Beijing, October 29, 2008—China is ready to substantially increase the number of electric vehicles on its roads over the next 20 years, a new study from global management consulting firm McKinsey & Company finds. The study, "China charges up: The electric vehicle opportunity," finds that China's auto industry, government, and consumers are ready to embrace electric vehicles as a commercially viable and environmentally friendly alternative to today's gasoline-powered automobiles. According to the study, electric vehicles can help China significantly cut greenhouse gas emissions, reduce oil dependency, and become a viable contender in the global electric vehicles market.
The study shows that electric vehicles, including plug-in hybrid electric vehicles and battery electric vehicles, can reduce per vehicle carbon emissions (including emissions produced directly by the vehicle as well as those generated by today's largely coal-fired electric power sources) by 19 percent over today's gas-powered automobiles. If China were to diversify its electric power supply away from coal-fired plants and toward renewable energy sources, however, per vehicle emissions from electric vehicles could be reduced by nearly 50 percent.
The study shows that by adopting a combination of several different technologies—electric vehicles, compressed natural gas (CNG) vehicles, gas–powered internal combustion engines, and technological enhancements to reduce emissions—China could reduce total CO2 emissions from passenger vehicles by up to 40 percent by 2030.
Electric vehicles are also an opportunity for China to enhance its energy security by reducing its reliance on imported oil. Assuming 30 percent of all passenger vehicles in China are electric vehicles by 2030, China could save up to 700 million barrels of oil, or 10 percent of the estimated 6.2 billion barrels of oil it is projected to need by then.
Electric vehicles also represent an attractive business opportunity for China's automakers and parts manufacturers. If electric vehicles were to achieve 30 percent penetration in China by 2030, the domestic market for assembled vehicles could reach 1.5 trillion renminbi by then, while the domestic parts market could be worth up to 400 billion renminbi.
Several Chinese manufacturers are positioning themselves to compete in the global market for electric vehicles. Shenzhen–based BYD has announced plans to launch plug-in hybrid electric and battery electric vehicles. Thunder Sky Energy Group, a Shenzhen-based lithium-ion battery manufacturer, supplies batteries that are used in electric buses in the United States, Japan, Italy, and Finland.
Recognizing the advantages of electric vehicles, the Chinese government has taken a number of substantive actions to kick–start their development and adoption. Besides channeling money into research and development of electric vehicle technology, the Chinese government can also promote greater consumer take-up of electric vehicles by increasing their affordability through tax incentives.
Paul Gao, partner and head of McKinsey's Automotive and Assembly Practice in Asia, believes, "With its large and rapidly growing domestic auto market, a pool of domestic automakers and parts manufacturers that are investing in related technologies, and essential backing from the government, China could play a shaping role in the global electric vehicles market."
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