Don#39;tputallNEVseggsinthebatteryba

原标题：Don't put all NEVs eggs in the battery basket

Among executives from different industries attending China's “Two Sessions” this year in early March, the outspoken Geely Holding Group Chairman Li Shufu drew special attention yet again.

“To deal with the problem of environmental pollution and the shortage of oil resources, methanol-powered vehicles should be promoted, and the road of energy diversification based on China's energy structure and market should be taken into consideration to mitigate the challenge of energy safety and improve air quality,” said Li at a media briefing in Beijing on March 2.

Just days before, Ninghai Zhidou Electric Vehicle Co., a company owned by Geely, received permission from the National Development and Reform Commission to invest in a new assembly plant in Lanzhou, Gansu Province to produce 40,000 electric cars a year with a total investment of ¥880 million ($128 million). No doubt, Li is as committed as anyone to making sure that Geely is part of the EV revolution, but he doesn’t have the luxury of being a starry-eyed visionary.

The market reality of EVs is that the demand is still not there. China sold only 39,800 EVs through the end of February, according to data from China Association of Automobile Manufacturers (CAAM), 80 percent of which were used for public transport. NEV sales plunged 74.4 percent in January, as the government tightened subsidy policies after discovering subsidy-cheating companies last year.

Automakers building EVs is to satisfy government requirement and make use of government policies rather than to capture consumer spending. And many consumers are buying EVs simply because it is hard to get license plate for traditional vehicles in big cities like Beijing and Shanghai.

Li was asked the question “do you think Tesla represents the future of the auto industry?” at an event and he answered by saying, “Not necessarily. Does Tesla make money now? How can we prove it? We need to be open minded to new things.”

What Li believes is that China's development of NEVs should consider China's energy structure and market due to practical considerations. Don't put all NEVs eggs in the battery basket.

Obviously, Li's vision for the electric vehicle industry is quite different than that held by Tesla. Tesla has gone all-in for lithium-ion batteries. Battery electric cars rely only on the battery pack to power the engine, which means the range is generally fairly limited. What other options are there? Brands such as Ford, BMW, Mercedes-Benz, Audi, Toyota – essentially all the big players on the market – are working mostly on hybrids in addition to their traditional lines of cars. The BMW i8, Chevrolet Volt, Toyota Prius Plug-In and Mitsubishi Outlander Plug-In are some well-known plug-in hybrid electric vehicle (PHEV) models on the market today. There are also the regular hybrids like the Prius and hybrid versions of poplar models such as the Honda Civic, Toyota Camry and Ford Fusion.

The methanol fuel proposed by Li is a clean burning, high octane fuel that can be blended with gasoline for automobiles and used in the production of biodiesel or fuel ethers and reduces carbon emissions by more than 90 percent compared to fossil fuels. Scientific studies indicate that methanol-fuelled cars generate as much as 80 percent fewer fine particulate matter (PM2.5) emissions than traditional gasoline-powered equivalents and cost on average 40-50 percent less than fuel. China began research and development of methanol cars in the 1980s. Up until now, apart from the four provinces such as methanol rich Guiyang that have been designated as methanol car pilot program bases by the central government, another 22 provinces have methanol-powered cars in operation, which consume energy worth ¥0.4/km ($0.06/km), compared with ¥0.7/km for gasoline-powered cars.

And methanol is an extremely plentiful element while we have to rely on import for cobalt, a critical metal for lithium-ion cells. Approximately 97 percent of the world’s supply of cobalt comes as a by-product of nickel or copper, which are based mostly out of Africa. In the past few years, since the methanol car pilot program started, only a few hundred units have been rolled out due to the lack of standards.

BYD, China's largest EV manufacturer, is also de-emphasizing EVs. In recent discussions, the company said it is focusing on the development of hybrid vehicles, rather than pure electrics. In BYD’s opinion, the future development of EVs is too dependent upon local government policies, which are inherently unpredictable.

Indeed the Chinese government’s push to have more EVs on the roads is spurring a production race that is straying away from market realities. Some companies with zero industry experience are rushing to make EVs, which are believed to be the largest gold mine of the auto industry. Mining company Western Resources raised ¥1.9 billion in 2016 to invest in battery makers and electric car startups.

Behind them are enthusiastic local governments that are each investing billions of RMB to build battery factories and electric car manufacturing lines. More than 30 electric car projects with a total investment exceeding ¥100 billion have been announced over the past 18 months, according to CAAM. The market is not ready for all the forthcoming production and is facing severe overcapacity.

And there are more difficulties that lie ahead for EVs such as the cost of building charging facilities and the concern of deterioration of aging battery pack capacity. The methanol-fuelled vehicles may be a good option. In other words – don’t put all NEVs eggs in the battery basket, keep them “scrambled,” like what Li suggests.

The above article appeared in the May 2017 (Vol. 12, No. 5) issue of China Automotive Review (CAR), our monthly tabloid magazine in English exclusively focused on the Chinese auto industry.

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