A report published by Reuters on January 10th uncovered 29 global automakers’ plans to invest at least $300 billion in electric vehicles over the next five to 10 years, with more than 45% of that figure going into China.
The race is on to lead the EV market that will overtake and replace petrol and diesel vehicles over the next few years through an influx of technology and new regulations being issued by governments amid environmental concerns. In addition to this, automakers are well on their way to producing EVs that are far superior to conventional vehicles, with improved battery costs, range and charging time. In short, this is all great news.
Germany is leading the pack in terms of EV investment, followed by China and the US. The lion’s share of this planned investment – over $135 billion – will be spent in China, which has leapfrogged the automotive industry since heavily backing EVs. One of the worst regions for petrol and diesel cars is well on its way to becoming a leader of electrification.
With many new EV brands entering the market over the next few years, consumers are no longer restricted to automakers which have dominated the market for the best part of a century. China identified this market potential early on and is now a leader in battery production, thanks to government incentives that have promoted battery and EV production in the country. As a result, global powerhouses in the automotive industry such as VW, Daimler and General Motors could end up investing more into the region than China’s own leading automakers like SAIC and Great Wall Motors.
“There’s no doubt that China is setting the tone in electrification, both in terms of demand and supply,” Lukas Neckermann, Managing Director of Neckermann Strategic Advisors and Author of Smart Cities, Smart Mobility tells Auto Futures. “Quotas are driving volume, and battery production volume is driving the price down. The global impact is clear: given some incentive scenarios and use-cases, we already have Total Cost of Ownership parity with internal-combustion engine vehicles, irrespective of oil price or protectionist measures. There’s no turning back now, either.”
Ultimately, China has made itself an attractive hub for EV production and will continue to benefit from foreign investment. In turn, this will increase registrations in the global market, especially as technology advances and production costs continue to decrease.
A Silver Lining
The automotive industry has taken a lot of hits in recent years and things are set to get worse, most notably from technology companies trying to take a piece of the mobility pie. However, it’s not all bad news. China’s high production and low-cost manufacturing is perfect for traditional OEMs which are trying to transform into environmentally-conscious automakers. These companies have been worried about the costly transformation of their business structures, especially when EV adoption rates still haven’t taken off as much as they would have liked to and authorities begin to crack down on emissions.
“Although the Chinese car market is currently growing somewhat slightly slower than in recent years, this market is the most important worldwide – for BYTON as well as for almost all other car manufacturers,” BYTON CEO, Carsten Breitfeld explains to Auto Futures. “Thanks to quick decisions and a clear pro-electric car policy, China’s infrastructure is ready for nationwide electrification of transport. In 2018 alone, 331,000 new charging stations were built (Europe currently has a total of 74,000 overall). The electrification of mobility is being accelerated by the general openness of large sections of the Chinese public to new technologies and the rapid consolidation of a stable middle class.”
Other regions around the world are building a sufficient EV infrastructure, through EV charging stations, working to change the common misconceptions of EVs and introducing new policies that support electrification, but they are still some way off China. The silver lining here, however, is that China is driving change across the globe, whether that is through other countries and automakers panicking or from a new understanding within the industry.
Everybody’s a Winner
Fundamentally, more EVs will create more EV demand, which is why China is so important to the global market. This kind of investment, into not just China but the rest of the world, shows how far electrification has come over the last few years, as automakers aggressively expand their EV offerings. With the appropriate infrastructure supporting this roll out, the industry can soon look forward to a much higher market share for EVs.
Robert Bryne, the CEO of leading EV charging company Franklin Energy tells Auto Futures that the news of this predicted investment “was music to our ears and is a glimpse of what is to come for the electrification of vehicles globally.”
“The EV market is beginning to see an unprecedented level of investment from global Tier One manufacturers and new start-ups. This recent news truly reflects the direction of travel the automotive sector is taking and highlights the disruption that lies ahead for the traditional car makers such as Ford and GM,” he continues. “Commitments from the likes of Volkswagen show real ambition to electrify not just VW passenger vehicles but the entire group, with a prediction to have over 300 electrified models by 2030 is somewhat mind blowing. This is just the beginning, fast forward 10 years and we will be in the midst of an automated, electric and connected car era, whilst the combustion engine vehicle will be a thing of the past like coal powered trains.”
With China and VW leading the $300 billion investment in EVs and technology over the next decade, the industry’s transition from fossil fuels has accelerated dramatically. China has not just caught up to German, Japanese and US automakers, which have dominated ICE vehicles, but has now positioned itself as a leader for EV development and developed into an automotive powerhouse on the world stage.
Industry experts across the industry have identified China as the best environment to develop the next generation of cars, especially with regulators moderating the shift over to EVs and a world-class talent hub thanks to technology advancements. But perhaps the most important aspect is the new global alliances we are seeing, such as between VW and China’s automakers and suppliers, which will propel innovation and the global roll out of EVs.