By Ross Douglas, Founder & CEO, Autonomy
The Future of Urban Mobility Series: Part I
China, the most populated country and number one polluter in the world, is currently facing an urban mobility crisis. Looking for an effective solution, the government has bet on electric vehicles by introducing subsidies, green plates, and investing in charging stations. Combined with the right mindset and favorable economic circumstances, these measures are paying off: 770,000 electric vehicles were sold last year and many new brands are being born. It thus seems safe to predict that the future of Chinese urban mobility will be electric.
There are over 1.414 billion people living in China today, and the country’s urban population is on the rise. In 2012, the Chinese National Bureau of Statistics reported that the urban population exceeded its rural one for the first time in history, and by 2030, up to 70% of Chinese people will be living in cities according to the World Bank. This phenomenon is leading to the overburdening of transport infrastructure as well as major congestion and parking problems in many cities. Though vehicle ownership remains low by the standards of developed countries, China is now the world’s largest producer and consumer of passenger vehicles. Inevitably, these issues have caused an increase in pollution levels, as seen in the 2014 graph below for Beijing (PM2.5 refers to particulate matter which is two and a half micron or less in width):
In the face of this alarming situation, the Chinese government has decided to promote electric vehicles (EVs). As proof of its commitment, it has included e-mobility in the “Made in China 2025” strategy which aims to upgrade the country’s industry in order raise the domestic content of core components and materials to 40% by 2020 and 70% by 2025.
The government uses several methods to encourage e-mobility. Thanks to local and central government subsidies combined, buyers can count on receiving up to $15,000, depending on the performance of the vehicle they want to purchase. The subsidies in China are, in fact, the second most generous in the world after Norway, according to the rating agency Fitch. A preferential vehicle licensing system has also been introduced for new energy vehicles, including EVs. These green plates are much simpler to obtain than the traditional ones which are given out by auction, lottery or in exchange of a high fee, in an effort to curb congestion.
Plates for large EVs (top) and small EVs (bottom) are distinguished by the letter “D”
Large investments are also going into electric charging stations. To increase from the 190,000 stations that existed as of late 2017, to the 4.8 million planned by 2020, the government has pledged $19 billion to this sector.
So far, these assertive policies are working: automakers sold 580,000 EVs in 2017, with sales up 72% compared to 2016, according to the Global EV Outlook published by the International Energy Agency. New players are also emerging on the Chinese e-mobility market. There’s Niu, the 80-km range, light-weight electric scooter which comes with an app offering GPS, anti-theft, remote tracking, scooter diagnostics and help center services. Not to be confused with Nio and its three premium electric and autonomous car models. Their EP9 race car has set world records in terms of speed for both electric and autonomous categories, the ES8 is a 7-seater SUV equipped with a swappable battery system, and the EVE autonomous car concept plans to create a real living space inside the car which adapts to the passengers’ needs and moods.
The Nio EP9 model © Nio
But government investment is not the only reason behind the success of electric vehicles. China, as it turns out, has all the elements in place to become a hotbed for innovative electric-based technology. According to Joseph Constanty, the international director of Niu, one simply needs to look at the proliferation and success of chinese mobile phone brands to grasp why Chinese EV technology is poised to dominate world markets:
“As the combustion engine for two and four wheels nears the end of its half-life, China is stepping on stage to lead the mobility disruption. China has the perfect ecosystem for rapid innovation in the EV space, with the largest consumer market for electric cars and scooters, the entire supply chain at home (especially in terms of battery pack technology), and quite possibly the most progressive government policies when it comes to encouraging EV adoption. Look no further than the success of Chinese mobile phone brands which started building their businesses over a decade ago and have become world leaders… when it comes to mobility, we’re only at the beginning of that curve”
Three other factors can be added to the list of advantages China has on the EV market: “the availability of large-scale finance, a mentality of trial and error, and an extremely strong desire to succeed as a first mover”, as explained in the Urban Mobility in China report by the Institute for Mobility Research. Indeed, China has steadily climbed to the top of the economic ranking, becoming the world’s largest economy in 2014, allowing for massive investment flows to permeate priority sectors. The “trial and error” mindset describes the fact that new developments don’t need to be fully mature to enter a market, and that they are usually regulated after a successful market launch.
The Chinese have identified EVs and mobility as an industry where they can be global leaders. Nio has taken on the complex task of battery swops, originally attempted by Israel startup Better Place and Renault, which lost close to $1 Billion before giving up. Niu Scooters meanwhile have cracked the EU scooter market, which has traditionally dominated by Japanese and European manufacturers. As cities around the world are banning diesel and petrol engines and encouraging cleaner forms of mobility, the space is opening up for new EV makers from China and from all around the world to take on the traditional OEMs.
This article is the second in Autonomy’s series The Future of Urban Mobility, which will be exploring the direction in which Autonomy believes mobility is headed in the world’s biggest markets.