the electric vehicle landscape in china which perspectives for

The Electric Vehicle Landscape in China Which Perspectives for Western Carmakers?

Bo Chen, Christophe Midler PVMI Conference, Sep. 11th 2015

Literature & Research Question

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1.  Literature on Electric Vehicles in China Chen and Zhao, 2013; Gong et al., 2013; Hao et al., 2014; Helveston et al., 2015; Howell et al., 2014; Liu and Kokko, 2013; Marquis et al., 2013; Tan et al., 2014; Tao, 2013; Wang and Su, 2011; Wan et al., 2015; Zhang et al., 2014a, 2014b, 2013; Zheng et al., 2012

2.  Strategy in Emerging Countries for Western MNCs Bhattacharya and Michael, 2008; Dawar and Chattopadhyay, 2002; Jolly, 2013; Khanna and Palepu, 2006; Lieberthal and Lieberthal, 2003; Zeng and Williamson, 2003 BUT Lack of China EV specific Strategic Perspectives for Western OEMs è Research Question:

What electric vehicle product and deployment strategies for foreign OEMs in China?

Bo Chen, Christophe Midler – PVMI Conference, Sep. 11th 2015

Methodology & Theoretical Framework

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Theoretical Framework Bo Chen, Christophe Midler, 2015


•  Academic literature

•  Grey literature

•  On-going PhD research at Renault EV Product Planning

•  Empirical research in China, 4 missions from 2013 to 2015 •  Research partnership with the Center for Automotive Industry, Shanghai Tongji University

2009 – 2015 EV Sales Summary

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MARKET STATUS


PEV sales from 2009 to Q1 2015 in China from Chinese carmakers and Western Joint Venture and Imports Chen and Midler, 2015

Western OEMs’ Main Drivers & Barriers

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MARKET STATUS


Drivers

•  Market potential

•  China part of global EV strategies

•  Support conventional cars sales through CAFC compliance

Barriers and Weaknesses

•  China’s strategy, biased policies (JVs, technology transfers), local protectionism and competitors

•  Compliance electric vehicles, inadequate products

•  JVs’ own product competition between electric and conventional ranges

Total Market Typology

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MARKET STATUS


Chinese Plug-In EV market typology (Chen and Midler, 2015) * Lead acid based vehicles

cannot receive central government purchase incentive

Overview of 5 Strategic Variables

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FIVE STRATEGIC VARIABLES

Five Strategic Variables selected for our research (Chen and Midler, 2015)


Hypotheses on Variables

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FIVE STRATEGIC VARIABLES

1.  The Premium segment is incompatible with T3/4 cities: lack high-income population.

2.  The Premium segment is incompatible with ECS: carsharing are cost-sensitive and require low vehicle up-front cost, low replacement parts cost and low maintenance costs.

3.  Premium BEVs are incompatible with 220 V: the large battery results in high full charging duration (around 30 hours for a Tesla Model S @220V).

4.  Mainstream PEVs are incompatible with T3/4 cities: these territories lack middle-income buyers. Limited number of buyers does not fit the mainstream segment.

5.  Low End PEVs are incompatible with Dedicated charging in T3/4 cities: the cost of a dedicated charger is too high for middle to low-income population.

6.  Low End BEVs are incompatible with Dedicated charging for B2B: Demanding application require dedicated charging and large batteries. Low End BEVs have small batteries.

7.  PHEVs are incompatible with ECS: ECS is a short-term rental application and requires low vehicle up-front cost, low replacement parts cost and low maintenance costs.


Space of Possibilities

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STRATEGIC OPPORTUNITIES IDENTIFICATION


29 Valid Opportunity Schemes

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STRATEGIC OPPORTUNITIES IDENTIFICATION


3 Strategic Opportunities Schemes identification sub-spaces (Premium, Mainstream and Low-End) Bo Chen, 2015

Potential Assessment

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POTENTIAL ASSESSMENT


1.  Keep pushing Dedicated Charging where it Makes Sense •  In the private Premium BEV segment (Tesla)

•  In captive B2B such as taxi and corporate fleets, chauffeuring businesses and electric carsharing systems

2.  Privilege Volumes over Margins •  Generate CAFC credits for ICEV business

•  Favor B2C over B2B for higher potential volumes

•  In emerging countries, “volumes drive profits, not margins” (Dawar and Chattopadhyay, 2002)

3.  Focus on Market Evidences over Institutional Forces •  Top-down push is inefficient and favor domestic players (Chen & Midler, 2015)

•  Higher tiers cities are not EV ready due to difficulties of dedicated charging deployment (T. Wu et al., 2015)

•  220 V charging popular among private buyers (Tesla, PHEVs, Official LSEVs)

•  Fast growing Informal LSEVs market in lower tier cities (Kimble and Wang, 2013; Shang and Shi, 2013; Wang and

Kimble, 2012a, 2012b; Z. Wu et al., 2015)

4.  Capitalize on the Full Value of Electric Carsharing •  Concept promotion, Brand promotion, Knowledge production and Partnerships creation (Maniak et al., 2014)

•  Autolib’ Paris, Electric Car2Go San Diego, Shenzhen ECS projects cases (on going research, empirical data)

•  Being operator (Car2Go) or just vehicle supplier is a question (many Chinese projects developing)

Potential Assessment

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5.  Adopt 220 V as the Main Charging Mode for PHEVs and small BEVs •  Dedicated charging is the dominant techno-push design of the western EV industry

•  Capitalize on ubiquitous 220 V infrastructure while keeping faster charging abilities (Official LSEVs)

•  Both market evidences (LSEVs, PHEVs) and literature suggest the relevance of 220 V charging

•  In the USA, “85–89% of drivers in the United States can be satisfied with electric vehicles charging with standard

120 V wall outlets at home only” (Saxena et al., 2015). 6.  Tap China’s Lower Tier Cities’ Potential

•  Tier 3/4 cities offer better growth prospects and more “EV ready” environments than tier 1/2 cities : common 220 V

charging, low density of gasoline stations, poor public transportation networks, individual homes with parking,

unreliability and high maintenance costs of low cost gasoline cars, great mobility needs (Wang and Kimble, 2012b)

7.  Explore Low End Segment Designed-to-Cost BEV •  Charged on 220 V overnight (LSEVs) but faster charging capable (like Official LSEVs)

•  Good enough products (Gadiesh and al., 2007) at below 150k RMB price to compete with LSEVs

•  The Dacia Logan Entry case (Midler and al., 2013)

•  Long lasting products, (Dawar and Chattopadhyay, 2002) ability to cope with variability (income, roads, charging)

•  Multi-positioning : Low End in T1/2 cities, Mainstream in T3/4 cities and Premium in rural areas

•  Resistant to new entrants and to technology transfer requirements (non-technological design-to-cost value)

•  Address multiple business models: B2C but also ECS (low cost, low repair cost and robust vehicles)

12 Selected High Potential Opportunity Schemes

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12 Selected High Potential Strategic Opportunity Schemes Bo Chen, 2015

29 valid Strategic Opportunity Schemes, showing 12 high potential ones (highlighted)

Bo Chen, 2015

Opportunity Schemes

Product Strategy Deployment Strategy Vehicle

Segment Powertrain

Type Charging

Mode Business

Model Deployment Territories

P1 Premium BEV Dedicated B2C T1/2 P4 Premium PHEV 220 V B2C T1/2 M2 Mainstream BEV 220 V B2C T1/2 M3 Mainstream BEV Dedicated B2B T1/2 M8 Mainstream PHEV 220 V B2C T1/2 L2 Low End BEV 220 V B2C T1/2 L3 Low End BEV 220 V B2C T3/4 L4 Low End BEV 220 V B2B T3/4 L5 Low End BEV Dedicated ECS T1/2 L6 Low End BEV 220 V ECS T1/2 L7 Low End BEV 220 V ECS T3/4 L9 Low End PHEV 220 V B2C T1/2

Key Findings

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CONCLUSION


Improve Mainstream BEVs and PHEVs •  Promote 220 V as the Main Charging Modality

Low end BEV Opportunities in Lower Tier Cities •  220 V is the main charging modality, faster charging capable

•  Tap the potential of private ownership in lower tiers cities

•  Compete with high volume official and informal LSEVs

•  Generate CAFC credits with volumes

•  Protect the product from technology transfers via design-to-cost

•  Supply T1/2 cities electric carsharing programs

15 Bo Chen, Christophe Midler – PVMI Conference, Sep. 11th 2015

Thank you! Merci ! Grazie !

谢谢！

Fuzhou, T3 city Shanghai, T1 city

Tesla illegal 220 V charging in Chengdu

Renault Kwid & CMF Platform

Sales Data 2009 – Q1 2015 + Usages

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MARKET STATUS

Brand / Model PWT Control Annual Sales

Total 2009 2010 2011 2012 2013 2014 Q1 2015 BYD Qin PHEV Private 142 14747 6319 21208

Chery QQ3 EV BEV Local 2167 3129 5727 7866 1429 20318 Geely-Kandi K10 EV BEV Private 4694 7500 1450 13644

BAIC E150/E160/EV200 BEV Local 645 1466 5232 1950 9293 Zotye Zhidou E20 BEV Private 7341 1927 9268 JAC J3 EV / iEV BEV Local 583 1002 2485 1309 2760 502 8641

BYD e6 BEV Private 33 401 1690 1544 3560 1099 8327 SAIC Roewe 550 PHEV PHEV Local 2600 1442 4042

Tesla Model S BEV Import 2499 1329 3828 Zotye Z100 Cloud EV BEV Private 2200 1526 3726

BYD F3DM PHEV Private 48 417 613 1201 1005 3284 Geely-Kandi K11 Panda EV BEV Private 1285 928 2213

Chery eQ BEV Local 542 1061 1603 Zotye TD100 EV BEV Private 845 236 1081

Venucia e30 BEV JV 15 216 582 218 1031 SAIC Roewe e50 BEV Local 238 409 168 815

Chery Riich M1 EV BEV Local 152 216 197 565 Denza EV BEV JV 132 267 399

Zotye M300 EV BEV Private 134 220 1 355 Zinoro 1E BEV JV 307 307

ChangAn Hafei Saibo EV BEV National 281 1 282 GAC Trumpchi GA5 PHEV Local 255 255

SAIC Springo EV BEV JV 14 69 130 213 Zotye T200 EV BEV Private 200 200

Brilliance Zhonghua BEV Local 92 92 BMW i8 PHEV Import 83 83 VW e-up BEV Import 46 46

Porsche Panamera PHEV Import 40 40 BMW i3 PHEV Import 39 39

Low Speed EVs (total) BEV Private 16000 30000 64000 120000 180000 300000 110000 820000 Subtotal Official PEVs 48 1033 4183 10829 17254 60149 21702 115198

BEVs 0 616 3570 9628 16107 42640 13686 86247 PHEVs 48 417 613 1201 1147 17509 8016 28951

Subtotal Foreign JV 0 0 0 29 285 1151 485 1950 Subtotal Foreign Imports 0 0 0 0 0 2707 1329 4036

Total (Official + Low Speed EVs) 16048 31033 68183 130829 197254 360149 131702 935198

Passenger PEVs (BEVs + PHEVs) annual sales by model in China from 2009 to Q1 2015 (PWT: powertrain type, JV: joint venture)

Chen and Midler, 2015

Sources

1.  The 2015 Automotive Market Analysis and Forecast, State Information Center, July 2015,

2.  The State Council Development Research Center Intranet Database of Auto Model Production and Sales, published by the Harvard Kennedy School (Howell et al., 2014), specifying light duty NEV sales by powertrain for the 2003-2013 period and by model for the 2011-2013 period,

3.  The EV Pilot Cities Reports for the MOST obtained by our research team and covering the complete 2009-2012 period for the 25 Pilot Cities,

4.  China monthly and yearly sales by model aggregated by Jose Pontes, ev-sales.blogspot.com,

5.  China Electric Vehicle Industry Report 2014-2015 Summary, Research in China, April 2015,

6.  An aggregation of various online sales reports on specific models for specific time periods.

Further reading

Chen, B., Midler, C., 2015. The Chinese Electric Vehicle Landscape: a Typology of the Market. 2015 PVMI Conf. Proc.


Official Market Sales

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MARKET STATUS


Official Passenger PEVs (BEVs + PHEVs) sales in China from 2009 to Q1 2015 Chen and Midler, 2015

Official Market Sales

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MARKET STATUS

OFFICIAL LOW SPEED EVs (T2/3 Cities) •  mostly privately owned •  charged overnight on 220 V outlets •  deployed in lower tiers cities (2-3) •  lack quality and safety

PHEVs (T1 Cities) •  mostly privately owned •  benefit from a regulatory

hole (bypass licence plate restrictions)

•  they do not trigger charging infrastructure deployment

•  are operated 50% of the time in gasoline mode

MAINSTREAM BEVs (T1 cities) •  mostly fleet vehicles •  constrained by lack of charging

infrastructure •  most rational middle segment •  Suffer from direct comparison

with gasoline models


Informal Low Speed BEVs Market

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MARKET STATUS


•  Bottom up, market driven in tier 3/4 cities •  Local support and licence but no central support •  220 V home charging with lead acid batteries •  Priced at 25-40k RMB, no buying incentives •  Frugal design, poor safety and quality •  Online selling, self maintenance

Top speed 40-80 kph, mostly 60 kph Range 80-150 km

Battery type Lead-acid batteries, Lithium based batteries available as an option on some luxury models

Battery capacity 100 Ah to 260 Ah, mostly 150 Ah Motor power 4-10 kW

Charging time 8-10 hours on AC 220 V outlet

Typical LSEV Specifications & Performance d1ev.com, Shanghai Tongji University, 2013

Informal Passenger LSEV (BEV) sales in China from 2009 to Q1 2015 Chen and Midler, 2015

d1ev.com, autohome.com.cn

Poor performance from Western OEMs

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MARKET STATUS

Chinese parties Foreign parties New JV Brand Brand Launch Model Name Cumulative Sales until Q1 2015 Platform

BYD Daimler Denza 2010.05 Denza EV 399 Mercedes B-class DFM Nissan Venucia 2010.09 E30 1031 Nissan Leaf SAIC VW Tianyue (Tantus) 2011.03 Tantus EV Not significant VW Lavida BlueMotion FAW VW Kaili 2011.05 Carely E88 EV Not significant VW Bora BAIC Hyundai Shouwang 2011.11 500e EV Not significant Hyundai Elantra

DFM + Yueda Kia Dianyue 2012.02 N30 Not significant Kia Cerato Changan Ford Jiayue 2012.10 Jiayue EV Not significant Ford Focus EV

SAIC GM Springo 2012.11 Springo EV 213 Chevrolet Sail Hatchback Brilliance BMW Zinoro 2013.04 1E 307 BMW X1

FAW Toyota Ranz 2013.03 E50 Not significant Toyota Corolla EX GAC Toyota Leahead 2014.10 i1 EV Concept Not launched yet Toyota Yaris DFM Renault ? ? ? Not launched yet Renault Fluence Z.E.


New joint venture brands producing NEVs derived from existing ICEV platforms Various sources, 2015

Tesla Model S: 3828 Units

Suggestions to classical B2C approaches

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POTENTIAL ASSESSMENT & CAPABILITIES



Opportunity Schemes


Segment Powertrain

Type Charging

Mode Business


P1 Premium BEV Dedicated B2C T1/2 P4 Premium PHEV 220 V B2C T1/2 M2 Mainstream BEV 220 V B2C T1/2 M3 Mainstream BEV Dedicated B2B T1/2 M8 Mainstream PHEV 220 V B2C T1/2 L2 Low End BEV 220V B2C T1/2 L3 Low End BEV 220V B2C T3/4 L4 Low End BEV 220 V B2B T3/4 L5 Low End BEV Dedicated ECS T1/2 L6 Low End BEV 220 V ECS T1/2 L7 Low End BEV 220 V ECS T3/4 L9 Low End PHEV 220V B2C T1/2

Singularity: Tesla to lead private Premium BEVs (P1) •  Premium to drive image and technology of EVs •  Sustainability of the trickle-down approach and Superchargers’ ability to cope with high demand?

Democratize private PHEVs in Premium and Mainstream segments with 220 V charging (P4, M8) •  Change the charging paradigm from dedicated to 220 V •  Major OEMs are already investing in PHEVs (BMW, VW,

GM, Toyota) •  Strong Mainstream competition from BYD and Roewe

Push Mainstream BEVs with 220 V charging (M2) •  Change the charging paradigm from dedicated to 220 V •  Compact and affordable city car •  Smart ed, VW e-up (160k RMB) still too expensive ? •  Competition with Low End BEVs

The Full Value of B2B and ECS

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Opportunity Schemes


Segment Powertrain

Type Charging

Mode Business



Engage electric carsharing initiatives in T1/2 (L5, L6) and T3/4 (L7) cities •  Low End BEVs are privileged for ECS •  Eventual stations requires strong local authorities support •  Become operator or sell cars to Chinese ECS operators? •  Daimler (e-Car2Go) and Renault (TwizyWay, Autolib)

è Conduct Business to Local governments

Push B2B fleet projects with dedicated charging in T1/2 cities (M3) •  All OEMs with Mainstream BEVs •  Target cities with no existing Chinese competitors

Explore B2B applications with 220 V charging in T3/4 cities (L4) •  Requires a Low End BEV •  LSEVs : police patrol, government fleet

Novel Products : The Low End Segment

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Opportunity Schemes


Segment Powertrain

Type Charging

Mode Business



Explore the high potential Low End BEV segment with Design-to-cost and typical Entry management (L2-7) •  High potential of B2C in T3/4 cities •  Renault experience with Entry lineage (Midler et al., 2013) •  Hyundai’s capability to produce low end?

Lower tier cities deployment agility with 220 V charging (L3, L4, L7) •  Deployment agility and dealership network expansion •  Explore lower tier cities in local JV regions

A Low End PHEV to explore?

Context

24 Bo Chen, Christophe Midler – PVMI Conference, Sep. 11th 2015

•  Indigenous R&D and Innovation •  Technology transfer through JVs •  Try all technologies and BMs •  Emergence of National Champions

2000 1990

Technology Development

2005

Buses & Special Purpose Vehicles (SPV) Development

Taxis & Fleets Development

Failure of Mass Private

EV push

2009 2012 2015

PHEV & LSEVs raise

+ JVs ?

ANKAI E-buses in Hefei BYD E-taxis in Shenzhen

PHEV – BYD Qin JV – Venucia e30

LSEV – Chery QQ EV

Pushed by Wan Gang, MOST

EV Pilot Cities Phase 1 : 25 cities

33k NEVs Total 214 Private BEV Only

EV Pilot Cities Phase 2 : 88 cities

Objectives end 2015 : 500K NEVs

Police SPV EV

5 mil. NEVs 2020 !

the electric vehicle landscape in china which perspectives for

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