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China's Electric Car Revolution
 

China's Electric Car Revolution

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Working session presentation delivered by Bill Russo at the World Ecological Forum in Visby, Sweden on July 2, 2010

Working session presentation delivered by Bill Russo at the World Ecological Forum in Visby, Sweden on July 2, 2010

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  • Full Name Full Name Comment goes here.
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  • Thanks. Good job. Could you please send me a copy at proDGnius@live.com ?
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  • Very interesting and informative post!
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  • Would you be so kind as to send me a copy to RohrlackEv36865@ohm-hochschule.de? You would help me a lot. Thank you!!
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  • It Will Take 131 Years To Replace Oil, And We've Only Got 10

    We will not join those who suggest to panic - that time has come in 2008 and is gone already - it is too late to panic. We need to put all resources together and move forward like China is doing now.
    GE with its purchase of 25000 Electric Cars is the first, but very important step in electric cars mass market creation.
    http://sufiy.blogspot.com/2010/11/peak-oil-lithium-drive-with-ree-spin-it.html
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  • China recently announced it is investing a further 15B into this market (last week)
    It is charging full speed ahead, and intends to lead the world in this important, 21st century market.
    Even as it refuses to play by international rules of trade.

    http://retirefunds.blogspot.com/2010/09/china-not-playing-by-international.html
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    China's Electric Car Revolution China's Electric Car Revolution Presentation Transcript

    • Booz & Company July 2010 Synergistics Limited China’s Next Revolution: Leading the Transition to Electric Cars Presented at the World Ecological Forum
    • Global Trends - Best Timing for New Energy Driving the Revolution: China Becomes the Largest Car Market New Energy Vehicles and Applications in China An New Ecosystem and Strategic Implications
    • When the automobile was introduced in late 1800’s, it was not readily apparent which engine technology would prevail Steam vs. Electric vs. Internal Combustion Electric Car Steam Car Gasoline-Powered Car (Robert Anderson, 1839) (Nicolas Joseph Cugnot 1769) (Carl Benz, 1886) At the end of 19th century, electrics outsold all other types of cars 3
    • ICE was victorious primarily due to its virtues of speed, power, and range – courtesy of petroleum’s exceptionally high energy density Competitive Advantages of ICE Powertrain Energy Density Of Petroleum Vs. Other Fuels Energy Available (Mega Criteria Electric Steam ICE Joules per Liter) Clean, free of smoke/odor  X X Quiet   X Reliable, durable  X  Simple, easy to maintain  X X Easy to drive and control  X  5x Free of vibration   X Instant starting  X  Speed X   Acceleration    Power X   Range, distance X X  Infrastructure X X  Note: ICE = Internal Combustion Engine Source: ANL, DOE, Sion, NRC, Booz & Company analysis
    • Key drivers for new era of alternative energy technology 1 Unsustainable petroleum-   based consumption New Era of Alternative Energy Technology 2 Increasing   3 Alternative energy   environmental technology reaching pressure threshold Source: Booz & Company analysis
    • 1 Unsustainable petroleum-based consumption Global daily oil consumption is still increasing steadily, of which transportation takes a large part Global Daily Oil Consumption(1) Global Daily Oil Consumption Breakdown 2001– 2020E By Application, 2007 Million barrels / day Total Consumption = 85 Million Barrels/Day Note: (1) Estimation is made based on the assumption that CAGR will be the same to that between 2001-2007 Source: BP reports, Booz & Company analysis Booz & 6 Company June 25, 10
    • 2 Increasing environmental pressure Our climate is going unsustainable with a gradual global warming trend Global Warming Trend – Temperature Change Living Environment Is Worsening 1990-2008   Global warming is a continuous trend –  Average temperature will increase by between 1.4 and 5.8 degrees Celsius by 2100   Rising temperature is likely to cause catastrophic results –  Melting ice caps in North and South Poles –  Sea level has risen 4 to 8 inches –  More frequent natural disasters, i.e. floods, droughts, etc. Source: World Bank; Booz & Company analysis
    • 3 Alternative energy technology reaching threshold Cost is still the major barrier in EV, but recent progress has pushed the technology to the minimum threshold of consumer acceptance Cost Curve of EV Battery 1,000 RMB per KwH 100 Key Assumptions Experimental Stage   Toyota Prius is one of the most popular (excluding scale effect) hybrid models in the world and use Ni-Li 10 battery that generates energy at a rate of 12 KwH   We assume that the cost curve of the (now) battery used by Toyota Pirus is identical 1 (2012) with that of general Li-ion battery Minimum Line of Acceptance by   For the cost at experimental stage, we Consumers assumed that the cost in year 1995 0.1 before the commercialized production is 0.001 0.01 0.1 1 10 Cumulative production representative Experimental Stage (Million Units) Toyota Pirus BYD Source: Prius Report; BYD interview notes; China Investment industry report; Gasgoo Auto; Booz & Company analysis
    • Global Trends - Best Timing for New Energy Driving the Revolution: China Becomes the Largest Car Market New Energy Vehicles and Applications in China An New Ecosystem and Strategic Implications
    • China’s auto market has been experiencing explosive growth Total China Vehicle Sales Number of Vehicles2) on Road 2005 - 2009, in Million Units 1980-2020, in Million Units +23% 4.62 Jan 1.21 Feb 1.74 Mar 2005 2006 2007 2008 2009 2010Q1 1980 1990 2000 2009 2015 2020 Vehicle sales in the 1st quarter of 2010 in China rose Forecast 71.8% from the same period last year to 4.62 million 1) Data does not include heavy truck Source: Global insight, CAAM auto market press release, Literature research, Booz & Company analysis June 25, 10 China's_Electric_Car_Development_100618 v2.ppt Booz & Company
    • Urbanization has been a major driver of income growth and demand for personal mobility in China Global Urban Population China’s Urban Population Mil. 2000-2050 Mil. 1980-2020 People Forecast People Forecast Rural Rural 70.0% Urban 58% Urban 47% 52% 49.5% 50.7% 36% 46.7% 26% 19% 2000 2007 2008 2050E 1980 1990 2000 2009 2015E 2020E   More than half of the global population live in urban   At start of reform era, more than 80% of China’s area since 2008 population was in rural areas   Majority of China’s population will reside in urban areas by 2015   Creation of urban middle class fuels demand for personal mobility Source: National Bureau of Statistics, UN, Booz & Company June 25, 10 China's_Electric_Car_Development_100618 v2.ppt Booz & Company
    • China has a clear and compelling need to reinvent the propulsion technology of the automobile   Air Pollution –  Bejing, Xi’an, Shenyang, Shanghai and Guangzhou have been listed among the Top 10 cities with the worst air pollution. The massive growth of the automotive market only adds to the problem –  The rapid growth of the automotive market worsens the problem. For example, Beijing’s automobile industry contributed 73% of the overall pollution problem in 2003   Energy Consumption –  China imports two-thirds of its oil, and its ever-increasing thirst has had a dramatic impact on global energy prices –  The gasoline and diesel consumption has accounted for half of the total consumption of petroleum products   Traffic Congestion –  In the light of the current rate of development and gas consumption level, China will have over 150 million vehicles and petroleum consumption will exceed 250 million tons in 2020 For alternative propulsion technologies such as clean diesel, hybrid and electric vehicles, China does not lead the technological development Source: Synergistics, Booz & Company analysis
    • Comparing to mature markets, China appears ready to address the challenges in introducing electric vehicles Readiness for EV Key Forces in China 1 Mature Market China   Ample resources to achieve low cost production   More battery manufacturing experience with larger scale, i.e. lithium Technology battery for cell phone 2   Relatively short driving history makes it easier to cross over to new Consumer products Acceptance   Less stringent requirement on performance due to short commuting distance and traffic density 3   China faces much greater environmental pressure, there is huge need Infrastructure & to switch into cleaner energy Legacy   The Chinese government has been a strong driving force behind the development of industry technology and infrastructure   Local VMs are looking to leverage EV to get ahead in the automotive market, thus resistance from market incumbents is low Source: Booz & Company analysis
    • Global Trends - Best Timing for New Energy Driving the Revolution: China Becomes the Largest Car Market New Energy Vehicles and Applications in China An New Ecosystem and Strategic Implications
    • Globally powertrain technologies of vehicle are moving towards alternative energies ILLUSTRATIVE Passenger Vehicles Sales Projection by Powertrain Technology 2000 - 2050, Unit Mn   In next decades, powertrain is available and accepted by alternative energies   Among them, electricity driven powertrain is the most significant trend   By 2050, EV and Hybrid EV will account for almost 50% of the total market Source: International Energy Agency; Booz & Company analysis Booz & Company 15
    • Environmental vehicles must offer customer benefits or they will fail, GM’s EV1 provides us with a good example Forcing Revolutionary Technology into the Market Can be Counterproductive… GM EV1   600 kg vehicle with 400 kg lead acid batteries = 1000 kg   102 kW Motor - 90 miles range (in California) - 40 miles in the NE states in the winter   Cost GM $350 m to develop   Lease cost = $399/month   About 1000 made in total These environmentally friendly vehicles are great… I hope my neighbor buys one!” Source: RICARDO, Booz & Company analysis
    • The Chinese government has been a strong driving force, starting 10 years ago, CNG And LPG vehicles were promoted…   Milestone in Phase 1: Clean Auto Action (1999-2002)   Investment: 100 Million RMB Background In 1999, Beijing, Xi’an, Shenyang, Shanghai and Guangzhou were listed in the World Top 10 Cities with   The government then did not Worst Air Condition put forward specialized requirement for new energy Main Tasks vehicles   New energy vehicles did not Improving the air pollution in big cities by: serve for national strategy   Improving the emission of fossil fuel vehicles to meet Euro II Standard   CNG and LPG vehicles’ R&D and demonstration   Other CAFV’s R&D Source: MOST; Booz & Company analysis
    • … since 2002, A 3×3 R&D mechanism was initiated to develop EVs through the 863 program…   Milestone in phase 2: Electric Vehicle Key Project in 863 Program during 10th five-year Plan (2002-2006)   Government Investment: 880 Million RMB 3×3 R&D Mechanism Achievements FCEV HEV BEV   Prototypes of BEV, HEV and FCV Whole Vehicle developed Vehicle Development   BEV and HEV are qualified to be Platform produced Powertrain Control System   BEV and HEV started Demonstration demonstration in 7 cities Electric Drive Motor Key Tech   26 national standards established Traction Battery Others   796 patents applied Source: MOST; Synergistics Limited analysis
    • … since 2006, all types of new energy vehicles are listed on the new round of 863 program and a new R&D mode is framed…   Milestone in phase 3: Energy Saving and New Energy Vehicle Key Project in 863 Program during 11th five-year Plan (2006-2010)   Government Investment: 1.1 Billion RMB (for 2006-2008) New R&D Mode of 863 Project in 11th Five-Year-Plan Product All types of vehicle products Development FCEV HEV BEV CAFV Vehicle Platform Battery Technology Fuel cell engine, traction battery, ultracapacitor... Key Electric Drive System Drive motor, motor driving system, engine... Technology for CAFV Basic Technology New material, new component, infrastructure... Public Support Test, standard, policy, demonstration, financing, intellectual property, Platform technology Information Source: MOST; Synergistics Limited analysis
    • …Since 2009, a number of policies demonstrate China’s dedication in the development of “New Energy Vehicles (NEVs) ” Recent Policies and Strategies on NEV Development Expected 2009 Apr. 2010 May Jun Jul.~   Prof. Wan Gang announced an   New Energy Automobile   Ministry of Industry & Information   An ambitious ambitious plan in cooperation with the Manufacturer Alliance (formed by Technology, Ministry of Science plan will be Ministry of Finance & the NDRC top 10 Chinese auto makers, & Technology, Ministry of submitted to the –  Promote the use of NEVs initially coordinated by China Association Finance, and NDRC jointly State Council in targeting 13 pilot cities, expanding of Automobile Manufacturers) released a pilot program to Jul. and is to 20 pilot cities in 2010 announced its plan subsidize the sale of plug-in expected to be –  Support the development of –  Number of pure electric hybrids and electric vehicles in released in late energy-saving technology for use vehicles to reach 500,000 by five cities 2010 or 2011 in government fleets, including 2015 –  Purchasers of plug-in buses, postal, and sanitation –  Electric technology to be widely hybrids will receive up to   If approved, it vehicles. used in conventional cars RMB 50,000 ($7,321) will be the –  Deploy 60,000 energy saving –  hybrid vehicles to account for –  Purchasers of pure electric biggest ever vehicles in China by 2012 30% of annual production vehicles will receive up to development –  whole vehicle and key RMB 60,000 ($8,785) plan for energy component production for new –  Five cities are Shanghai, saving and new energy automobiles to reach a Changchun, Shenzhen, energy world advanced level Hangzhou and Hefei, which automobiles –  New car average fuel are corporate homes of six consumption to drop by 30%, domestic automakers reaching international levels Source: Synergistics, Synergistics Limited analysis, China Association of Automobile Manufactures, Literature Search
    • In line with government mandate, almost all of China’s top ten local OEMs are developing NEV solutions… Sales Volume Sales Volume Activities about hybrid OEM Activities about hybrid OEM in 2009 in 2009 Production in Prototype 1 2,720,000 2010 6 606,000 750 hybrid AHEV Production in Production in 2009 2009 2 1,940,000 7 500,300 Besturn hybrid A5 BSG Production in Production in 2010 3 1,897,700 8 448,400 2010 S30-BSG F6 Production in Production in 2009 4 1,869,800 9 348,300 2010 Jiexun hev Zunchi hybrid Production in Prototype 2010 5 1,243,000 10 329,100 B90 Kingkong Source: Booz & Company analysis Booz & 21 Company
    • …and Local OEMs are also building capacities for NEV production Manufacturing Capacity of Local OEMs NEV Project FAW   Besturn B70 Great Wall   Capacity - 11,000   GWPERI QingYuan   HAVAL   Kulia   B6; A0   Capacity - 20,000 SAIC BAIC Chery   A5, BSG, ISG, S11, BYD S18 Chang’An Wanxiang BAIC SAIC   Jie Xun Hybrid BYD   Capacity - 300,000 (2010); -   LaCrosse Hybrid 600,000 (2014)   Roewe 750 Hybrid with capacity of 10,000 GAC DongFeng BYD   Fengsheng BSG; Fengxing MPV   F3DM, F6DM, F3e, E6   Capacity - 8,500 (2010); 20,000   Capacity - 200,000 (Xi’an); (2014) 600,000 (Shenzhen) Source: Literature search, Booz & Company analysis Booz & Company DATE 22
    • China also offers favorable manufacturing environment with ample resources and established general battery manufacturers 2007 Distribution of Global Lithium China is the Largest Lithium Top-ranking Li-ion Battery OEMs in Carbonate Production Capacity Battery Production Base Globally China   Shenzhen BYD Co., Ltd.   Tianjin Lishen Battery Co., Ltd.   CITIC Guo’an MGL   Harbin Guangyu Power Supply Group Co., Ltd.   Henan Huanyu Power Supply Co., Ltd.   Huizhou Desai Energy Technology Co., Ltd.   Shenzhen Huitong Tianxia Technology Co., Ltd.   Shenzhen Beeke Battery Co., Ltd.   Henan Haipusai Energy Technology Co., Ltd. Total Global Production Total Global Production in 2007 = 79.4 K Tons in 2008 = 9.3 Bn Units Source: China galaxy securities, Booz & Company analysis Booz & Company 23
    • BYD has introduced the first mass produced plug-in EV to use a home outlet, yet market acceptance remains challenging F3DM E6   Convertible between EV and HEV modes   Pure EV   Market launch in Dec. 2008 (Fleet orders only)   Field testing in Shenzhen, 40 taxis   Retail sales to begin in 9/2009   US Market launch in late 2010 (expected)   MSRP: RMB 149.8K   MSRP: 40,000 $ (estimated)   Combined total power output: 125kW   Four different power combinations: 75kW (101hp),   Acceleration 0-100km/h: 9 sec. 160+40kW (215+54hp)   Charging time: 7 hours with normal household power outlet   Acceleration 0-100km/h: 10 sec.   Max. distance for one charge: 100 km   Normal charge: 220V/10A household electric power socket   Sales available in 14 1st-tier and 2nd-tier cities in China   3C fast charge: 80% capacity in 15 minutes   Max. distance for one charge: 300 km Source: Synergistics, Booz & Company analysis
    • By 2020, it’s expected 25% of new cars could be EV around the world, and China EV market could reach ~6 million Global EV Market Growth Chinese EV Market Growth (2008 Vs. 2020F, in thousand units ) (2008 Vs. 2020F, in thousand units) % = Global EV/ 24.7% % = Chinese 28.1% Vehicle 21,000 EV/ Global EV 5,900 20,000 Hybrid EV Hybrid EV 0.9% 0.2% 1,000 Pure EV 300 Pure EV 2008 2020F 2008 2020F Source: 1) Total sales number: Commercial Times; Average electric vehicle price: Toyota Prius price (due to the majority sales are Prius), 2)China Statistics Bureau, 3) International Energy Agency, 4) CICC, 5) Literature research Booz & Company 25
    • Global Trends - Best Timing for New Energy Driving the Revolution: China Becomes the Largest Car Market New Energy Vehicles and Applications in China An New Ecosystem and Strategic Implications
    • Innovations in both technology and business models will be needed to succeed in the EV industry Consumers’ Combined Innovation Solutions Greatest Concerns about EV over ICE Technology Innovation Cost To provide a solution that balances performance (power, range, etc) and cost Winning Consumers Performance + Business Model Innovation To meet the needs of Infrastructure consumers while benefiting all stakeholders in the industry value chain   The logic flow –  To win over consumers, EV manufacturers will need to address their greatest concerns, of The Logic Flow which only a combined technology and business model innovation solutions can solve The Action Flow   The action flow –  From the EV manufacturers’ viewpoint, they have to start from setting up appropriate technology and business innovation models and work backwards to win over consumers Source: Booz & Company analysis
    • The value chain of the EV industry – a new ecosystem Key Stakeholders of the EV Industry After-Market R&D Sourcing Assembly Distribution Retail Services Auto Part OEM R&D VM Distributor Dealership Consumer Battery OEM 1 2 Product Flow Cooperation or Contract Battery Leasing & Utility Recharging   Government may have more active engagement over the value chain –  Enact relevant industry policies Government –  May take the initiative to invest in the construction of EV infrastructure, i.e. charge stations Source: Booz & Company analysis
    • Conclusions: Driving Market Acceptance   Consumer acceptance of new energy vehicles is major challenge –  While the infrastructure investments already described will help tip the scales in favor of new energy vehicles, consumers must also be convinced that the price and performance of the new energy vehicle can in fact meet their expectations –  As a national priority, we can expect the China government to help by offering incentives for the retail consumer to purchase new energy vehicles –  Chinese consumers have less experience with gasoline-powered cars, and are already accustomed to short distance, low-speed commuting – conditions very favorable for electric cars   The China government’s willingness to invest in the infrastructure to support alternative propulsion technology will ultimately help drive demand side market acceptance –  This is where China has the opportunity to take the lead, and that will drive supply side investment in new technology –  For the development of NEVs, the infrastructure must come first - and this will drive supply-side innovation It takes a combination of business and government working together to make this revolutionary change possible and nowhere in the world is there a closer link between business and government than in China
    • Thank You!
    • Driven by environmental and energy pressure, China government has shown strong commitment to capture EV opportunity Driving Forces for China Government to Promote EV Government’s Support   Bejing, Xi’an, Shenyang, Shanghai and   In 2010, latest detailed subsidy plan for EV in the Guangzhou have been listed among the Top Demonstration Catalogue (1): up to 60,000 RMB per car Air Pollution 10 cities with the worst air pollution ( central government)/ up to 80,000 RMB per car   The rapid growth of the automotive market (Shenzhen government) worsens the problem   In March 2009, Revitalization Policy of Auto Industry   To establish 500,000 production capability of BEV, HEV and FCV   China imports two-thirds of its oil, and its ever-increasing thirst had a dramatic impact   To make the EV sales accounts for 5% of the total PV sales Energy on global energy prices. Consumption   Government also promoted the construction for   The gasoline and diesel consumption has Infrastructure for EV in China. accounted for half of the total consumption of   Shenzhen: 6 stations has come into use,13 is under petroleum products construction.10,000 charging pillars and 200 stations are planed to be established by 2012   Local Chinese manufacturers are lagging   Beijing plan to finish the first charging station by June Government’s behind global leaders under ICE technology 2010 Intention to for many years   Other cities are also planning to or currently building Promote Automobile   EV technology migration provides China a charging station. e.g. Tangshan, Wuxi, Yangzhou, great opportunity to leapfrog from ICE-based Wuhu, Chengdu, Urumqi, etc. Industry vehicles to EV (1) Demonstration Catalogue comprise 110 vehicle models, including 27 passenger car models; EV in the catalogue are in line with certain technology requirements, that they can enjoy government subsidiaries Source: China Association of Automobile Manufacturers, Literature Research, Booz & Company analysis Booz & Company 6/25/10 31
    • Chinese government is very supportive for EV and already set targets for its development   In April 2009, Prof. Wan Gang, the minister of the Ministry of Science and Technology China, announced an ambitious plan in cooperation with the Ministry of Finance & the National Development and Reform Commission –  to promote the use of NEVs initially targeting 13 pilot cities, including Beijing, Shanghai, Chongqing, Changchun, Dalian, Hangzhou, Jinan, Wuhan, Shenzhen, Hefei, Changsha, Kunming, and Nanchang –  to support the development of energy-saving technology for use in government fleets, including buses, postal, and sanitation vehicles –  to deploy 60,000 energy saving vehicles in China by 2012   In March 2009, Revitalization Policy of Auto Industry –  to establish 500,000 production capability of BEV, HEV and FCV –  to make the EV sales accounts for 5% of the total PV sales   Key Objectives of Ministry of Science & Technology –  to promote industrial development and expansion of 863 project and HEV & EV development plan –  to technically support the development of NEV, R&D for NEV, and their promotion and industrialization   Tenth Five Year Plan introduced goal to commercialize and industrialize EVs –  3 Vertical Plans: force assembly, driving electric motor and dynamic battery; 3 Horizontal Plans: FCEV, HEV and EV (1) “Revitalization plan of auto industry” released by the State Council: aim to make EV accounts for 5% of total PV sales and 500,000 production capability Source: China Association of Automobile Manufacturers, Literature Research, Booz & Company analysis Booz & Company 32
    • Additionally, due to relatively short driving history, Chinese consumers are more likely to accept EV with a lower switch cost 2008 Per Capita PV Ownership Observation Units   Passenger ownership per capita in China suggest a very low penetration of vehicle in China   Consumer habit in China is still in the forming process due to relatively short driving history   Thus consumer acceptance to EV is comparatively high than mature markets (e.g. US with approx. 20-year driving history)   Meanwhile, the switch cost is expected to be low Source: 2008 statistic; literature research; China automotive industry yearbook, Booz & Company analysis Booz & Company 33
    • However, EV products still needs to improve price competitiveness and performance to win mass market consumers Consumer Position   Currently hybrid car price is too high for mass market acceptance   Current low gas price makes little   Consumers must be convinced difference between petrol engine and that the price and performance of the new energy vehicle can in new fuels fact meet their expectations   Inconvenience of battery charging is   Higher tax incentive and price also a constraint for electric cars reduction are essential to operation generate real demand   Families on a tight budget is less likely to pay extra for environmentally sustainable green products Booz & Company 34
    • Foreign OEMs take part in China’s HEV market competition Product Introducing Jointly R&D Japanese Companies introduce their products actively 2005 2006 2007 2008 Prius Camry Hybrid Touran (Hybrid) RX400h LS600h GS450h Lacrosse (Hybrid) Joint ventures take a cautious attitude in hybrid Civic hybrid R&D, partly because of the IP concerns Source: Synergistics, Booz & Company analysis Booz & Company 35
    • Comparing with mature markets, China stands out as a significant opportunity and seems more ready to introduce EV Key Forces in China   Driven by greater environmental   Passenger ownership per pressure and energy Government Consumer capita in China suggest a very China consumption, China Support Acceptance low penetration of vehicle in government has stronger Market Is a China incentive to promote cleaner Significant   Consumer habit in China is still technologies in automobile Opportunity in the forming process due to industry relatively short driving history   Meanwhile, China’s automobile   Thus consumer acceptance to industry has lagged behind EV is comparatively high than foreign leaders under internal mature markets (e.g. US with Mass Production combustion engine era, and the approx. 20-year driving history) Environment emergence of EV provide great   Meanwhile, the switch cost is opportunity for China to catch expected to be low up   China possesses ample resources to achieve low cost production   Established battery manufacturers with large-scale capacity, especially supply lithium battery to cell phone/laptop Source: Booz & Company analysis industry Booz & Company 36
    • In order for the technology innovation to achieve performance and cost balance, the co-op model will be a good way to go The Co-Op Model Why Adopt Co-op Model   Shortfalls in going alone –  Potential compatibility issues may greatly impair vehicle performance Battery OEM VM –  Lack of standardization will have a negative impact on achieving critical mass, thus makes it difficult to drive down costs   Advantages from working together –  Joint R&D opportunities to leverage the “Know-How” of each party to improve vehicle Utility performance –  Able to reach critical mass and drive down Working together to improve performance cost while gaining scale to drive down costs Source: Booz & Company analysis
    • 2 Case Study: BYD’s success with the co-op model BYD made the price step from ICE to EV transparent with the similarly-named F3 and F3DM BYD - F3 BYD F3 Specification   Engine: L4/16 Valve, Water cooling, SOHC   Displacement: 1.5L   Max. Power: 78/6000 (Kw/rpm)   Max. Torque: 134/4500 (N*m/rpm)   Compression ratio: 10 There is a huge Price Difference between   Max. Speed: 180Km/h F3DM and F31)   Transmission: 5MT 1,000 RMB   Tank Capacity: 50L   Min. Fuel Consumption: 4.7L/100km * Note: (1) The price for BYD F3 is based on F3 G-I model Source: Literature research, Booz & Company analysis * *