automotive

The increasing power of the electric market

Paul Burrows Paul Burrows

The electric vehicle market continues to grow thanks to new companies and traditional brands alike embracing the potential for change in the industry.

The electric vehicle market has continued to gain traction in 2017. The major motor manufacturers are investing more money, while changing UK and French legislation bans the sale of new diesel and petrol vehicles from 2040. If these developments fulfil their potential, then does the electric plug-in vehicle represent the path to the success of clean future transport?

Electric vehicles are the original ‘come-back kid’. The first electric production car made its debut in 1883 – well before Daimler-Benz’s internal combustion engine vehicle in 1886 – and by 1898 had a land speed record of 39 mph. However, the internal combustion engine took the lead, with the milk float and the Sinclair C5 being the icons of a moribund electric market, until the 1990s when automotive manufacturers once again started to invest in this area.

Chinese investment in electric vehicles

The Chinese Government provided financial support for its electric vehicle market for a number of years. In 2001, China started its first high-tech development project – 863 program – and by 2004, 16 state-owned companies had set up their own electric vehicle association1. Investment was swift in 2007, comprising US$300 million for energy efficient vehicle development and was followed in 2009 by a further US$1.5 billion for new e-vehicles industrialisation and US$3 billion for technical development. Since this early investment in e-technology, the Chinese Government has continued to maintain the pressure to encourage growth2.

China is aiming to sell a total of 35 million vehicles, and new energy vehicles (NEVs) are expected to comprise one-fifth of all vehicles sold by 20253. This is an ambitious target, as green vehicle energy sales currently represent only 2% of the total number of vehicles sold in 20174. Furthermore, many of the large manufacturers are grappling with the potentially imminent introduction of new rules in China where up to 8% of vehicles sold in China will have to be electric. Those who do not achieve these targets could be restricted from selling vehicles in China, or could have to purchase credits from their rivals who have exceeded their quota of sales. Although these rulings are still not fully confirmed, they have generated a number of joint ventures and boosted interest in the large international automotive manufacturers investing in China’s electric vehicle and battery markets.

Chinese joint ventures to drive electric vehicle development

Daimler and BAIC have recently partnered in a joint venture known as Beijing Benz Automotive. Their latest joint investment is reportedly worth in excess of US$735 million5. Recently China’s regulators agreed a joint venture between VW and JAC to build 100,000 pure battery electric vehicles per year in a project worth US$740 million6. Volvo – now a Chinese owned company – has also indicated that it will introduce its first 100% electric vehicles in 2019 and will use electric motors in all its vehicles from 2019 onwards with no standalone internal combustion engines7.

However, it is not only the Chinese manufacturers who are making advances in this area of the market. The US EV manufacturer, Tesla, announced at its Q2 2017 results that the company will produce 5,000 Model 3 vehicles per week by the end of 2017, rising to 10,000 units per week at some point during 20188.

The future for electric vehicles market

Many large manufacturers are indicating that electric vehicles will become a significant part of their brand portfolio going forward. Daimler has indicated that, by 2025, there will be ten new electric cars that could contribute to 15-25% of Mercedes’ sales9. Toyota will be mass producing electric vehicles by 2020 and General Motors is planning to make ten new vehicles and also to make the first profitable electric vehicle10.

Notwithstanding all this excitement surrounding electric vehicles, there are still numerous unanswered questions. Will the average automotive customer reject the internal combustion engine in favour of electric? In a number of countries, such as UK and Norway, the local government incentivises buyers, so what will happen to electric vehicle sales in the short-term when these incentives are removed?  Can enough electricity be generated – especially in the UK – to charge all these electric vehicles? What changes will electric make to the manufacturing, selling and servicing of vehicles? Over the coming months, we will delve in more detail into some of these pressing issues.

Sources:

  1. Ministry of Science and Technology of the People´s Republic of China - National High-tech R&D Program (863 Program)
  2. Reuters - China electric vehicles to hit 1 million by 2020: report
  3. Autovista Group, China to loosen JV restrictions as targets one-fifth of car sales to be NEVs by 2025
  4. Bloomberg, Daimler and BAIC jointly invest in the localization of battery electric vehicles in China
  5. Reuters, Daimler, BAIC to invest $735 million in electric vehicles in China  
  6. Reuters, Chinese regulator approves VW-JAC Motor electric car venture  
  7. Autocar, All Volvo models to become electrified from 2019
  8. Tesla, Shareholder Update Q2 2017  
  9. Reuters,  Daimler to make more than 10 electric cars by 2025
  10. Telegraph, General Motors says it will become the first automaker to generate profit from electric cars