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Perspective   John Jullens              Bill Russo              Huchu XuThe Circuitous Path toElectrification of China’sAu...
Contact InformationBeijingBill RussoSenior Advisor+86-10-6563-8300bill.russo@booz.comShanghaiHuchu XuPartner+86-21-2327-98...
EXECUTIVE        As the balance of world market and economic power shifts                 from West to East, China will em...
InTRodUCTIon                                 For global automakers, Asia Pacific,                                         ...
braking systems to electrically-                              vehicles. These will almost inevitably                      ...
vanish in the electric car of the future.   so enabling itself to become theMIT’s CityCar and GM’s P.U.M.A              eq...
ThE SEARCh foR   Already, the government has spent                 heavily on research into alternative                   ...
AChIEVAblE?                                At first glance, this target looks                                           ac...
By 2020, this gap will have closed          of alternative propulsion systems.            design—being able to produce jus...
AlTERnATIVE   However, we believe it is possible              to discern some of the important                            ...
Along the technical dimension, tie-        and inventory control.Maintenance         Electric vehicles need lighter andups...
TowARd A nEw    Some of the possibilities can be                discerned in a handful of electric                        ...
ConClUSIon       Nonetheless, despite such promising                 starts, we believe that the transition               ...
largest power transmission company,        vehicles—taxi, bus and delivery          industry will be rebuilt for the 21sth...
About the AuthorsHuchu Xu is a partner withBooz & Company and leadsthe firm’s automotive practicein Greater China. He haso...
The most recent             Worldwide Officeslist of our officesand affiliates, with        Asia                Brisbane  ...
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The Circuitous Path to Electrification of China's Automotive Industry


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Booz & Company Viewpoint describing the path to electrification of the China automotive industry.

The paper suggests a need for cross-value chain collaboration and suggests that new business models are essential to achieve broader acceptance of electric vehicles.

Published in: Technology, Business
  • Thanks Corey...fully agree with your comments. Targeting applications and duty cycles where EVs are most appropriate is indeed critical to drive mass commercialization - but this is likely not the first assumption made by the markets and the regulators...hence the 'circuitous path' is the most likely scenario.

    Bill Russo
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  • An enlightening article indeed that pinpointed the key element in the development of the EV industry in China: the formation of an ecosystem that will nurture the EV industry in a circuitous path.

    Two areas I would like to comment on:

    First, I believe the new EV ecosystem should include one more key partner – the user groups of electric vehicles. The economic power of the user groups will be the only source of sustainable funding for the continuous development of EV tech, as in the development of other tech. Cell phone, cell phone battery, e-commerce, the internet …, were and still are being developed rapidly using continuous inflow of customers’ monies.

    For EVs, where near term benefits are not as apparent, the early involvement of institutional users, rather than the individual consumers, may be the most important ingredient in the new EV ecosystem.

    Second, from a technological stand point, EVs are ready for all commercial applications as yet. Other than the cost factor, bottle neck in the battery technology presents many challenges. For examples: safety risks while driving and in accidents (hi voltage, hi amperage in a metal structure encaging human beings), battery life cycle and recycling, charging downtime ... EVs are better off, at this point, used for commercial applications where driving cycles and purposes are known and risks and down-time are controllable.

    Pre-mature and large scale launches of EVs in either commercial and passenger car market will just kill off users’ confidence in EVs and worst yet, the potential inflow of users’ dollars into EV market.

    I believe the most viable application of EV is the controlled use of series hybrid tech in short-haul, commuting city buses, as NYC and many other metropolitan cities are doing, where driving cycles, and driving purposes ... are all known and managed under a professional firm (the bus company).

    In all, I think the early stage of this EV ecosystem is a consortium consists of bus companies, tech firms, car/parts companies, local governments and investment firms. And the kick-start point in this circuitous development is applying off-the-shelf series hybrid tech to target the conversion bus market, rather than the replacement bus market, i.e. a business to convert China’s enormous fleets of diesel/gasoline buses into series hybrid buses.
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The Circuitous Path to Electrification of China's Automotive Industry

  1. 1. Perspective John Jullens Bill Russo Huchu XuThe Circuitous Path toElectrification of China’sAutomotive Industry
  2. 2. Contact InformationBeijingBill RussoSenior Advisor+86-10-6563-8300bill.russo@booz.comShanghaiHuchu XuPartner+86-21-2327-9800huchu.xu@booz.comJohn Booz & Company
  3. 3. EXECUTIVE As the balance of world market and economic power shifts from West to East, China will emerge as the key location in theSUMMARY battle for dominance of the 21st century’s global auto industry. Due to increasing pressure from air pollution, oil consumption and urban congestion, the focus of the country’s auto industry will increasingly switch from internal combustion driven vehicles to alternative propulsion technologies, particularly those powered by electricity. Already many observers believe that the government’s ambitious series of programs and policies designed to accelerate the development of new energy vehicles run over the last decade will lead to the emergence of China as the key location for a global “green” mobility revolution. As this happens, the eventual electrification of the automotive powertrain will transform the automotive industry, and even society itself. However, we also believe that these be mandated, and what subsidies and efforts to reinvent transportation will incentives such as tax breaks should take longer than widely anticipated. be offered. Transformation will occur Efforts to leapfrog internal combustion in stages, with commercial vehicles engine technologies or to otherwise such as taxi fleets, delivery companies short-cycle the development of new and and bus services being the first major advanced mobility technologies will users. As this happens, the industry fall short in the short to medium term. will see the emergence of new business Instead, China’s automotive industry “ecosystems”—ones that bring will take a longer, more circuitous together a different range of companies route towards its objective of finding from those traditionally involved in new energy replacements for gasoline. the auto sector. These new forms of The government will be a key player collaborative partnerships will in turn in this through its decisions on where lead to new business models, very resources and research efforts should different from those formed in the era be directed, what standards should of the internal combustion engine.Booz & Company 1
  4. 4. InTRodUCTIon For global automakers, Asia Pacific, and above all China, represents the the automotive industry—and, given the importance of cars and mobility greatest opportunity for growth in to cities and our ways of life, to the 21st century. In 2009, China society itself. surpassed the US as the world’s largest market by volume. But with it The impact of the electrification of just entering the accelerated growth the powertrain on the automotive phase typical of emerging markets, industry’s value chain will be hugely its car industry will continue to grow significant. The supplier landscape strongly for the foreseeable future. will call for new companies—many Over the coming decades, therefore, of them from the technology and IT China will be the main battleground sectors rather than the engineering for dominance of the global auto and metal businesses which have industry (see Exhibit 1 and 2). dominated the industry until now—to develop and make very different However, this battle will not be components—from the electric fought over traditional territory. motors and the batteries needed The eventual electrification of the to drive them, through belt-driven automotive powertrain will transform alternator starters and regenerativeExhibit 1For the Global Auto Market, Asia Pacific Represents the Greatest Opportunity for Growth Area Reflects Size Of 2010 Actual PV Sales Area Reflects Size Of 2020 Forecasted PV Sales Western Europe Growth thru 2020: 1,527K NAFTA CAGR (2010-2020):1% Growth thru 2020: 5,528K CAGR (2010-2020):4% Eastern Europe Growth thru 2020: 2,835K CAGR (2010-2020): 6% Africa/Middle East Growth thru 2020: 2,899K CAGR (2010-2020): 6% Latin America Asia Pacific Growth thru 2020: 2,899K Growth thru 2020: 12,626K CAGR (2010-2020): 6% CAGR (2010-2020): 5% In Thousand Units Market 2010 PV 2015 PV 2020 PV Asia Pacific 22,212 30,350 34,838 NAFTA 11,545 16,877 17,073 Western Europe 12,776 14,133 14,302 Eastern Europe 3,261 5,035 6,095 Latin America 4,030 5,570 6,929 Africa/Middle East 2,946 3,783 4,211Source: Global Insight 2 Booz & Company
  5. 5. braking systems to electrically- vehicles. These will almost inevitably electronic parking with dynamicdriven ancillaries and intelligent be much smaller, quieter and lighter pricing determined by availability andcontrols—along with all the electronic than current autos. They will be usage and meters that double up ascomponents needed for such vehicles. made from recycled materials, and recharge stations; power generation incorporate smart features such as will be distributed widely, incorporateAn even larger challenge, though sensing technologies and telematics storage and be friendlier to wind andwill be the transformation of society that allow them to drive and navigate solar sources. Their designers willitself. Cities and highways which with little or no driver assistance. find themselves with greater freedomnow have their streets clogged with to test and experiment—much asinternal-combustion driven cars, Vehicles will rely for their power on the traditional joystick is no longervans and trucks, will instead find smart grids that combine electricity needed in fly-by-wire passengerthemselves filled with zero-emission provision with features such as aircraft, so even steering wheels couldExhibit 2Within Asia Pacific, the Greatest Growth Opportunity Is China Area Reflects Size Of 2010 Actual PV Sales Area Reflects Size Of 2020 Forecasted PV Sales Japan: Growth thru 2020: -457K CAGR (2010-2020): -1% South Korea: Growth thru 2020: 110K CAGR (2010-2020): 1% Taiwan: Growth thru 2020: 79K CAGR (2010-2020): 2% China: Growth thru 2020: 8,653K India: CAGR (2010-2020): 6% Growth thru 2020: 2,621K CAGR (2010-2020): 8% In Thousand Units ASEAN: Market 2010 PV 2015 PV 2020 PV Growth thru 2020: 1,074K CAGR (2010-2020): 5% China 11,462 17,296 20,115 Japan 4,254 4,075 3,797 India 2,240 3,700 4,862 ASEAN 1,634 2,185 2,709 Australia: South Korea 1,302 1,407 1,412 Growth thru 2020: 310K CAGR (2010-2020): 3% Australia 807 1,020 1,117 Taiwan 299 337 378 New Zealand 63 82 87 Rest of Asia Pacific 152 247 328 Total 22,212 30,350 34,838Note: ASEAN figures include top 5 ASEAN member countries, including Thailand, Malaysia, Indonesia, Singapore, and Philippines; Rest of Asia-Pacific includes Hong Kong and PakistanSource: Global InsightBooz & Company 3
  6. 6. vanish in the electric car of the future. so enabling itself to become theMIT’s CityCar and GM’s P.U.M.A equipment-making world leader it isconcept are early prototypes of today. Gasoline Alternativeswhat such USVs might look like (see Numerous technologicalExhibit 3). Second, its remarkable economic rise innovations that can be brought has led to staggering levels of pollution to bear on the challenge ofRevolutionary as such visions and congestion in its densely populated alternative propulsion:are, China is uniquely positioned cities. Vehicle pollution and otherto assume a leading role in the environmental impacts are a major • Hydrogen fuel-cell vehiclesreworking of the automotive value threat to health. In addition, growing (FCVs) oxidize hydrogenchain that would be required to make demand for fuel has simultaneously stored in a tank to generatethem a reality. Despite it short history made energy security and cost a electricity.of car-making—just two decades ago, major concern. China already imports • Liquid petroleum (LPG)/it was producing less than 1 million two-thirds of its oil needs, and its compressed naturalvehicles a year—it has three key ever-increasing thirst can only put gas (CNG) vehiclesreasons for driving change. further huge pressure on global offer vehicles with lower prices. Alternative vehicle fuels and emissions than gasoline-First, it views the automotive powertrains that can simultaneously fueled vehicles.sector as a strategic industry for its reduce pollution levels, congestion and • Gasoline hybrid electriceconomic development in general. reliance on overseas energy resources vehicles (HEVs) useWhile its efforts have led to the have enormous appeal. batteries to supplementestablishment of a massive Chinese regular internal combustionauto industry, domestic companies Third, it has the capacity to make the engines; their batteries arehave not displaced the traditional massive investments in new battery recharged as the vehicle isinternational giants of the US, Japan and related automotive technology as driven.and Europe. But a focus on future well as in complementary industries, • Plug-in hybrid electrictechnologies could allow Chinese such as utilities that a transition vehicles (PHEVs) havecompanies to leapfrog their Western from internal combustion engines batteries that are rechargedcompetitors. The precedent for to electric vehicles will require. Its from an external electricthis is telecoms equipment, where state-directed breed of capitalism power source.Shenzhen-based Huawei Technologies is uniquely able to direct such • Battery electric vehicleslargely skipped fixed-line technology investments and provide—even (BEVs) rely solely onand went straight to manufacturing compel—the required cross-industry electricity for network infrastructure, coordination. • Diesel vehicles have long been more efficient than gasoline vehicles, with about 50 percent greaterExhibit 3 fuel economy; “clean”CityCar (MIT) and P.U.M.A (GM) diesel engines have lower emissions of most gases and particulates than their gasoline counterparts. • Diesel hybrids are theoretically possible, but despite work on prototypes, no auto company has put P.U.M.A (GM) one into regular production. CityCar (MIT)Source: MIT, General Motors 4 Booz & Company
  7. 7. ThE SEARCh foR Already, the government has spent heavily on research into alternative leading advanced technology development program.AlTERnATIVES automotive propulsion technology. Over a decade ago, the Chinese Spending was further upped in a third government became the driving force phase, from 2006, to Rmb1.1 billion in the development of New Energy ($138 million), and again in a fourth Vehicles (NEV) with a stronger focus. phase, since 2009, with the range of power sources under investigation Its first target, from 1999-2002, broadening to include batteries, fuel was compressed natural gas (CNG), cells and hybrid technologies. liquid petroleum gas (LPG) and other combustion alternative fuel vehicles Under the 12th Five Year Plan, (CAFVs), in a program called the covering the 2011-15 period, electric Clean Auto Auction. In a second phase, vehicles are singled out as one of running from 2002-06 (coinciding seven emerging industries to be given with the Tenth Five Year Plan) special support. An alternative- introduced the goal to commercialize energy vehicles development plan and industrialize electric vehicles. The for 2011-20 provides for investment National 863 Program targeted the of Rmb100 billion ($15.15bn) in Electric Vehicle Project and identified research and development with the the FCV, EV and HEV as the priorities goal of having between 5 million for the development of alternative and 10 million electric vehicles on propulsion technologies. Through this the road by the end of this decade— initiative, officials committed Rmb800 roughly 20% of the private passenger million (then the equivalent of $97 vehicle total. Meeting this target will million) from the State High Tech require annual production capacity of Development Plan, the government’s 1 million electric vehicles by 2020.Booz & Company 5
  8. 8. AChIEVAblE? At first glance, this target looks achievable. More and more people a great opportunity to gain a position of technological advantage relative to believe alternative sources of auto the major international carmakers and power are approaching the threshold potentially leapfrog into a leadership of commercial viability. China with position in the world automotive both its fast-growing market and industry. Given its already sizable EV low-cost production strengths would research commitment, market scale, appear the right location to base and the near certainty that demand production, not least because the for passenger cars will continue to world’s biggest rechargeable battery grow, China is apparently in a strong manufacturers are all already present position to drive the standards and with large-scale capacity in place architecture of future automotive to serve the cell phone and lap-top technology. computer industries. Unfortunately, efforts to “leapfrog” Consumer acceptance for electric or short-cycle the development of vehicles also looks unlikely to be an advanced technology are likely to fail. issue. With per capita passenger car One obstacle is that while consumers ownership still low and preferences have no objection to electric cars still for the most part unformed due per se, their extra cost will remain to the country’s short driving history, a major hurdle to purchase. While electric vehicles face fewer purchasing maintenance and fuel charges are obstacles than in the mature auto considerably lower for electric vehicles markets of north America, Europe than gasoline-powered ones, the and Japan. upfront cost is around one-and-a-half times as much. Even spread over five Additionally, a successful entrance years, the total cost of ownership for into the electric vehicle market would a mid-sized electric vehicle is around give China’s domestic vehicle makers 75-80% higher (see Exhibit 4).Exhibit 4Total Cost of Ownership Comparison—2010 2010 TOTAL COST OF OWNERSHIP IN USD THOUSANDS50 48.6 1.7 2.0 40 36.1 1.0 1.5 2.230 28.1 29.0 27.4 4.9 5.9 6.5 3.0 44.920 3.4 3.4 Electricity cost 31.4 Fuel cost represents mix of vehicle efficiency, driving patterns and fuel prices10 21.1 Maintenance cost includes oil, filters, brake pads, and other 17.5 18.8 wear items replaced at regular intervals Fixed cost (net of depreciation) includes initial purchase price minus the residual value of the vehicle at end of life 0 Gas Diesel Hybrid PHEV 40 BEV 100Source: Booz & Company 6 Booz & Company
  9. 9. By 2020, this gap will have closed of alternative propulsion systems. design—being able to produce just theconsiderably, with electric vehicles An automobile is a complex elements of an electric vehicle, evencosting just under 20% more to run engineered system requiring advanced the most important ones such as theover five years, but in a price sensitive R&D capabilities in order to test battery, may prove of less importancemarket such as China’s this remains a and validate the achievement of than the ability to construct entiremajor barrier (see Exhibit 5). benchmark targets in the areas of new value chains that in turn require performance, fuel economy, safety and very different business models.Also problematic are technological quality. It is in this area that Chineseand business challenges. Despite firms lack experience. Thus, despite the efforts of the pastits investment in research, decade and more, it now seemsChinese automakers are still Furthermore, any transition in evident that it will take longer thanvery inexperienced at the vehicle propulsion technology will almost anticipated to achieve a genuinedevelopment and synthesis process certainly be accompanied by a “mobility revolution.”which is critical to the development need for major innovations in autoExhibit 5Total Cost of Ownership Comparison—2020 (Estimated) 2020 TOTAL COST OF OWNERSHIP IN USD THOUSANDS5040 32.0 30.8 1.0 1.730 27.2 27.9 28.0 1.4 2.0 2.2 5.3 4.5 5.9 3.4 3.020 3.4 28.3 26.2 Electricity10 19.2 20.4 17.9 Fuel Maintenance Fixed Cost (net of depreciation) 0 Gas Diesel Hybrid PHEV 40 BEV 100Source: Booz & CompanyBooz & Company 7
  10. 10. AlTERnATIVE However, we believe it is possible to discern some of the important and other incentives, and support for test schemes. Of course, thisCIRCUIT features determining the form of the does not mean official choices will automotive industry that will emerge necessarily be the ones that are in China as new forms of propulsion eventually adopted by the market, replace internal combustion. but its policies will be one of the What we see happening is the most powerful forces deciding which emergence of a new “ecosystem” of directions are explored or ignored. collaborative partnerships bringing together organizations along three But most revolutionary will be dimensions—regulatory, technical and changes in the automotive value business (see Exhibit 6). chain. The electric vehicles will require an entirely new range of As has been the case over the last manufacturing skills. The step-by- ten years, the government will play step reduction of gasoline and diesel a vital role in setting the direction of powertrain manufacturing capacity the industry through its funding of will be replaced with the ramping up research and infrastructure, setting of alternative powertrain production of standards, subsidies, tax breaks facilities. Exhibit 6 Three Dimensions of the New Eco-system Regulatory Innovation Frontier (Government) - New policies (including subsidy policy) to support the commercialization of green transportation technologies Technical Innovation Frontier (Auto Industry) Business Innovation Frontier - Partnerships among key players to (Cross Industry/Value Chain) deliver deep, scalable solutions for future green transportation - Partnerships between other industries and auto makers/suppliers to develop new business model for future green cars Source: Booz & Company8 Booz & Company
  11. 11. Along the technical dimension, tie- and inventory control.Maintenance Electric vehicles need lighter andups between automakers and new skills will also have to be married to stronger materials to replace thetypes of electric vehicle suppliers information technology and software heavy metal body of conventionalwill be required to discover the new expertise, and home or work-based vehicles. The cost of currently availablemobility technologies, particularly maintenance may replace visits to technologies remains high; thus afor powertrain and new lightweight garages. The ability to integrate second key challenge is developingmaterial technologies, that will be vehicles with other electronic devices economical vehicle body materials.needed to find viable, cost-effective such as smartphones and tablets willreplacements to internal combustion almost certainly become important. As both the powertrain and bodyengines. material elements of electric vehicles Companies will need to establish bear little resemblance to thoseThe automotive production partnerships along the length of the used in internal combustion drivenfootprint will be transformed value chain between auto makers, vehicles, opportunities will emerge forin the process. Metal bashing is utility companies, distributors, suppliers from outside the traditionalreplaced with production using infrastructure developers, leasing automotive sector to enter the supplydifferent, lightweight materials. New firms, and other service providers to chain.production sites will emerge, using develop new business models—manydifferent manufacturing technologies of which will involve businesses and Finally, developing new technologiesand so configured very differently industries from outside the traditional and building vehicles will notfrom the auto plants of today. automotive sector. be enough without adequate infrastructure to support rechargingSales and after-sales services will also Success, therefore, will call for and maintenance and alignmentcall for new types of business model. collaboration both within and with wider government policies onVehicle maintenance will require across these three dimensions. the development of urban transportvery different skills and expertise. Take the effect of changing vehicle systems that dovetail with China’sFor sure, mechanical knowledge will powertrains—the location of the planning needs as hundreds ofremain important, but as electric biggest “discontinuity” in the millions of country dwellers move tovehicles have few moving parts, much technology migration from the cities in the next two decades.of the after-sales repair business— internal combustion engine to electricvital for dealers’ profitability now— vehicles. This is not a simple matter In short, innovations in bothwould disappear. The spare parts of replacing one kind of engine with technology and business modelsbusiness will therefore have to be another; rather it will call for a will be needed to achieve large-scalereorganized, and with it warehousing reworking of the entire vehicle. electrification of transportation.Booz & Company 9
  12. 12. TowARd A nEw Some of the possibilities can be discerned in a handful of electric sales and service end of its business, it also involves itself in developing theECoSYSTEM of vehicle ventures with ties to China location of recharge infrastructure.CollAboRATIVE that are experimenting with new approaches. Coda, a privately While most of Better Place’s effortsPARTnERShIPS owned US company which aims to have focused on the two relatively sell electric vehicles in the United small markets of Denmark and States, has developed a new business Israel, in the last two years it has model for collaborative electric signed agreements to develop electric vehicle development via a network of vehicles with Chery Auto, a leading partnerships. For its powertrain, Coda independent Chinese auto firm, to set uses motor technology from UQM, up an experimental battery station a US-based manufacturer of electric and education center in Guangzhou, motors, generators and controllers, the capital of Guangdong province, but its other major partners are all with China Southern Power Grid Chinese. Current electric vehicle Company. This center is a showcase models sold in the US are based on a for technology supplied by Better vehicle platform from Hafei Motor, a Place. Under the Better Place business subsidiary of stated-owned Changan model, customers not only recharge Group, China’s fourth largest auto their electric cars but also periodically group. It also has launched a joint stop at an electric filling station to venture with Lishen Power Battery, swap their nearly depleted batteries Lio Energy Systems, to develop for freshly charged ones. The power battery systems exclusively for its use. company and Better Place are in talks To unlock the scale advantages of to sell electric cars to the Guangzhou participating in the Chinese market, municipal government and to taxi Coda has signed a letter of intent with fleets. Great Wall Motor, a fast-growing automaker from Hebei province, to Hertz Global is another company supply advanced electric powertrains experimenting with a cooperation and jointly develop battery electric model. It is teaming up with GE vehicles. Energy and Shenzhen-based BYD Auto to expand its electric vehicle Better Place, a start-up based in leasing business into China. Palo Alto, California, is another The intention is to capitalize on company exploring innovative ways China’s still nascent electric vehicle of spreading its electric vehicle market, though high cost and technology. Its business model is weak infrastructure remain the based around the idea of leasing the biggest hurdles to popularizing the batteries of an electric car—its single technology. Hertz will offer leasing most expensive element—separately to consumers and companies in from the rest of the vehicle. Instead Shanghai, Shenzhen and Beijing, of charging for them upfront, their initially using BYD’s E6 electric cost is recouped through monthly crossover model, with GE helping to payments that also include electricity build up an initial network of 770 and maintenance. To handle both the charging stations.10 Booz & Company
  13. 13. ConClUSIon Nonetheless, despite such promising starts, we believe that the transition and which should be deferred, and whether it will be possible to advance from the internal combustion alone or with a partner. engine towards electrification of the automotive powertrain will prove In general, therefore, we believe far more difficult than originally that most future collaborations expected, even with the full backing of will involve broad mixes of players the Chinese government. from both within and outside the traditional auto sector. Companies Potential electric vehicles stakeholders will need to pool competences and will have to develop their strategies share investment requirements and and make potentially very significant risk. State-owned enterprises and investments under conditions of officially backed research bodies considerable uncertainty. Standards will be crucial for the roll out of will be unknown, and could quite infrastructure, setting of standards possibly be set to suit the needs of and testing of experimental projects. specific state-backed companies. But private sector collaboration will Investment in charging infrastructure be the most important source of new will likely be made by local business models as companies figure governments or power utilities with out just what kind of technical and no automotive background, with service partners they need to put priorities very different from those together viable operations. of the oil companies which dominate the fuel supplies of the today’s road China’s economic resilience, with its transport industry financial system is less exposed to turmoil in other parts of the world They will have to be clear about the and GDP growth still heavily driven range of possible scenarios, and how by fixed investment, will ensure that to adjust depending on what actually investment continues into new energy unfolds. Just as important will be vehicles and the infrastructure needed thinking long and hard about which to support their uptake. (State Grid investments should be made now, Corporation of China, the country’sBooz & Company 11
  14. 14. largest power transmission company, vehicles—taxi, bus and delivery industry will be rebuilt for the 21sthas announced plans to build a companies. Particularly important century, should turn their attentionnationwide network of more than will be businesses owned by the to figuring out what collaborative2,350 recharging stations with a total government—as both purchasers partnerships they can form withof 220,000 charging points by 2016.) and promoters. The scale of Chinese multinational companies, utility demand will count further down the firms, research bodies and officialsBut with demand for conventional, road—once a new ecosystem has that will allow them to be amonginternal combustion driven vehicles taken place, then allowing scale to be the businesses that drive China—likely to remain robust, China’s built at a hyper-rapid pace. and likely the world’s—mobilityroute to the widespread adoption of revolution.electric vehicles will be circuitous. It For now, therefore, companies whichis likely that the first major users of want to play a leading role in theelectric vehicles will be commercial location where the global automotive12 Booz & Company
  15. 15. About the AuthorsHuchu Xu is a partner withBooz & Company and leadsthe firm’s automotive practicein Greater China. He hasover ten years of experiencein management consulting,with extensive experience inserving both multinational andChinese clients along the wholeautomotive industry chain,from large OEM groups to JVcompanies and auto partssuppliers.John Jullens is a director withBooz & Company based inShanghai. He specializes indemand-side transformation,including revenue growthstrategies, brand management,customer retention, and retailchannel effectiveness forB2C and B2B clients in NorthAmerica, Europe, and Asia.Bill Russo is a senior advisorwith Booz & Company as wellas the Founder and Presidentof Synergistics Limited. Helives in Beijing and has morethan 20 years of experiencein the automotive industry,most recently serving as VicePresident of Chrysler’sbusiness in North East Asia.Booz & Company 13
  16. 16. The most recent Worldwide Officeslist of our officesand affiliates, with Asia Brisbane Istanbul Middle East Florham Parkaddresses and Beijing Canberra London Abu Dhabi Houstontelephone numbers, Delhi Jakarta Madrid Beirut Los Angelescan be found on Hong Kong Kuala Lumpur Milan Cairo Mexico Cityour website, Mumbai Melbourne Moscow Doha New York Seoul Sydney Munich Dubai Parsippany Shanghai Oslo Riyadh San Francisco Taipei Europe Paris Tokyo Amsterdam Rome North America South America Berlin Stockholm Atlanta Buenos Aires Australia, Copenhagen Stuttgart Chicago Rio de Janeiro New Zealand & Dublin Vienna Cleveland Santiago Southeast Asia Düsseldorf Warsaw Dallas São Paulo Auckland Frankfurt Zurich DC Bangkok Helsinki DetroitBooz & Company is a leading global managementconsulting firm, helping the world’s top businesses,governments, and organizations. Our founder,Edwin Booz, defined the profession when he estab-lished the first management consulting firm in 1914.Today, with more than 3,300 people in 60 officesaround the world, we bring foresight and knowledge,deep functional expertise, and a practical approachto building capabilities and delivering real impact.We work closely with our clients to create and deliveressential advantage. The independent White Spacereport ranked Booz & Company #1 among consultingfirms for “the best thought leadership” in 2011.For our management magazine strategy+business, to learn more aboutBooz & Company.Printed in Greater China©2012 Booz & Company Inc.