China driving slowly towards a greener future

  • AFP
  • Updated: Mar 18, 2015 16:38 IST

Interest in electric cars is growing in China, but don't expect a green motoring revolution anytime soon. It's going to take until the end of the decade for electric and hybrid vehicles to constitute 4% of new cars on the road. Still, the figures, courtesy of Frost and Sullivan, paint a more optimistic picture of the country's personal mobility future than the most recent report from the US Energy Information Administration.

Its 2014 long-term outlook forecasts that it will take until 2040 for plug-in electric cars to represent 1% of new vehicles on US roads. However, it is more optimistic about hybrids, which it believes will make up 5% of the new car total within the next two decades.

Frost & Sullivan's report "Strategic Analysis of the Chinese Powertrain Market," published on Tuesday, highlights that government support for the technology along with financial incentives are helping to make plug-in hybrids and full electric cars more popular with Chinese drivers and to focus businesses on continuing to develop and market the technology.

"Besides the New Energy Vehicle Development Program, the Chinese Government has launched the National Program for Medium-to-Long-Term Scientific and Technological Development and 863 Program to transform the Chinese automotive manufacturing industry," said Frost & Sullivan Automotive & Transportation Research Associate Ming Lih Chan. "These initiatives will open up revenue opportunities for existing and new entrants in the Chinese powertrain market."

However, there are a number of obstacles to overcome. The most immediate of which is saturation. Affluent consumers who live in China's mega tier-one and tier-two cities have already bought a car, meaning there are fewer people left to market to.

Electric vehicle technology is currently best suited to urban city dwellers, where the charging and servicing infrastructure is comparatively easy to install. But without takers for plug-in cars, there will be no push to start integrating charging points or other services.

As wealth trickles down to other regions, demand for new cars will increase, however, provincial cities, separated by huge swathes of highway, are not best suited for the current generation of electric-only vehicles and integrating the infrastructure would be complex, time consuming and hugely expensive.

Nielsen data shows that tier-three and tier-four Chinese cities are home to 55% of current car owners and represent 68% of the potential car buying market.

Tesla has found to its cost that it's difficult to sell to customers who already have cars, even if the Model S is a truly premium, individualistic statement of a car. And likewise, it's hard to get potential buyers to take a risk on a car powered by a technology that could potentially leave them stranded halfway home. Even with offering free installation of a home charging box with each Model S, the company has failed to meet sales targets.

But address the infrastructure shortfalls, and interest can pick up. Pike Research data shows how in US states like Texas, that were built on oil, attitudes towards electric cars are changing simply because they're arriving on the market as the infrastructure is also arriving. As a result, Texas jumped from 42nd to fourth place on Pike's list of states with the most favorable attitudes towards electric cars between 2010 and 2012.

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