Following the EV Leader

China cements its dominance in electric vehicles.

There was a time, in the late 1990s—when the futuristic GM EV1 electric car had been launched by General Motors—that it appeared that North America would lead the world in electric vehicle (EV) development. But GM cancelled the EV1 in 2003 and crushed all but a handful of the cars. Other US carmakers' EV programs quickly followed suit, bringing development of electrification to a near standstill. It didn’t seem like it at the time, but this was the beginning of the end for US EV supremacy, providing an opening for others to exploit. China has become that “other.”  

During the past month, four announcements have provided a clear indication of where the Chinese EV auto industry is headed:

  • June 27, 2018 – BYD opened a 24GWh power battery factory in Western China’s Qinghai province as it prepares to increase total production capacity to 60GWh by 2020. The technologically advanced factory will be the largest in the world after its construction is completed in 2019.
  • July 8, 2018 - The world’s largest lithium ion battery maker, Contemporary Amperex Technology Ltd. (CATL)—a Chinese company—announced it would build a $280 million battery plant in Germany to supply European car makers that are entering the EV market.
  • July 9, 2018 - BMW announced that its electrically powered iX3 cross-over utility vehicle would be built in China for both the Chinese market and would be shipped from China for all markets worldwide.
  • July 10, 2018 - Tesla announced that it would build a plant in China capable of producing 500,000 electric vehicles. Unlike previous automobile plants in China, which have been joint ventures between foreign and domestic carmakers, the Gigafactory 3—scheduled to open within 2 years—will be wholly owned by Tesla.

Growth Markets

Although it has taken nearly a decade, the auto industry has finally rebounded from the aftermath of the 2008 financial calamity that saw bankruptcies, takeovers, and bailouts. But in North America, the demand for new cars has plateaued. In 2017, 17.4 million light vehicles were sold here. That number is expected to only grow to 18 million vehicles by 2024. By comparison, the growth of China’s auto market has been enormous and continuous. In 2015, China became the largest auto market in the world, surpassing the US. It is also the largest market for EVs.

“There are two main drivers for the investment into producing EVs in China,” Stephanie Brinley, principle analyst at IHS Markit, told Design News. “The first is the sheer size and potential of the overall light-vehicle market itself. In 2017, 27.9 million light vehicles were sold in China, and the market is forecast to grow to nearly 34 million units by 2024. With a market that size, there can be a case for localized production being more effective and efficient. Second, the Chinese government is encouraging investment into EV production and sales, through a combination of tax incentives for consumers and production targets for automakers.”

CATL Battery Factory
In a few short years, CATL has become the largest lithium ion battery maker in the world. (Image source: CATL)

EV Powerhouse

It is this government support for EVs that is making China into an EV powerhouse. “Regulations across the world are encouraging a broader shift to electrified powertrains, but the Chinese market is larger, and with government support, has potential to be a larger EV market than others as well,” said Brinley.

Worldwide, after a slow start, there is a growing shift toward EVs. “Electrification is a done deal as several countries have announced a deadline for the sale of internal combustion engine cars to end. Electric vehicles are on the cusp of another boom,” said BYD President and Chairman Wang Chuanfu in a company press release that announced his company’s new Qinghai battery factory.

According to the IHS Markit production forecast, global production of EVs will reach about 7.3 million units in 2025, compared with 1.3 million units in 2018. Global production of all vehicles is forecast to reach 110.5 million units in 2025. EVs are forecast to account for about 6.7% of global production that year, Brinley said.

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