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China’s NEV road map and building a strong auto industry

Rao Da, China’s life-long auto analyst and founder of China Passenger Car Association (CPCA), passed away on January 4.

In an obituary published on, editor Feng Shiming fondly remembers how he and his colleagues had enjoyed over the past five years Rao’s insightful and candid analyses of China’s auto market at CPCA’s monthly release of the country’s output and sales data. Rao was planning to speak at’s conference on China’s new energy vehicle market later last year but was held back due to the deterioration of his lung cancer. The following is Rao’s written presentation dated September 4, 2014 published in the obituary. Rao talked about China’s NEV road map and what he believed China needs to do to grow into a strong automotive country. – Editor

Conditions for a strong automobile industry

China is the largest automobile manufacturing country in the world but not a strong one. The automobile is a piece of complicated machinery and consumer product, which makes it a pillar industry for the national economy. The revenue generated by the automobile and related industries exceeds 10 percent of the national income. China’s auto industry is closely related to national economic and military security and therefore cannot be controlled by foreign monopolies.

Miao Wei, minister of Industry and Information Technology, defines a strong automotive nation as having enterprises becoming global front-runners and proprietary technologies that help facilitate global auto industry development.

Based on such a definition, we cannot change the equity share control of foreign invested OEMs. A 51 percent equity share ownership by foreign partners would create a jolt in the entire automotive industry because it would lead to the consolidation of the entire JV output, sales and revenue in favor of the majority shareholders. Annual output and sales of China’s six large state-owned enterprises would amount to only about a million units each. It will create a tragic outcome where none of them would be capable in becoming a global front-runner in another 10 years. For this reason China’s official position is reportedly that opening up the equity share control would be postponed at a later date.

NEV development would be the other important factor in building a strong automotive nation. BYD was the world’s first automaker to release a market ready plug-in hybrid electric car, the F3DM. Today BYD boasts more than 300 patents and the Qin that has just been released to the market is the world’s first upgraded PHEV with proprietary and unique technologies.

We are moving from the era where the automobile changed the world into a new era where the world is changing the automobile. The general trend of automobile technology development is to replace fuels with electricity. Until we have a breakthrough in battery technology, PHEV would be the vehicle that can be popularized rapidly.

China is a world leader in solar power, solar water heaters, wind power, all types of electric vehicles and output and sales of lithium ion batteries. These form a strong foundation for the development of NEVs. Chinese local companies are most responsive to national strategic goals and they are way ahead in the R&D, output and sales of NEVs. The central government has decided to offer huge subsidies in the building of charging infrastructure in large cities. Once a charging network is in place, China will likely move from the stage of pilot city NEV development to large scale market commercialization.

With the realization of the above two goals, China may become a strong automotive nation in the next 6-10 years.

HEVs are not NEVs

There are four reasons why China does not list HEV as an NEV.

First, there are two transitional types of vehicles in the evolution of vehicle electrification, HEV and PHEV. HEV cannot be charged and due to the small battery capacity it cannot operate in pure electric mode. The potential level of HEV fuel economy is limited. PHEV can be recharged and saves more fuel when charging is available.

Second, because most HEV patent technologies are controlled by Toyota, offering subsidies for HEVs would mean subsidizing Toyota. The cost of locally making HEVs based on Toyota technologies will be high unless Toyota opens up its patents to the public like Tesla.

Third, due to the worsening Sino-Japanese relationship over the past three years, subsidizing HEVs in China would create political problems.

Last but not the least, HEVs do not need to be charged. The national plan in China is to build a charging infrastructure in support of vehicle electrification. Subsidies for HEVs would have a negative impact on the country’s efforts in building charging facilities and push backward China’s commercialization of NEVs by at least 10 years.

Treating HEV as an NEV and offering subsidies would impede the development and commercialization of EVs and PHEVs. This is the reason why China decided not to list HEV as an NEV.

(Rewritten by Wayne Xing based on Feng Shiming’s article published on

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