The modern automobile was of course pioneered by visionary Henry Ford, whose ingenuity and legacy was as much about creating a product that transformed the world as it was about revolutionizing the industrial process of manufacturing cars. Then came the second wave, where the Germans and Japanese emerged to mount a sustained challenge to American dominance in autos. Will the Chinese be the new spirited challenger in the third wave? Is China the battleground for the electric vehicles revolution?
The Chinese would like to think so. EVs are all the rage these days in China, at least among industry and policy wonks in Beijing. The logic is simple: Having missed the industrial revolution, and then assumed the role of a benchwarmer during the information revolution, China must now seize on the energy revolution. Beijing wants game-changers, and it has pinned hopes on EVs as one of them. Consumer demand for autos continues to be robust in China, even after certain subsidies were peeled back. And having a personal car symbolizes something more than just the abstract notion of entering the middle-class. To the average Chinese, a car is a definitive emblem of private ownership in a country where the state still owns the land on which one's home sits (in one recent newspaper poll, 60% of respondents said they planned to buy a car in the next five years). Yes, yes, the status symbol of having a luxury-brand car in urban China shouldn't be overlooked, and it may even improve your mating prospects. A few years back when I lived in Shanghai, Chinese friends would tell me that "BMW" actually stood for "Be My Wife"--apparently irresistible to many Shanghainese damsels, distressed or otherwise (this is an entire topic onto itself).
A voracious appetite for automobiles could mean 200 million vehicles on China's roads by 2020, according to Chinese officials. That will rival the current US number of roughly 250 million vehicles. So introducing EVs into China's fleets makes a lot of sense. But consumers aren't really clamoring for EVs now--like in other markets, the prohibitive cost remains the biggest barrier. An e6 model from China's private sector EV darling BYD--which isn't being sold to individual consumers yet--can run as much as $44,000 without subsidies, well beyond the reach of most self-described middle-class Chinese.
That of course hasn't stopped the Chinese government from throwing numbers behind its effort like usual. Numbers like $15 billion investment over 10 years...5 million EV units sold annually by 2020. Little has been discussed in terms of the "hows" of commercialization. And so there exists an enormous chasm between technological aspiration and commercial execution (and one may argue what good is technology if it cannot be commercialized at scale). But it seems that China's quest after technological prowess has made commercialization an afterthought, almost peripheral for now. And even on the technology front, questions remain about the pace of advancement and breakthroughs in batteries that would make EVs widely appealing and affordable (a meaningful carbon tax would certainly change dynamics). Not to mention the host of infrastructure challenges from charging stations to parking garages in China and the slew of problems that beset China's auto industry. Then there's also the jockeying between state-owned giants and private sector champions--a subject that will be treated at length another time.
Casting all of that aside, China's ambition is palpable, and many are now riding on that ambition. HSBC's recent report went so far as to trumpet EVs over other renewable energy, and China is supposed to be the one to meet that clarion call. (Disclosure: HSBC is apparently invested in Better Place, a start-up focused on charging stations, which also is collaborating with China's Chery auto on EVs.) So this brings me to a larger point, and prompt questions for which I don't have the answers. The development of EVs in China has become a strategic focus, which means it is a pillar of China's industrial policy. Then is betting on China's EV breakthrough also a bet on the success of Chinese industrial policy? And if China does succeed, what will that say for innovation by top-down fiat and sheer will to make it so? Is this what the energy revolution will be defined by? Sure, I'm simplifying here, but these questions should be entertained.
Damien Ma is a fellow at the Paulson Institute, where he focuses on investment and policy programs, and on the Institute's research and think-tank activities. Previously, he was a lead China analyst at Eurasia Group, a political risk research and advisory firm.