprises to help them succeed. It is trying to do the same with EVs. Beijing may set policy, but local governments implement it, and their spending has been wasteful and inefficient. This is in contrast to the U.S., where domestic efforts to promote electric vehicles – coordinated local efforts among statesprivate industry programs and federal policy proposals – are growing.

The result? Chinese electric vehicle manufacturers crop up in 23 provinces, but companies have only put 45 percent of certified, designed models into production. The rest may never become commercial products.

Demonstration projects spread across 25 cities combined with $9,000 per car central government incentives were supposed to put hundreds of thousands of cars on the road by the end of 2013. What happened? Very little. Only 8,733 EVs were sold in 2012.

Why don’t electric vehicles sell in China? In contrast to wind turbines, electric vehicles are consumer products; there is more to success than a low price tag. Even at 2 million sales worldwide, electric vehicle ownership will still be the domain of relatively affluent early adopters. Granted, a subset of affluent Chinese might decide EVs are their status symbol. But to sell products abroad, Chinese companies must build international consumer brand awareness, a high hurdle the solar and wind turbine industries didn’t face.

In order to dominate international electric vehicle manufacturing, the central government needs this hot consumer brand not be an imported Tesla, but a homegrown alternative. The popular domestic brands largely cater to first-time car buyers interested in small, basic cars. The foreign markets Chinese manufacturers currently export to – Egypt, Chile, Ukraine and others – are not much wealthier.

The average EV is more expensive than a conventional car, and your average Chinese motorist isn’t that rich. Yes, luxury cars sell in China, but these tend towards the SUV segment and the ubiquitous, black Audi A6 government officials favor. Granted, in cities where electric car buyers could circumvent expensive license plate auctions or lotteries, this could change. But rich city-dwelling Chinese live in apartments and lack access to the parking and home charging American suburbanites have. Meanwhile, the disconnect between central government ambition and local government means that Beijing, China’s most populous city, has just 64 charging poles.

Many American industries are justifiably concerned about competition from China. It would make sense that American electric vehicle manufacturers would be peering over the shoulders at their Chinese rivals just as the market is poised to boom. The unique characteristics of China that have helped drive success in other sectors, however, are not benefiting the more fragmented Chinese auto industry. That’s making it very hard for China to translate Tesla, the Volt or the Prius into a success of its own.

third-wayEditor’s Note: EarthTechling is proud to repost this article courtesy of Third Way. Author credit goes to Ingrid Akerlind.

Third Way represents Americans in the “vital center” — those who believe in pragmatic solutions and principled compromise, but who too often are ignored in Washington. Our mission is to advance moderate policy and political ideas. Our agenda includes: a series of grand economic bargains, a new approach to the climate crisis, progress on social issues like immigration reform, marriage for gay couples, tighter gun safety laws, and a credible alternative to neoconservative security policy.

    • Nad Colors

      Obviously the Chinaman can add. He can pick up a commuter car for probally less than $5K and you what think he’s going to want to spend $30K for an electric car?