America has to help China get cracking on battery vehicles: report
You can give them batteries, but will they use them on the road? So far, the progress in both China and the United States in adopting battery electric vehicles has been less than stellar. And that’s the opinion of the United States Energy Security Council which has recently completed a report on how the two countries can collaborate on using new technologies to clean up vehicle emissions.
The section that concerns us here is that on vehicle electrification because it has enormous implications for technology metals — especially lithium, the rare earth magnet metals and, of course, graphite.
The report, Avenues for Collaboration, argues that vehicle electrification provides a unique security benefit. Battery electric vehicles (BEVs) have become the focus of China’s New Energy Vehicle (NEVs) plan. The U.S. also has been backing BEVs: after all, President Obama called (in his 2011 State of the Union address) for 1 million electric vehicles on the road by this year. Both countries have failed to make as much progress as had been expected.
In 2012 China introduced subsidies for electric vehicles of Rmb60,000 ($9,490) and Rmb50,000 for hybrids. As the report notes, ambitious goals were also set for battery technology and other related electric components. At present, China is considering providing as much as the equivalent of $16 billion to build electric-vehicle charging facilities. China also announced last year that all NEVs would be exempt from the state’s 10% sales tax as long as they can drive at least 30 miles on electricity alone.
But the report says that, in spite of strong support and infusion of large sums of government money, the NEV project is falling short of expectations. For the most part, Chinese consumers lack access to public charging and affluent Chinese prefer traditional luxury cars rather than environmentally-friendly ones with a limited range, as is the case with electric vehicles. As a result, sales of electric vehicles in 2014 in China came in under 40,000 units, less than 1% of new vehicle sales. While that figure was quadruple that for sales in 2012, the report notes that it is “still a relatively insignificant portion of the total automobile market and with such weak sales Chinese automakers have insufficient incentive to dedicate their production lines to electric vehicle manufacturing”.
In the United States, the report continues, the situation is not much better. Electric car buyers in the U.S. receive a tax credit of up to $7,500. Sales of plug-in cars in 2014 stood at 120,000 out of 16 million vehicles sold — as with China, a market share of less than 1% “Even if electric vehicle sales reach a compounded growth of 30% a year their total share of the fleet will be under 5% by 2025,” the council notes. And the fall in oil prices which translates into low gasoline prices has already reduced the motivation of many consumers to buy electric vehicles.
New policies are clearly needed. As the council points out, the U.S. tax credit is scheduled to phase out once a qualified automaker sells 200,000 vehicles.The Chinese government has said the amount of the subsidy will be reduced once 50,000 units are sold.
The bottom line: “Unless Washington and Beijing extend those tax incentives, something that seems unlikely under current political and fiscal conditions, or the cost of electrification drops substantially, electric vehicles will have a hard time remaining competitive with other equivalent vehicles in the market”.
There is an answer: but perpetual subsidisation is not that answer; rather there needs to be a sustained effort to increase public acceptance and address infrastructure and technology challenges. “While issues like battery cost, recharging infrastructure and safety are being increasingly addressed we believe that mass adoption of battery electric vehicles in China will not be able to take place without significant modernization of the electricity grid system,” the report adds.
U.S. companies like Honeywell and IBM have been working with China’s state grid but, the report says, this effort must be augmented by additional U.S.-China co-operation, aiming at imparting some of the North America’s experience to China. (and perhaps they can sell China battery storage systems — that would be a boost for technology metals concerned].
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