China's vehicle electrification development: World Bank's view

by Ray Jing   2011-07-25

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World Bank: battery cost reduction forecast by 2020

The World Bank in June 2010 organized a team of international experts in urban transport, electric vehicle technologies, and policy and environment to carry out a survey study of China’s new energy vehicle program. The team managed to gain a better understanding of the program by meeting with governments and industry stakeholders in Beijing and Shenzhen.

The preliminary findings of the World Bank’s study indicated that the scale of China’s NEV program leaves the country well poised to benefit from vehicle electrification. Vehicle electrification is expected to be strategically important to China’s future in the following four areas: global climate change; energy security; urban air quality; and China’s growing auto industry. The study also identified several challenges for China going forward in the vehicle electrification program in terms of policy, technology, and commercial models, etc. – Editor

Policy and strategy

China indicates that vehicle electrification is of strategic importance to its future development in four areas: global climate change, energy security, urban pollution and fast auto industry growth.

China is likely to benefit from the EV drivetrain components value train largely due to its strengths in producing batteries and motors. China also enjoys an advantage in electric motors due to its position as the dominant producer of rare earth materials, specifically neodymium, contributing to approximately 30 percent of the material cost of permanent magnet motors, one of the key motor types used in electric propulsion systems.

The result of these advantages in batteries and motors could provide an overall advantage for Chinese companies in electric drivetrain components and may position Chinese automakers to assume global leadership in electric vehicles.

In 2009, China initiated the "10 Cities, 1,000 Vehicles" program to stimulate EV development through large-scale pilots in 10 cities that would identify and address technology and safety issues associated with electric vehicles. In 2010 China also introduced EV purchase subsidies with the maximum amount reaching ¥60,000 ($9,300) per unit. Recently the Chinese government has announced plans to invest ¥100 billion over 10 years to stimulate its NEV industry.

Current standards, technology, infrastructure and commercial models

Led by China’s Ministry of Science and Technology, infrastructure companies, automotive component suppliers, and automakers are collaborating to develop a national standard for the charging method and connector but it is not yet finalized. State Grid has joined in industry to develop a seven-pin vehicle/charger connector that will enable both AC and DC charging. Other standards for battery cells and network communications are yet to be developed.

As one of the global leaders in lithium-ion battery production for cell phones, China has a strong foundation in lithium-ion battery technology, which is being used to develop solutions to the key issues in the application of lithium-ion batteries in EV traction drive systems.

In 2010, the producing costs for lithium-ion battery packs in China appeared to be between ¥3,400 and ¥5,000 per kWh. Battery manufacturers in China expect costs in 2020 to be reduced by approximately 60 percent to between ¥1,300 and ¥2,000 per kWh. This will reduce the cost of a typical new vehicle battery to between ¥34,000 and ¥50,000.

In-vehicle battery life is currently expected to be approximately three to five years, or around 160,000 kilometers. Battery life is needed to be improved by approximately 50 percent to meet the needs of most electric vehicle owners.

Electric buses are among the key areas of vehicle technology development and some have been developed to meet the high energy and high duty cycle requirements of the transit bus market.

Charging infrastructure technology development has focused on the needs of fleets since the early EV applications in China have been associated with fleet vehicles. The current charging mode for electric vehicles include three major approaches: slower, lower power charging, fast charging and battery swapping.

New vehicle value chains are emerging to address the technology and manufacturing gaps that the existing automotive value chain holds for EVs in China, beginning to develop new businesses and business models to provide the infrastructure, component, vehicle, and services necessary to enable an EV ecosystem. For example, some of the auto industry corporations have set up separate companies that are solely focusing on new energy vehicles such as the Beijing New Energy Vehicle Co. established by Beijing Automotive Group Co., Ltd. (BAIC)

Challenges for China going forward

Policy. The existing NEV-related policies in China mainly focus on the promotion of vehicle adoption by way of introducing purchase subsidies at a national and provincial level. Meanwhile, policies to stimulate demand for EV, deploy vehicle-charging infrastructure, and stimulate investment in technology development and manufacturing capacity also need to be developed. China’s ambitious ¥100 billion investment in new energy vehicles over the next 10 years will need to include a balanced approach to stimulating demand and supply.

Integrated charging solutions. Though the early vehicle applications have been with fleet vehicles with charging infrastructure technology development in China focusing on the need for fleets, private EVs will be fully involved eventually, thus integrated battery charging solutions need to be developed to cover three basic types: smart charging, standardized/safe/ authenticated charging, and networked and high service charging.

Standards. China has not yet come up with its national standards for EV. The first emerging standard is for electric vehicle charging. The full set of such standards should not only govern the physical interface, but also take into consideration safety and power grid standards. To facilitate trade and establish a global market, ideally standards would need to be harmonized worldwide to minimize costs.

Commercial models. The EV value chain is beginning to develop new business models to provide infrastructure, component vehicle, and related services. It is essential to build a commercially viable business model which bears the cost of charging infrastructure, as the industry cannot indefinitely rely on government funding. It is also likely that revenue collected from services can help offset the cost of infrastructure.

Customer acceptance. Customers will be committed to EVs only if they find values in the new energy vehicles. Given the lifetime ownership costs become favorable for EVs, the upfront vehicle cost will still be significantly higher than a conventional vehicle with a longer payback period than most consumers or commercial fleet owners are willing to accept. Vehicle leasing could address this issue, a secondary market for batteries would have to be established, in addition to a vehicle finance market, to enable the leasing market to be viable.

GHG benefits. China’s current electricity grid produces relatively high GHG emissions and is projected to remain GHG-intensive for a significant period of time due to the long remaining lifetime of the coal-fired generation capacity. A new framework for maximizing GHG benefits in China has to be developed to fully realize the low emission potential of electric vehicles.

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