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CAR TECH
China could electrify global rechargeable car market
By Tangi QUEMENER
Beijing (AFP) April 24, 2016


China's Tesla BYD has electric dreams
Beijing (AFP) April 24, 2016 - In contrast to the usual pattern of technological advance, Chinese car firm BYD -- for Build Your Dreams -- has led the way in electric vehicles but now faces increasing competition from Western manufacturers.

BYD has nothing like the global profile of Tesla but sold its first hybrid in 2008, long before the US firm went into production.

The same year, US billionaire Warren Buffett acquired a 10 percent stake in the company. Deliveries of its first all-electric car, the e6, began in 2011, a year ahead of the first sales of Tesla's Model S.

While Tesla founder Elon Musk might be compared to a "sprinter", BYD's president Wang Chuanfu "is more of a marathon runner", the company's senior vice president Stella Li told Bloomberg News earlier this month, slowly but surely building its brand recognition and sales volume.

In 2015, BYD sold around 58,000 electric and hybrid vehicles, doubling year-on-year, according to its annual report, which did not differentiate between the categories. It hopes to sell three times as many this year.

In comparison, all-electric Tesla sold 50,580 cars globally in 2015.

BYD, which has its origins as a battery manufacturer, is looking to diversify its offerings across price ranges, partnering with German automaker Daimler to create Denza, a high-end brand that seeks to compete for Tesla's well-heeled clientele.

At the other end of the range, it was the first company in the world to create mass-produced, fully electric buses, and has sold them to the US, Britain, India and Brazil, among others.

Chinese new energy vehicle sales -- a category that brings together both all-electric and hybrids -- quadrupled last year on the back of government subsidies, but still made up less than one percent of the world's biggest auto market.

But BYD believes such incentives will become increasingly unnecessary as the sector becomes "driven more by the industry's fundamentals than government policies", it said in its annual report, which predicted "a phase of acceleration in full force".

Even so more than 80 percent of BYD's production remains conventional petrol models, and last week it unveiled a new petrol-run SUV to great fanfare: the "Yuan", named to evoke the grandeur of the Mongol dynasty that ruled China for nearly a century.

Competition is becoming fierce as other automakers such as Ford, BMW and Renault enter the electric car field.

"It doesn't matter that you were the pioneer," said Namrita Chow, analyst at industry data firm IHS Automotive. "To stay at the top of your game and stay in the spotlight in China, you must have a constant stream of new, technically advanced products coming to market."

Electric cars have their highest-profile prophet in US-based entrepreneur Elon Musk and their widest adoption in Norway, but China's vast auto market will decide their worldwide future, experts say.

Top global brands will be fighting it out to electrify buyers at China's premier car show opening Monday in Beijing.

The country is already the world's largest auto market and took the number one spot for electric models last year, with some 247,000 "zero emission" cars sold -- quadruple the number in 2014 -- according to the China Association of Automobile Manufacturers.

So far only around one percent of cars owned in China are electric, but authorities are pushing them as a potential solution to the country's crippling air pollution health crisis.

The central government gives buyers subsidies of up to 55,000 yuan ($8,500) for each car and electric vehicles are exempt from traffic restrictions in China's congested major cities.

While electric cars are becoming more popular worldwide, particularly high-end brands like Tesla, their hefty price tags and restricted driving range mean they are still only a niche market.

Their evolution has been mainly state-subsidised, as in Norway, which has the world's highest penetration at 17 percent of new sales in 2015.

But experts say winning even a small chunk of Chinese sales -- which totalled 24.6 million last year -- could be a game-changer for electric cars.

"Given the size of the market, it would be a powerful driver" at a global level, Flavien Neuvy, auto expert at Observatoire Cetelem, told AFP.

Jean-Francois Belorgey, an expert with consultancy EY, predicted that by 2020, up to 750,000 electric cars will be sold in China every year.

"China is perhaps the one place in the world where the automobile industry can achieve the economy of scale needed to bring down costs," he said.

- 'Chicken and egg' -

Laurent Petizon, a specialist on the auto market with AlixPartners, added: "If there is a market where electric (cars) can hit enough of a critical mass that batteries will start to be reasonable in terms of price, it's China."

China's government aims to have at least five million rechargeable cars on the roads by 2020.

But Ben Scott, an expert in electric cars with IHS, said that target looked "quite optimistic".

"The incentives and subsidies that are being offered to consumers right now will be eventually phased out and will stop by the year 2020," he said.

"We're still in the very early days of the electric car market in China," he added, explaining that recharging infrastructure remained in its infancy, in a "classic chicken and egg problem".

Several Chinese manufacturers already produce electric vehicles, including the domestic market leader BYD, which also makes the Denza brand in a joint venture with Daimler.

France's Renault plans to release its Fluence ZE in China in 2017, and PSA group will be showing a unique C-Elysee electric sedan at the Beijing show that is also due to be released next year.

Chinese companies have also provided funding for Western firms' development projects, including Britain's Aston Martin and the US's Faraday Future, which sees itself as a possible competitor to Tesla.

But despite the progress, critics say China's electric cars will never be truly green if they are powered by electricity that is generated in carbon-intensive ways.

"It could be argued that you're just moving the CO2 from the exhaust pipe to a power plant somewhere," said Scott.

Belorgey adding that cutting the carbon footprint of China's electricity "will take some time".

"This does not solve the problem of the greenhouse effect, but it addresses the issue of the concentration of particles," he said.

tq/cah/bfc/slb/cah

IHS Global Insight

RENAULT

DAIMLER

PSA PEUGEOT CITROEN

TESLA MOTORS

BYD COMPANY


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