The Great Auto Electrification Race

Electric cars have been around for quite some time but taking forever to become a mainstream way of life. With the increased awareness about global warming, greenhouse gases, and rising gas prices there are stronger and stronger incentives every year for them to become a reality.

The US government, and auto industry have realized the same and thus you see the likes of the Chevy Volt (beautiful car, and love the ad) especially coming with a tax credit of 7.5 K on electric cars pitting them very competitively in the 20-30K range. California, and some other states provide a further subsidy of 5K i.e. 12.5K the government is spending on incentivising every electric car.

Which is great, but US is not the only country which has woken up to the reality. US contributes to about 17% of the greenhouse emissions globally, but China contributes about 24%. The Chinese government has realized the importance of Clean Tech and investing heavily into the same already being the biggest market for Wind Energy, and expected to leapfrog US & Europe in Electric Car penetration.

The electrification race has been compared by many to the space race in the 60s, and if that is true US is losing out. China has 120 domestic car companies compared to US’s 13, and there are 33,200 employees working in Lithium battery industry in China compared to 1,100 in the US. But the most important part is the money the Chinese government is putting behind the industry. US govt has decided to invest 5 Bn USD, but the Chinese government is pumping 17 Bn USD.

China is also being slightly smarter (or cunning) about how it gives the money away, they now have 19,300 USD in subsidies on each electric vehicles. GM has decided to develop cars in China with it’s partner SAIC. This combined with the fact that gasoline is twice as expensive in China than in US explains a lot. China has a lot of coal, and able to produce electricity cheaper. It is not just about a more sustainable option environmentally but also economically.

The catch though is China realizes that it is set to be the biggest Auto market in the world (GM already sells more cars in China than in the US), and that it has a lot of bargaining power in allowing foreign players to play in China. It is asking for technology transfer in one of the three core technologies
1. Electric Motors
2. Complex Electronic Controls
3. Power Storage Devices (whether batteries or fuel cell)
to qualify for the subsidy.

This is the same way China built it’s industries in big industries like Wind Turbines, High Speed Trains, and Water Purification.

It’s not a bad deal for the players also, China is hoping to have 5 Mn electric cars on roads by 2020, assuming that GM can get 15-20% market share i.e. 14.475 Bn USD in licensing for the technology! This is thus a model where those confident on their success would be more than happy to share, while others will prefer to stay out e.g. Nissan

By: Pramath Malik

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