By Cui Dongshu, Secretary-General of China Passenger Car Association

Breakthroughs with new-energy vehicles (NEVs) are set as an important direction for upgrading and transforming the automobile industry in China. Pushed by various policies of the state, therefore, the NEV market has grown rapidly in recent years, with super strong growth this year, prominently promoting business in upstream sectors.

Sustained high growth of output

   New-energy vehicle activities in China started in 2009, and NEV sales began to grow rapidly in 2015. Stable rapid growth was maintained during 2016-2017, despite policy adjustments: 810 000 NEVs were made in 2017, a YoY increase of 56%. Output during January-April 2018 was 230 000 vehicles, a YoY increase of 178%. The sales volume was 520 000 vehicles in 2016, a YoY increase of 39%. For 2017, 519 000 vehicles were sold, a YoY increase of 56% with faster volume growth than before.

Proportion of vehicle types, in terms of power systems

   Today’s NEVs include a low proportion of buses and a rising proportion of passenger cars. The proportion of passenger cars was 57% in 2015, 62% in 2016 and 68% in 2017, while growth of the sheer volume of production was quite rapid. During January-April 2018, the proportion of passenger cars reached 89%.
   Among new-energy passenger cars, the proportion of blade-type electric vehicles has grown rapidly: 70% in 2015, to 77% in 2016 and 72% in 2018. The proportion of plug-in hybrid electric vehicles went up from 19% in 2017 to 28% in 2018.
   Among new-energy buses, however, the proportion of plug-in hybrid electric vehicles has seen sustained decline. Plug-in hybrids constituted 14% of new-energy buses made in 2016, seven percentage points lower than their 21% share in 2015. The proportion was 15% in 2017 (hardly changed YoY) and dropped to 10% in 2018, the all-time low.

Technologies for components constrain the sector

   Plug-in hybrid electric vehicles have prominent advantages. Consumers prefer plug-in hybrid electric vehicles to the blade type, so the plug-in market potential is huge. Prices of plug-in hybrid electric vehicles are comparable to prices of traditional vehicles, helping to make them the most important shift to the thrust of consumers’ purchase power.
   International manufacturers’ dominance of the market for NEV core components seriously constrains development of plug-in hybrid electric vehicle manufacture in China. The previous decision on not developing plug-in hybrid electric vehicles shows that China’s capabilities to design and manufacture vehicle components are weaker than its abilities to produce finished vehicles. The development of plug-in hybrid electric vehicles obviously depends on progress with components.

“Catfish” mode helps development of NEVs

   New enterprises for new-energy cars have developed rapidly in recent years. The Catfish development mode, an innovation by U.S. carmaker Tesla, has become a focus of attention. China has newly approved 15 enterprises to make new-energy cars; among these are established internet companies. New enterprises for making new-energy vehicles have many advantages. Traditional manufacturers hope to upgrade fuel systems and achieve profit maximization. Plug-in hybrid electric vehicles are therefore an ideal choice for competing with them and breaking into the car market.
   Faced with pressures brought by new car-making enterprises such as internet companies, some traditional vehicle manufacturers are seeking to ally with internet giants such as Alibaba, Tencent and Baidu to gain more opportunities in the competition for industrial breakthroughs.

The battery is the key

   If we intend to get NEVs into households, the hurdle is to reduce the power consumption of Class A vehicles and Class A0 vehicles to 10 kW per 100 km. We hope that by 2020 the comprehensive cost of small electric vehicles with a running range exceeding 300 km is comparable to internal combustion vehicles.
   The batter(ies) influence NEVs’ driving range considerably. Increasing single-battery energy density has progressed quite slowly in the past three years. It was around 120 Wh/kg in 2016 and around 140 Wh/kg in 2017. Manufacture of 140 W/kg batteries can be easily attained today. The single-battery energy density of most new vehicles meets or exceeds that level.
   Rapid development of the sector also requires accelerated upgrading of standards for batteries. The “Action Plan for Promoting the Development of Vehicle Power Batteries”, issued some time ago, proposes to promote the development of vehicle power batteries in China in three phases. The cost-effectiveness of existing batteries is to be enhanced in 2018 to ensure the supply of high-quality batteries. Large-scale application of new-generation lithium ion power batteries will be achieved before 2020 on the basis of improvements to existing technologies.
   The primary development target is drastic upgrades of battery performance. The specific energy of the power battery system is to double by 2020, reaching 260 Wh/kg, and the cost will be reduced below RMB1.0/Wh. Specific energy is to reach 500 Wh/kg in 2025. Upgrading battery performance will remain the sector’s main theme in the foreseeable future. Pressure to both reduce cost and upgrade technology will be intense.

Demand for power batteries will keep growing fast

   The fast growth of the NEV sector has pushed demand for power batteries. Last year 810 000 NEVs were made in China, a YoY increase of 99%, and the demand for power batteries reached 36.02 million kW. After negative growth of power batteries in the first half of 2017, dramatic positive growth of 30% was achieved in the second half. The main reason for the recovery was rapid growth of demand for power batteries during July-December of the year. The demand for power batteries during January-April 2018 was 2.8 times higher than in the same period of last year.
   Owing to sustained fast growth of special NEVs and new-energy passenger cars, the demand for power batteries is expected to keep increasing fast in the future. Technical progress will become all the more prominent. Rising prices of raw material cobalt put considerable pressure on midstream and downstream battery sectors. The midstream sector, in particular, has to cope with a big cost increase. So the diversity of cathode materials will expand, along with related R&D.
   This new pattern of competition between domestic and foreign investment will accelerate development of the NEV sector. China-made vehicles have already shown rapid development and now occupy a big share of the global NEV market. NEV-based demand for power batteries in joint venture vehicle manufacturers will attract foreign battery makers. The lack of competition in the battery sector will also bring huge investment in leading battery producers. Once full competition is launched, a new market pattern will form in the NEV sector, motivating players to develop better and faster.