Analysis of Factors Affecting China's Electric Vehicle Industry

In big cities like Shanghai, China, people who ride motorcycles are not often seen. They either shuttle in the streets near the subway station as black car drivers, or drive retro three-wheeled motorcycles, Harley cars, just to be satisfied in the eyes of pedestrians envious. Their rare part is due to the policies of the local government. For reasons of safety and air quality, the policy either prohibits motorcycles on the road or greatly reduces their number. But another reason is that motorcycles face very cruel competition, on the one hand from more secure bicycles (China is the famous "bike kingdom") and on the other from cars that cause continuous road congestion.

At the same time, electric bicycles (ie, electric vehicles) are flooding into China's bicycle lanes and streets. Although China’s bicycle ownership rate is much higher, about 470 million vehicles, we cannot deny the popularity of electric vehicles. The number of electric vehicles has been steadily increasing. It has reached 120 million vehicles, an increase of 5.2 million vehicles over the previous year.

However, the electric vehicle industry is now at a crossroads: Similar to a group of local industries, it is also a highly fragmented and inefficient industry. Not only that, the industry urgently needs to increase the demand for new foreign markets. And now it basically relies on domestic sales. According to statistics from the China Bicycle Association, China's total electric vehicle production in 2010 was 29.5 million, of which 585,000 were for export. According to the “Electric Bicycle Global Report”, the number of electric vehicles sold worldwide is about 29 million, and the United States and Europe account for only 80,000 and 1.02 million, respectively.

Accelerating Growth So far, one obstacle after another has emerged, limiting the growth of China's electric vehicle industry. For example, Shanghai banned the use of gasoline-powered motorcycles in 1996. Even today, the internal-combustion engine motorcycles on the streets of Shanghai are either fueled by liquefied petroleum gas (although they are legal, but they are limited in quantity), or else they are licenses on the field.

Christopher R. Cherry, professor of urban and environmental engineering at the University of Tennessee, pointed out that apart from prohibiting motorcycles on the road in many cities, other factors included the SARS epidemic in 2003. People are no longer taking buses because they are afraid of being infected. Metro; New housing and employment policies have allowed longer commuting miles; increased disposable income; more roads, better road conditions, and so on. As many people still can't afford to buy cars, electric cars have become "Cadillac" for the working class. This type of vehicle is equipped with a mobile battery that can be easily recharged at home or in the office. They are more like small motorcycles and they are classified as non-motorized vehicles. Therefore, they are not subject to the "restricted orders" of many cities.

At the same time, the electric vehicle industry is flooding with too many competitors. There are more than 2,600 electric vehicle manufacturers in China, but the vast majority just buy parts from other manufacturers for simple assembly. Only 60 or so are genuine manufacturers.

The highly dispersed market, Ed Benjamin, general manager of eCycle Electric Consultants in Florida, said that for this reason, the electric vehicle industry has been undergoing mergers and acquisitions in recent years, and he foresees that this will become a general trend. As a veteran in the US cycling industry for 30 years, Benjamin said: "I think this situation will continue until two or three large companies and small businesses appear in each province."

Others are not so optimistic. “The industry is currently fragmented and more companies continue (influx),” concluded Masatoshi Kojima, a professor of business administration at the University of Tokyo. He is also a researcher at the Creative Management Research Center of the University of Tokyo. “The key to changing this situation is whether Chinese consumers need more high-quality products, including electric vehicles.” This will increase access barriers.

At least for the vast majority of electric car manufacturers in China, the driving force for change is almost non-existent. In the domestic electric vehicle market, few foreign manufacturers compete with it, so it is easier to maintain the status quo, and at least in the short term can still get more profits.

However, similar to other industries in China, if the EV manufacturers do not move to the upper reaches of the "value chain" and improve the quality of their products, the industry may decline. Benjamin warned. "Quality, especially maintaining consistent quality, is a big problem," he said. “There are quite a few businessmen in China who believe that the way to make money is to reduce the cost of materials, which leads to low product quality and users are not satisfied. They are very good at reducing the cost of products. For Chinese businessmen, this is a good business.”

Chi-Jen Yang, a technology policy analyst at the Duke Global Change Center, pointed out: “There are cultural factors in the mainland. As long as Chinese consumers prefer to choose low prices instead of high quality, the quality of Chinese-made products will not improve. ."

The reason why the deep-rooted reason is not high enough to attract foreign customers. "The ready-made electric cars designed for the Chinese market usually don't work," said Chery of the University of Tennessee. “Many companies in the United States have imported the entire cabinet of Chinese electric vehicles (made for the Chinese market), but they usually do not meet American safety standards and are of poor quality. The store or online store I have seen is unsuccessful.”

However, Benjamin also pointed out that some Chinese electric vehicle exporters, such as Perpetual, Feige, Tol, Bashan and Yadi, are showing signs of improvement. They may be looking at brands like Giant, Merida, Ideal and Fairly. These Taiwanese companies design high-quality electric vehicles locally and then manufacture them in China and export them from China. As a result, they occupied the global export market. “Taiwanese companies have been selling ordinary bicycle products through distribution channels for thirty years. They can easily add electric vehicles to their product portfolio,” said Benjamin. He worked for an electric vehicle company in Taiwan for many years. "Taiwanese are very smart in international trade and they are very good at it."

China's electric vehicle industry is not only the brand of Taiwan, but also the old European companies Accell and Gazelle are also importing electric bicycle components from China. At the same time, Japanese Yamaha, Honda and other automobile companies have also established joint ventures in China, producing high-end electric vehicles that mainly supply the local market. In Japan, the popularity of motorcycles is the same as in China.

Poor management of potholes but Chinese electric car manufacturers also have certain advantages, because the rural population of 800 million people in China is a huge potential consumer groups. "In the next five to ten years, the development of rural areas in China is worth paying attention to," said Professor Yang. At present, electric vehicles are not widely used in rural areas, but there are no restrictions on motor vehicles as there are in cities. Professor Yang said: “The ability of electric vehicles to compete with petrol-fueled small motorcycles in the rural market will be a key issue for the future of China’s electric vehicle industry. I cannot answer this question.”

An important issue is that electric vehicles currently sold in China are designed for relatively short distances and lighter loads. Rural road conditions are even more difficult. If you want to make a choice between an oil-laden motorcycle and an electric car, Benjamin says he knows what a farmer will choose. "If the farmer wants to transport the pigs to the rural market, the role of electric cars is inferior to that of motorcycles. ”

Outside of the city, "longer journeys, faster speed limits (higher), poorer road conditions, and electric vehicles are not suitable there," Chery said. “I have been waiting for a brand in Chinese companies that competes with low-cost Chinese-made motorcycles to compete in China and overseas markets. But this is not the case in rural areas.”

Li Zejiang, a research fellow at the University of Tokyo's Manufacturing Management Research Center, said that he noticed an increase in the number of EVs in outlying areas of Chinese cities and in rural areas. The low price of electric cars is a big factor in attracting people. An oil-laden motorcycle costs between 5,000 yuan and 8,000 yuan (about 788 dollars to 1,261 dollars), while electric cars only cost 1,500 to 3,000 yuan. Moreover, some electric vehicles can also adapt to long-distance driving. Researcher Li said: “I was surprised to see that some electric cars can run more than 100 kilometers on a single charge. Can you imagine that? That is to say, these electric cars can drive from Shanghai (100 kilometers) to Suzhou.”

However, the upgrading of the electric vehicle industry is not about the needs of travel, but because of environmental and safety concerns. In China and elsewhere, consumers are increasingly aware that although electric vehicles are more energy-efficient and do not produce direct carbon emissions, they are still not as environmentally friendly as they think. According to statistics from the China Bicycle Association, 97.5% of China's electric vehicles are produced using lead-acid batteries rather than less-polluting lithium-ion batteries. The former is the culprit in causing a series of lead pollution incidents. Earlier this year, officials officially shut down a number of polluting manufacturers that manufacture such electric vehicles.

But given the current reliance on lead-acid batteries, changes will not come soon. Lithium-ion batteries are lighter and more durable, but they are 2.5 times more expensive than lead-acid batteries. However, according to the average power consumption per kilometer, the cost of lithium-ion batteries is not much higher than that of lead-acid batteries. Therefore, Cherie believes that this issue actually lies in whether it can overcome the "price shock."

Bigger, faster, and more dangerous Even so, a series of traffic accidents has prompted some cities to consider limiting electric vehicles. "You don't need to deal with any traffic lights or traffic control. You can open it anywhere, including sidewalks," said a salesperson from an electric vehicle store on the outskirts of Shanghai. "You don't need a driver's license."

Because electric vehicles are less noisy than other vehicles and they travel at a surprisingly fast speed, they are dangerous. In 2009, more than 3,600 people died in traffic accidents related to electric vehicles, compared with 2,500 in 2007. The management measures introduced in 1998 required that the weight of electric vehicles should not exceed 40 kilograms (about 88 pounds), and the speed should not exceed 20 kilometers per hour. But now many of the electric cars on the road are overweight and overspeed. Both manufacturers and retailers have turned a blind eye to laws and regulations. The same is true for electric vehicle drivers.

Cherie pointed out: "This "bigger and faster" trend has a certain warning effect, because this kind of thing does not stipulate the driver's license, age, insurance (and similar issues). Electric vehicles are still on the bicycle lanes, sidewalks And in various places, there is no obstacle.” In a research report on the development of electric vehicles in China and the impact of electric vehicles on travel, Cherie suggested that China introduce electric vehicle driving licenses to improve safety and control quantity.

Although the central government tried to solve this problem, it encountered resistance at the local government. In 2009, the National Standardization Management Committee revised the management plan for electric vehicles, stipulating that if the weight of an electric two-wheeled vehicle exceeds 40 kilograms and the design speed is faster than 20 kilometers per hour, it will be recognized as a motorcycle, in addition to compulsory insurance, driver's license, and prohibition. Occupy bicycle lanes and other regulations. However, the management committee finally gave up the draft, because all parties opposed the voice, saying that this standard would force hundreds of electric car manufacturers to close the door and lead to millions of electric car drivers to be unfairly punished.

However, this debate has not yet ended. "I don't think the government will ban electric vehicles. After all, it is very popular in China," predicted Frank Jamerson, publisher of EBWR in Michigan. He retired from GM's electric car project in 1993. He said: "They will introduce more laws and regulations to improve safety and performance."

According to Cheri, this situation reflects the prevailing contradiction between the central and local governments. He said: "Ultimately, it is very likely that one city has a policy that makes it difficult to see where the changes will take place."