Transition to Electric Cars in China (NY Times)

From NY Times, April 20th, 2011

A STUDY prepared for the World Bank Transport Office in Beijing released today makes clear the urgency of China’s transition to electric cars. According to “The China New Vehicles Program: Challenges and Opportunities,” prepared by PRTM, a management consulting firm, China’s soaring consumption of imported oil could stifle the country’s economy, while emissions from petroleum-powered vehicles could choke its cities with air pollution.

Seventy percent of Beijing’s carbon monoxide and hydrocarbon emissions come from transportation sources. China’s oil consumption is expected to rise to 11.6 million barrels per day by 2020, from 7.6 million in 2007. Half its oil currently is imported.

“This was recognizance,” said Shomik Mehndiratta, lead transport specialist at the World Bank. “Usually, we focus our urban transport work on walking, cycling, public transportation and land development to minimize auto travel, and we leave technology completely out of it. But all the analysis suggests that 50 percent of global carbon reductions in transportation will come from technology.”

Any financial support from the World Bank would be dwarfed by the Chinese government’s commitment to spend $15 billion on building and selling electric cars in the next five years.

“The money is not the key here,” said Oliver Hazimeh, head of the global e-mobility practice and a partner at PRTM. “The bigger notion of this report is helping China figuring out what else needs to be addressed in the overall ecosystem to make E.V.’s work. It is a technical, business-modeling, policy-setting support role more than a financial one.”

As dire as the need to go electric is for China, the challenges in making the transition to electric vehicles are even more monumental, according to the PRTM study, and similar to the situation in the United States. The first several hundred plug-in cars started rolling on to American roadways earlier this year, but availability of vehicles is just the beginning.

The long list of challenges in China (and the United States) includes uncertainty about how much car charging infrastructure is needed; lack of standards for how and where vehicles will be charged; and the need for industries that have traditionally not worked together — utilities and auto companies, for example — to forge partnerships.

Then there’s the elephant in the room: how to gain consumer acceptance for battery-powered cars when their driving range is shorter than gas or diesel vehicles but their costs are significantly higher. Helping China to reach massive scale of electric car production is expected to bring down those costs in the next five to 10 years.

According to Mr. Hazimeh, in both China and the United States different regions and constituents are each developing their own standards for vehicle and battery production, charging infrastructure and related business models.

“In China, you can’t just go in as we do in the U.S., and say here’s the money for parts solutions without looking at connecting the elements,” he said.

The study recommends roughly $50 million in loans for pilot projects, from building charging infrastructure and related information networks to evaluating the commercial feasibility of re-using E.V. batteries in secondary markets.

The consequences extend beyond national borders, as China is now the world’s largest auto market and is expected to become the world’s largest producer of electric car batteries and drive systems. The Chinese automotive market is expected to grow to 30 million vehicles per year by 2030, from 12.9 million vehicles in 2009.

“The next stage is to take the lessons learned, and put it into a more coordinated aligned roadmap,” Mr. Hazimeh said. “Otherwise, you face a fragmentation of solutions.”