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Perspective   Bill Russo
              Tao Ke
              Edward Tse

China’s Automotive
Leading the Tran...
Contact Information

Bill Russo
Senior Advisor

Edward Tse
EXECUTIVE        Since the introduction of the automobile in the late 1800’s,
                 the internal combustion eng...
HUGE MARKET       China is the world’s largest auto
                                                             market an...
had a remarkable impact on the            while China’s self-sufficiency rate of   environment. Ten years ago, Bejing,
energy vehicles market where each                 a solid market share of 34% in the                   adjustment is neede...
EVOLUTION OF     In recent years, the Chinese
                 government has accelerated the
A “3X3” R&D mechanism (3                                     vehicle R&D discipline, and proposed                         ...
Exhibit 3
Energy saving and new energy vehicle key project

            Milestone in phase 3: Energy Saving and New Ener...
included the R&D for all types of                       motor and fuel cell engine, as well as                     develop...
LONG ROAD        The global economic crisis is a
                 triggering event that freezes debate on
Meanwhile, local vehicle                Moreover, universities also respond      - and GM’s EV1 program provides
A HEALTHY        Innovations in both technology
                 and business models will be needed
infrastructure in tandem with the                        As the largest automotive market,                               t...

1 EV = Electric Vehicle
2 NEV = New Energy Vehicle                                                              ...
The most recent list of     Worldwide Offices
our office addresses and
telephone numbers can       Asia                Ban...
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Leading The Transition To New Energy Vehicles En


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Since the introduction of the automobile in the late 1800’s, the internal combustion engine (ICE) has emerged as the dominant vehicle propulsion technology. However, at the end of the 19th century, it was the electric vehicle (EV1) that actually outsold all other types of cars. In fact, the EV was introduced several decades earlier than ICE-powered cars. However, ICE eventually surpassed the EV due to its virtues of speed, power and range.

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Leading The Transition To New Energy Vehicles En

  1. 1. Perspective Bill Russo Tao Ke Edward Tse China’s Automotive Opportunity Leading the Transition To New Energy Vehicles
  2. 2. Contact Information Beijing Bill Russo Senior Advisor +86-10-6563-8300 Shanghai/Beijing Edward Tse Senior Partner +86-21-2327-9800 +86-10-6563-8300 Tao Ke Principal +86-21-2327-9800 Booz & Company
  3. 3. EXECUTIVE Since the introduction of the automobile in the late 1800’s, the internal combustion engine (ICE) has emerged as the SUMMARY dominant vehicle propulsion technology. However, at the end of the 19th century, it was the electric vehicle (EV1) that actually outsold all other types of cars. In fact, the EV was introduced several decades earlier than ICE-powered cars. However, ICE eventually surpassed the EV due to its virtues of speed, power and range. Since the 1970s, there has been a oil consumption was contributed growing awareness of the lack of to transportation. Statistics of sustainability of petroleum-based IEA show that transportation will consumption. Rising concerns over account for more than 62% of global the impact of carbon emissions on oil consumption by 2020, while the environment have increased the emerging markets, such as China, pressure on finding alternative energy are the major forces driving the technologies that can eventually increase in global oil consumption. replace the ICE. Recent technological The Energy Economics and advances are bringing new energy Strategy Research Center of China’s vehicles back into the spotlight. We National Development and Reform believe a new era of alternative energy Commission (NDRC) estimates that technology will emerge in the 21st oil demand will be nearly 560-600 century automotive industry, million tons in China by 2020. and this represents a key opportunity for China and its domestic car Continuous global warming results companies to assume a leading role in in increasingly worsened living this transition. environment. According to scientists, global average temperatures will Global daily oil consumption is still increase between 1.4 and 5.8 degrees increasing steadily. According to a Celsius by 2100. Rising temperature BP report, it is estimated that global is likely to cause catastrophic daily oil consumption will reach 93 results, such as rising sea levels due million barrels by 2020. In 2007, to melting polar ice caps (18-59 over half (57%) of global daily centimeters in 2100), and more Booz & Company 1
  4. 4. HUGE MARKET China is the world’s largest auto market and will keep a rapid growth POTENTIAL FOR rate over a quite long period of time. NEW ENERGY As the balance of global economic power has been shifting eastward VEHICLES (NEV2) to places like India and particularly IN CHINA China, the attention of most of the automotive industry development has in recent years been concentrated on the Asia-Pacific region where China is expected to capture over a half of the growth in the next ten years. China’s automotive market has doubled its size since 2003 – with annual sales soaring from 4.56 million to 9.67 million in 2008. During this period of time, the market share of passenger frequent natural disasters (i.e. floods, vehicles (excluding buses, trucks droughts). Global warming is mainly and other commercial vehicles) has caused by the world wide increase increased from 50% to 60%. in CO2 emissions, which is more significant in developing countries. To address the economic crisis, the China is one of the biggest emitters of Chinese government launched a CO2. According to EIA, China’s CO2 series of stimulus initiatives in an emissions per capita is increasing full effort to achieve a targeted GDP speed and will catch up to 1/3 of the growth of 8%. These initiatives have US’s in 2030. Cost is still the major barrier in EV. As the power source of EV, battery technology has been a major barrier for the development of EV. However, recent progress has pushed the technology to the minimum threshold of consumer acceptance. In addition, the energy density of electric battery has been continuously increasing and is approaching the minimal threshold for market acceptance. 2 Booz & Company
  5. 5. had a remarkable impact on the while China’s self-sufficiency rate of environment. Ten years ago, Bejing, automotive market in the first half of crude oil continues to decrease. Xi’an, Shenyang, Shanghai and 2009. A large proportion of Chinese Guangzhou were already listed among auto consumers are composed of As the leading automotive market, the Top Ten cities with the worst air first-time buyers who have actively China has the opportunity to drive pollution. The massive growth of the leveraged preferential policies on the standards and architecture for the automotive market only adds to the their purchases in the form of tax global auto industry and has problem. Additionally, China imports incentives. For the overall calendar a clear and compelling need to two-thirds of its oil, and its year of 2009, China’s market grew reinvent the propulsion technology ever-increasing thirst has had a beyond 13 million units against 10.4 of the automobile. dramatic impact on global energy million in the US. prices. Based on the current growth Intensified stress from traditional trend, China will possess 1.5 billion China’s automotive industry will energy supply and environmental vehicles and consume 2.5 billion tons continue to experience strong growth protection. As the size of the auto of oil by the year 2020. No doubt, over the foreseeable future. Global market inexorably expands, China China has a clear and compelling Insight has forecast that over the will play an increasingly significant need to reinvent the propulsion next ten years China will account for role in the development of new technology of the automobile. more than half of the growth of the automotive technologies. China’s Asia Pacific region with annualized emergence as the leading automotive “To start from scratch” and lead the growth of 6% through 2018. It is market in terms of sales has several transition to new energy technology. also noteworthy that while China is implications. While most attention China may lag over a decade behind experiencing the growth of the auto has been paid to relative sales the leaders in the development of market, environmental pollution has performance of the foreign and advanced automotive industry. mounted and a decrease in home- domestic companies, what is arguably However, given its advantages exploited crude oil has been observed. of more long-term significance is the on costs and markets, China has As China’s auto market continues to impact of China’s market expansion developed the potential to take the grow, pollution significantly increases on energy consumption and lead in the development of new China’s automotive industry will continue to experience strong growth over the foreseeable future. Booz & Company 3
  6. 6. energy vehicles market where each a solid market share of 34% in the adjustment is needed in consumer player is essentially starting from global lithium ion battery market, driving habits. Moreover, Chinese scratch (see Exhibit 1). of which BYD has rocketed into citizens rely much more on public the top five largest manufacturers. transportation. Public transportation Regarding the technologies on At present, China has evolved into companies will be more willing to lead-acid batteries, NiMH batteries one of the largest global lithium ion switch to new energy vehicles even and lithium ion batteries, a large battery manufacturing bases, one if private consumers are reluctant to number of players have developed that accounts for 17% of the global buy EVs. their core technologies and product output in 2008. portfolios. For example, China has The popularization of NEV and EV abundant resources and technologies On the issue of consumer acceptance, largely relies on the relevant services, for lithium ion battery production consumer habit in China is still in the infrastructure and facilities, such as and has stepped into the rapid forming process due to a relatively repair and maintenance, construction growth stage since 2001, facilitated short driving history. China has of infrastructure (i.e. Recharging by the quick emergence of large very low car ownership penetration Station) and new specific services (i.e. enterprises specializing in lithium ion compared with developed countries. insurance for NEV), which are still at battery production, e.g. BYD, B&K As a result, the realistic and potential a preliminary stage. and others. In the last few years, cost of switching from a traditional Chinese enterprises have achieved vehicle to NEV is lower and less Exhibit 1 Comparing to mature markets, China appears ready to address the challenges in introducing electric vehicles READINESS FOR EV KEY FORCES IN CHINA Mature Market China 1  Ample resources to achieve low cost production Technology  More battery manufacturing experience with larger scale, i.e. lithium battery for cell phone 2  Relatively short driving history makes it easier to cross over to new products Consumer  Less stringent requirement on performance due to short community Acceptance distance and crowd traffic 3  China faces much greater environmental pressure, there is huge need to switch into cleaner energy Infrastructure  The Chinese government has been a strong driving force behind the & Legacy 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 4 Booz & Company
  7. 7. EVOLUTION OF In recent years, the Chinese government has accelerated the initiated the “Air Purification Program: Clean Auto Action” to NEV IN CHINA pace of energy structure adjustment, promote clean energy vehicles in given the ever-increasing oil price 19 cities, which were either most and environmental pressure resulting polluted or had resource advantages. from industrialization. In fact, over a In this phase, the government did not decade ago, the Chinese government put forward specialized requirements became the driving force in the for NEV; and NEV did not serve a development of NEV with a stronger national strategy. focus. There are three phases in the development. Phase 2: Electric Vehicle Key Project (2002-2006) with an investment of Phase 1: Clean Auto Action (1999- 880 million RMB 2002) with an investment of 100 From the perspective of development million RMB strategy of the national automobile In 1999, Beijing, Xi’an, Shenyang, industry, the Tenth Five Year Plan Shanghai and Guangzhou were listed introduced the goal to commercialize in the World Top Ten Cities with the and industrialize EVs. The National worst air pollution. To mitigate air 863 Program set the Electric pollution, big cities implemented a set Vehicle Project and identified the of initiatives, such as improvement of FCV, EV and HEV as the priorities the emission of fossil fuel vehicles to for the development of HEV. The meet Euro II Standard, CNG and LPG Government cooperated with vehicles’ R&D and demonstration, businesses, academies and research as well as other CAFV3’s R&D. A institutions, to conduct R&D jointly. total of 13 ministries, including the Ministry of Science and Technology, Booz & Company 5
  8. 8. A “3X3” R&D mechanism (3 vehicle R&D discipline, and proposed Phase 3: Energy Saving and New Horizontal Plans: FCEV4, HEV5 and a basic principle of development Energy Vehicle Key Project (since EV; 3 Vertical Plans: force assembly, oriented, key component and related 2006) with an investment of 1.1 driving electric motor and dynamic materials linked, infrastructure billion RMB battery) was initiated in the project development aligned, and policies, The Energy Saving and New Energy (see Exhibit 2). It focused on the technical standards and assessment Vehicle Key Project was initiated establishment of a rigorous process techniques simultaneously developed. in the 863 Program in the Eleventh that is in alignment with whole Five Year Plan (see Exhibit 3), which Exhibit 2 3×3 R&D mechanism and achievements  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 6 Vehicle  Prototypes of BEV, HEV and FCV developed Whole Development  BEV and HEV are qualified to be produced Vehicle Platform Powertrain Control System Demonstration  BEV and HEV started demonstration in 7 cities Electric Drive Motor Key Tech  26 national standards established Traction Battery Others  796 patents applied Source: MOST; Booz & Company analysis 6 Booz & Company
  9. 9. Exhibit 3 Energy saving and new energy vehicle key project  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 Development All types of vehicle products FCEV HEV BEV CAFV Vehicle Platform Battery Technology Fuel cell engine, traction battery, ultracapacitor... engi ultracapac Key Technology for CAFV Electric Drive System Drive motor, motor driving system, engine... e m engine. Basic Technology New material, new component, infrastructure... rastructu Public Support Platform Test, standard, policy, demonstration, financing, intellectual property, technology Information Source: MOST; Booz & Company analysis Booz & Company 7
  10. 10. included the R&D for all types of motor and fuel cell engine, as well as development of key technologies, but vehicle products and identified the the application of technical standards more effort is needed on the OEM7 new R&D model. The project covered and tests. side (see Exhibit 4). the R&D of energy saving and new energy technologies, research of key With this structure, China has components such as traction battery, made significant progress in the Exhibit 4 Progress in development of key technologies 10th Five-Year-Plan 11th Five-Year-Plan 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 National 863 Electric Vehicle Key Project National 863 Energy Saving and New Energy Vehicle Key Project Car: small scale production and export overseas Car: OEMs and universities developed more prototypes BEV Bus: demonstration on Beijing city bus line Infrastructure: State Grid are considering charge station construction Car: prototype developed Car: Most local OEM released HEV launch plan HEV Bus: 400,000km demonstration in Wuhan Bus: Two types are listed on the product bulletin Car: prototype developed by Tongji University Demonstration: UNDP in Shanghai and Beijing PCEV Bus: prototype developed by Tsinghua University Infrastructure: 2 filling station in Shanghai and Beijing A few models were developed under government project More and more OEMs are involved in initiative More efforts for commercialization are made Source: MOST; Booz & Company analysis 8 Booz & Company
  11. 11. LONG ROAD The global economic crisis is a triggering event that freezes debate on technology for use in government fleets, including buses, postal and AHEAD FOR NEV whether change is needed and creates sanitation vehicles; give priority to the DEVELOPMENT opportunities for collaboration between government and industry. EV and promote collaboration with businesses to develop infrastructure to IN CHINA Such collaboration is essential for support NEV. the successful transition from the conventional ICE to NEV technology. For example: To impel the energy saving and • Beijing: purchased 800 hybrid industrialization of NEV, the Ministry buses from Beijing Foton of Science and Technology, working with the Ministry of Finance and • Shanghai: hydrogen fuel cell car the National Development and project was initiated by Shanghai Reform Commission, is sponsoring Major Project Promotion Office as an ambitious plan to promote the a 2008 Olympics project use of NEVs, initially targeting 13 pilot cities, which includes Beijing, • Jinan: promotes NEVs and plans Shanghai, Chongqing, Changchun, to use HEV buses to replace some Dalian, Hangzhou, Jinan, Wuhan, of the old bus system to meet the Shenzhen, Hefei, Changsha, Kunming, requirement of National Sports and Nanchang. The plan includes Meeting support for the development of energy-saving technology for use in • Shenzhen: is going to establish a government fleets, including buses, charging station in the downtown postal, and sanitation vehicles. The area for NEVs; and the F3DM plan targets the deployment of 60,000 duel mode EV was first launched energy saving vehicles in China by in Shenzhen which is the first mass 2012. produced duel mode EV in the world National governments and global OEMs also took notice of China’s • Wuhan: becomes new energy commitment to fund the development resource experimental unit for of its NEV infrastructure. About Nissan, and Nissan will contribute 45% of China’s $588 billion USD 300 hybrid buses to the city stimulus plan is to be invested in projects related to developing China’s • Chongqing: purchased hybrid buses infrastructure, which includes support from Chang’an Group for a variety of clean car technologies. As a result, local governments support • Changchun & Dalian: partnered the development of energy-saving with FAW Booz & Company 9
  12. 12. Meanwhile, local vehicle Moreover, universities also respond - and GM’s EV1 program provides manufacturers (VM8) in China are proactively to the government’s us with a good example. Launched viewing NEV as an opportunity to initiatives. For example, Tsinghua in December 1996, EV1 was a catch up with foreign counterparts, University established a laboratory pilot small electric car with a total thus are actively engaging. Local for alternative power system production volume of 1,000. The OEMs fall far behind foreign development. fiberglass made vehicle (600 kg) was counterparts in the conventional equipped with 32 lead acid batteries automotive market: the domestic top In view of the large market potential (400 kg) as main power source. The twoVMs are merely 12% of the size in China, foreign OEMs are 102 KW motor provided a range from of Toyota in sales; and most advanced prioritizing NEV development in 40 miles (in Northeast states in the ICE technologies are controlled by China. For example, Toyota supports winter) to 90 miles (in California). global players. Therefore, NEV might the HEV R&D work of CATARC GM had invested $350 million on give local VMs a chance to catch while GM established two NEV R&D development. In spite of the costly up because there is no large gap in centers in China and cooperates efforts of GM to develop and promote relevant technology, while local VMs with SGM and PATAC to develop the car, the high cost of ownership of enjoy some natural resource and new HEV. the EV1 ultimately limited its market development cost advantages. acceptance. Ultimately, GM withdrew China’s push for electric cars was the EV1 from the market. In line with government mandate, clearly on display at the Shanghai many local brands, some with support Motor Show in April 2009, as BYD has recently introduced the first of foreign partners, participate in alternative propulsion technologies mass produced plug-in EV that uses NEV development and integrate the became the hottest exhibition themes. a home outlet, yet market acceptance corresponding plan into their long- Local manufacturers, such as BYD, remains challenging. On December term strategy. For example: Geely, Great Wall, Brilliance and 15, 2008, BYD launched F3DM, • SAIC: invested RMB 2 billion for Chery, introduced many EVs and a dual-mode EV, in Shenzhen and NEV development other energy-saving vehicles. accepted fleet orders from China Construction Bank and the Shenzhen • Chang’An: established NEV JV and At present, energy consumption of Municipal Government. Retail sales plans first hybrid car for 2009 Chinese consumers is lower than that began in September 2009 with a of their peers in developed markets, MSRP of RMB 149,800. As an EV • FAW/DFM: have hybrid buses in and the Chinese government could, with a 125 KW power output, nine pilot operation through proper guidance, encourage seconds for 0-100km/h acceleration, them to pay more attention to a seven hours charging time with a • Chery: introduced plans for the energy efficiency. But how could normal household power outlet, and hybrid car A5 and electric car S18 policymakers promote energy-saving 100 km of maximum distance for one vehicles in the domestic market? The charge; F3DM is available in 14 1st- • BYD: introduced plans for the existing promotion of NEVs in 13 tier and 2nd-tier cities in China. F3DM dual-mode electric car pilot cities is a good beginning to lead and influence the individual car After over a decade of development, According to the China Association buyers. Chinese policymakers may the NEV industry in China has of Automobile Manufacturers, also consider promulgating additional made some breakthroughs in terms the top ten local VMs in terms of financial and policy incentives: of technology and infrastructure. sales, including SAIC, FAW, DFM, stronger credit and fund support Though consumer environmental Chang’an, GAIG, BAIC, Brilliance, for manufacturers to develop NEVs consciousness is apparent, economic Chery, CNHTC and JAC, will and batteries, more subsidy for considerations still remain the key seek opportunities to collaborate individual NEV buyers and more decision criteria. In fact, Chinese in NEV development. They will developed infrastructure such as consumers make their buying not only cooperate to develop key charging stations. decisions with a focus on the price to powertrain and component, but also performance ratio and overall cost jointly set the standards for EV and However, environmentally friendly of ownership. On these measures, components. Initially required by vehicles must offer tangible customer VMs must continue to pursue both government, now developing NEV is benefits or they will ultimately fail. further breakthroughs in order to gain gradually integrated into the long- Forcing revolutionary technology into marketplace acceptance of term strategy of many Chinese VMs. the market can be counterproductive NEV technology. 10 Booz & Company
  13. 13. A HEALTHY Innovations in both technology and business models will be needed in order to increase production size and drive down cost. WIN-WIN to succeed in the EV industry. INDUSTRY Consumers’ greatest concerns about EV over ICE are cost, Using a “Cooperation model”. In order for the technological innovation ECOSYSTEM IS performance and infrastructure. To to achieve performance and cost KEY TO SUCCESS win over consumers, simultaneous technological and business model balance, the cooperation model is a sound approach. Potential innovations are needed. Technology shortfalls in going alone may include innovation could provide a solution compatibility issues resulting in that balances performance (power, great compromises on vehicle range, etc) and cost. Business model performance, and negative impact innovation could meet the needs on achieving critical mass due to of consumers while benefiting lack of standardization, thus making all stakeholders in the industry it difficult to drive down costs. value chain (see Exhibit 5, page However, joint R&D opportunities 12). From the EV manufacturers’ could leverage the “Know-How” viewpoint, they must start by setting of each party to improve vehicle up appropriate technology and performance, reach critical mass business innovation models and work and drive down cost. In May 2009, backwards to win over consumers. Volkswagen signed an understanding memorandum with BYD to seek the BYD’s technological innovation possibility of joint development in the has brought a huge cost advantage fields such as Li-ion battery for hybrid while improving performance. In electric and full electric vehicles. addition, BYD also innovates its Such cooperation can allow the business model. By integrating partners to bring their complementary battery and EV R&D, while resources to bear and to address the other OEMs do it separately, it requirements of capital, technology integrates battery manufacturing and market, while reducing the with the role of a traditional VM costs and risks to realize the mass- to capitalize on the current battery production of EVs. and auto manufacturing resources and facilities. Moreover, BYD Build up sufficient infrastructure. also prioritizes the role that local Replacing traditional ICE with other government (or utility) plays by technologies—such as hybrid electric, approaching local government as full electric, hydrogen powered the first customer base to create the vehicles or clean diesel - requires market and working closely with collaboration between businesses these partners to develop the market and the government to develop the Booz & Company 11
  14. 14. infrastructure in tandem with the As the largest automotive market, the vehicle itself—but the need for development of the technology. The and because the China government invention of the infrastructure for economics of the product itself and has the capacity and willingness to delivering renewable sources of ultimate market acceptance is very invest in the infrastructure for the electricity and installation of battery much dependent on the availability new energy technology, we have charging/replacement stations. As of the infrastructure to recharge or every reason to believe that China’s the largest car market, and the replenish the fuel. It is not realistic NEV market will reach significant place with the largest need for to expect a company to reinvent scale. When it does, the Chinese car alternative energy solutions, we can the technological underpinnings companies will begin to close the expect to see China place a heavy of the automobile, unless there gap relative to the industry leaders. emphasis on development of the EV is a concurrent development and What makes the development of infrastructure. The country that leads investment in the infrastructure to alternative propulsion technology the development of this infrastructure support that new technology vehicle. particularly challenging is not simply will undoubtedly lead in attracting Exhibit 5 The value chain of the EV industry – a new ecosystem Product Flow Cooperation or Contract 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 Utility Battery Leasing & Recharging  Government may have more active engagement over the value chain Government – Enact relevant industry policies – May take the initiative to invest in the construction of EV infrastructure, i.e. charge stations Source: Booz & Company analysis 12 Booz & Company
  15. 15. Endnotes 1 EV = Electric Vehicle 2 NEV = New Energy Vehicle About the Authors 3 CAFV= Combustion Alternative Fuel Vehicle 4 FCEV = Fuel Cell Electric Vehicle Edward Tse is 5 HEV = Hybrid Electric Vehicle Booz & Company’s senior 6 BEV = Battery Electric Vehicle partner and chairman for 7 OEM = Original Equipment Manufacturer Greater China, specializing in 8 VM = Vehicle Manufacturer definition and implementation of business strategies, organizational effectiveness, and corporate transformation. He has assisted several hundred companies—head- quartered both within and outside China—on all aspects of business related to China and its integration with the rest of the world. Bill Russo is a senior advisor the investment in development of to purchase NEV. As 85% of with Booz & Company. He has more than 25 years extensive the technologies that plug in to that Chinese consumers are first time experience in the automotive infrastructure. car buyers, with less experience industry most recently serving with gasoline-powered cars, and as Vice President of North East Business model innovation should are already accustomed to short Asia automotive operations for address the interests of different distance, low-speed commuting Chrysler having specialized in stakeholders, thus a transition from conditions, these factors are very new business development, “paying for hardware” to “paying for favorable for the acceptance of the product and business strategy, mileage” would be practical. Utility less-performed electric cars. The performance management, corporate governance and companies, such as State Grid, are Chinese government’s willingness to post-merger integration. well-positioned to act as a battery invest in the infrastructure to support leasing and charging vendors: another alternative propulsion technology Tao Ke is a project principal revenue generation source as a battery will ultimately help drive demand with Booz & Company and is owner, large existing customer base, side market acceptance. This is where a member of the automotive mature infrastructure and networks China has the opportunity to take competance center leadership in place to serve potential EV clients, the lead, and that will drive supply team in Greater China. He has side investment in new technology. more than 10 years’ consulting amendment to the revenue fluctuation experience in a broad range from current product portfolio. For the development of NEVs, the of strategy, operations, On the other hand, consumers are infrastructure must come first—and organization, and risk unwilling to own battery as it takes this will drive supply-side innovation. management assignments, up a huge part of the entire vehicle It takes a combination of business covering the automotive, budget, its life cycle tends to be short and government working together to financial services, consumer, and value depreciation is severe and make such a transformational change and telecom industries. individual battery product may have possible—and nowhere in the world compatibility issues with recharging is there a closer link between business station networks. and government than in China. In summary, consumer acceptance Energy saving, carbon reduction of new energy vehicles is a major and pollution abatement are not challenge. While the infrastructure only development trends around the investments already described world, but priorities for the Chinese will help tip the scales in favor of government. Without awareness of new energy vehicles, consumers these, Chinese vehicle manufacturers must also be convinced that the will be left behind or even defeated, price and performance of the new by their global rivals. China should energy vehicle can in fact meet leverage the existing advantages to their expectations. As a national success in a new battlefield—the priority, we can expect the Chinese EV market. government to help by offering incentives for the retail consumer Booz & Company 13
  16. 16. The most recent list of Worldwide Offices our office addresses and telephone numbers can Asia Bangkok Helsinki Middle East Los Angeles be found on our website, Beijing Brisbane Istanbul Abu Dhabi McLean Delhi Canberra London Beirut Mexico City Hong Kong Jakarta Madrid Cairo New York City Mumbai Kuala Lumpur Milan Dubai Parsippany Seoul Melbourne Moscow Riyadh San Francisco Shanghai Sydney Munich Taipei Oslo North America South America Tokyo Europe Paris Atlanta Buenos Aires Amsterdam Rome Chicago Rio de Janeiro Australia, Berlin Stockholm Cleveland Santiago New Zealand & Copenhagen Stuttgart Dallas São Paulo Southeast Asia Dublin Vienna Detroit Adelaide Düsseldorf Warsaw Florham Park Auckland Frankfurt Zurich Houston Booz & Company is a leading global management consulting firm, helping the world’s top businesses, governments, and organizations. Our founder, Edwin Booz, defined the profession when he established the first management consulting firm in 1914. Today, with more than 3,300 people in 60 offices around the world, we bring foresight and knowledge, deep functional expertise, and a practical approach to building capabilities and delivering real impact. We work closely with our clients to create and deliver essential advantage. For our management magazine strategy+business, visit Visit to learn more about Booz & Company. Printed in Greater China ©2009 Booz & Company Inc.