The Chinese market for “New Energy Vehicles” (NEV)

Electric vehicles, which together with hybrid and fuel cell cars are commonly referred to as “new energy vehicles” (NEV) in China, have been an element of China’s Five-Year Plans since 2001.

Following the categorization of NEVs as a strategic emerging industry in 2010 and the promulgation of the 12th Five-Year National Development of Strategic Emerging Industries in 2012, the State Council of China issued an “Energy-Saving and New-Energy Automobile Industry Development Plan (2012-2020)” to further direct and support the development of China’s new-energy auto industry. The plan emphasizes the importance of the commercialization of new energy vehicles, the construction of supporting facilities, and the development of key core technologies. In an effort to save energy and combat pollution, the Chinese government is pursuing to sell at least 500,000 NEVs by 2015 and 5 million NEVs by 2020. In order to reach its goal, newly implemented policies promote the use of new energy vehicles via a number of subsidy programs, tax exemptions, free license plates etc.. Furthermore, China has taken important steps toward shoring up supporting charging infrastructure to bolster consumer demand. In May 2014, China’s State Grid announced plans to open the country’s distributed power grid and electric vehicle charging equipment markets to private investors as a way to promote the construction rate of charging piles. In August, major municipalities like Beijing, Shanghai, Shenzhen, and Guangzhou, released plans to construct NEV-related infrastructure, including charging stations, charging piles, power exchange centers, and power distribution centers.

Although China still lags behind other leading automotive nations in terms of the share of NEVs in total vehicle sales, in 2014 it became the second-biggest global market for NEVs in absolute terms. Thus, in 2014 the Chinese NEV market experienced a dynamic upswing with sales records dwarfing statistics from previous years. During January-July 2014, output of pure electric passenger cars in China soared to 13,829 units, representing an increase of almost 700 percent compared with the preceding year. At the same time, production of plug-in hybrid passenger cars climbed about 10 times to 5,027 units. According to the study “"E-mobility Index–1st Quarter 2015" conducted by Roland Berger Strategy Consultants and the Forschungsgesellschaft Kraftfahrwesen mbH Aachen (fka), China will become the third largest producer of EVs and PHEVs by 2017. In 2014, total NEV sales stood at 74,800, representing a 325 increase compared with the previous year. The positive market development can be attributed to further advancements in alternative fuel technologies and purchase subsidies of up to RMB 120,000 ($19,395) for qualified vehicles.

The Global Lithium-Ion Battery Market

Lithium-ion batteries were first proposed in the 1970’s and commercially developed in the 1990’s.

According to a market report published by Transparency Market Research, the market for lithium ion batteries has grown to USD 11.70 billion in 2012 and is expected to grow dramatically in the next few year. Thus, according to the study the market could be worth USD 33.11 billion in 2019, growing at a CAGR of 14.4% from 2013 to 2019.

According to a study conducted by Frost & Sullivan, there will be a shift in market segments in which the market will experience rapid growth in the next couple of years. In 2013, 64% of the lithium-ion battery market was in consumer batteries (i.e., laptops, tablets, medical devices, UPS systems, cell phones, cameras, power tools, industrial cranes, gardening machines, etc.). While further growth in the consumer battery market is expected through 2016, consumer batteries are expected to constitute only 52% of the lithium-ion battery market by 2016. The rest of the market growth is expected to occur in two sectors: automotive and industrial (which as defined by Frost & Sullivan includes grid-connected electricity storage).  By 2017, the automotive market segment will grow from 14% to 25% of the market (a CAGR of 37%) while industrial applications will grow from 22% to 23% (a CAGR of 18%).  China is expected to be the largest market for lithium-ion automotive batteries in 2016 (40% of the market), due to strong government incentives for EV’s.  North America will remain the largest market for industrial lithium-ion batteries in 2016, though the rates of growth in Europe and Asia in this sector will surpass that of North America. Growth of the industrial lithium-ion market in Europe will be driven in part by increased investment in grid-connected storage in Germany. 

Gift of Nature: Lithium Resources in Qinghai Province

The Qaidam Basin of Qinghai province accounts for a total of 33 saline lakes in which 3.3 million tones of lithium reserve have been quoted; making it the province with the largest lithium reserves in China.

Owing to its regional resource advantage, the region strives to become the most important manufacturing base for the complete supply chain of lithium-ion batteries used for EVs and grid-storage -- "brine to batteries".

Furthermore, the whole province sits on a plateau, from which it derives two particular climatic features: 1) intense solar radiation and 2) abundant wind energy. With an annual sunshine time reaching 3,200-3,600 hours and annual solar flux amount hitting 7,000-8,000 megajoules per square meter, the Qaidam Basin in Qinghai has the richest illumination resources in China. Thus, the local landscape provides the province with ample space to expand the country's solar energy base. By 2020 the photovoltaic industry will become a pillar industry for the province, and a complete photovoltaic industrial supply chain will be established with an annual output value of 100 billion RMB ($14.64 billion). Qinghai has set the goal to become China's biggest solar power production and solar energy comprehensive utilization base.

Meanwhile, the western region of the Qingnan plateau and the central and western Qilian mountains create average wind speeds that exceed 4m/s. Moreover, wind power utilization potential exceeds over 5,000 hours across the central and western parts of Qingnan plateau, the Caidam basin, the environs of Qinghai Lake, and the southern area of Hainan mesa.