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Fri April 22, 2011
China will be tough competitor to U.S. in electric cars in future, says study
Fears that China is destined for dominance of the electric vehicle and advanced battery industry may be overblown, suggests a new study by the management consulting firm PRTM.
Yes, the Chinese government is strongly committed to the electrification of cars and trucks. After all, China is even more dependent on foreign oil than the U.S. And its cities are fouled by pollution caused in large part by internal combustion engines.
And yes, China has spent five times more than the U.S. on helping its electric car industry.
But PRTM partner Oliver Hazimeh says the country faces some challenges, too.
For one thing, Chinese cars, electric or not, aren't good enough yet to be exported.
And certain components that go into electric cars - notably the battery packs and electric motors - are very expensive to ship overseas, because they're so heavy and bulky. That means American companies that make them should be able to compete, says Hazimeh.
Much of the advanced battery industry in the U.S. is in Michigan right now. The state received the lion's share of federal grants to help advanced battery companies set up shop.
On the other hand, Hazimeh says the Chinese government could potentially dominate the manufacture of lithium-ion cells. And the cells are the most valuable part of an advanced battery.
Hazimeh says China has used subsidies to try to corner global markets before and could do so again.
"The government potentially subsidizing cell manufacturing and potentially distorting the prices, will that prevent the U.S. automotive battery industry from taking off?" he asks.
Hazimeh says U.S. companies that make cars in China could use to their advantage China's commitment to vehicle electrification.
GM, for example, now sells more cars in China than in the U.S. Ford recently said it would develop an electric car for the Chinese market.
"They can use China as a good testing ground in terms of what lower-cost vehicles, what different technologies can we deploy."
The danger is that China will demand that U.S. companies hand over their electric vehicle technology know-how to their Chinese partners. China does not allow a foreign company to make cars in the country unless it has a Chinese partner.
Hazimeh says China's centralized government has also enabled it to establish electric car pilot projects more effectively than the U.S. has been able to do. And China has only two electric utility companies, whereas the U.S. has well over 200.
Hazimeh says the Department of Energy might want to consider taking a stronger leadership role and craft a large pilot project in the U.S. that would involve all the players - car companies, battery companies, suppliers, electric utilities, and cities.
Hazimeh estimates that the electric car industry could be worth $250-billion, perhaps $300-billion, annually in the future.