By Nathan Lawes
Human innovation created the steam turbine and the internal combustion engine, paving the way for the Industrial Revolution and the horseless carriage (now known as the car). These innovations have made our lives easier, but our planet less healthy and our roads busier. China’s increasingly innovative and influential but smoggy cities, that play host to some of the world’s worst traffic, exemplify this. But like the era of the Yellow Pea Soup in London, this is about to change and in doing so provides British industry with an array of opportunities. Cue the era of the electric vehicle (EV) and the underground charge park.
Innovation, innovation, innovation
A recent article in The Economist provides a solid solution for offsetting negative environmental impacts from technological advancements, suggesting that the best way to tackle global crises is by doing what we humans do best: “to keep inventing”. This will need significant political and financial backing, such as government subsidies for those wanting to produce and purchase cleaner, greener cars. Increasing demand and disrupting the status quo will help progressive newcomers establish themselves in the market.
Now that the Paris Agreement has been ratified by enough states worldwide, a significant amount of finance is being unlocked with the aim of tackling greenhouse gas emissions and climate change. This explains why the Chinese Prime Minister, Li Keqiang, believes innovation will be the top driving force for future growth. He cites that 60 percent of China’s economic expansion will come from advancements in science and technology. The combination of ambitious government environmental targets and a growing consumer middle-class (larger than the entire population of the United States) means that opportunities in China are abundant.
Like the monumental industrial advancements that occurred during the 19th Century, the upcoming Green Tech Revolution of the 21st Century will provide unprecedented opportunities of which Beijing – along with the likes of San Francisco, Tel Aviv, Bangalore and London – is at the forefront. There is no finer example of this than the new-energy vehicle market and the sectors that complement this booming industry.
“We are living through a golden era in the automotive sector with new technology revolutionising almost every aspect of the car industry from the energy to drive a vehicle to the way that the vehicle is driven,” says Peter Jostins, Senior Research Fellow at Coventry University.
“Even the word driving seems to have been swapped for ‘intelligent mobility’ and car ownership models like ‘electric shared self-drive car fleets’ are now considered the future for city transport. Add to this the negative side of VW dieselgate, climate change, pollution in our cities and a reluctance of investors to invest in old technology companies and we have a sea change in the concept of motoring,” he says.
Enter the “Electric-motion steam car”
Like the steam turbine and combustion engine before it, the electric vehicle (or diàndòng qìchē in Mandarin Chinese) will shift the technological, business and geopolitical landscape, revolutionising how private drivers and corporate fleets around the world will operate. President Xi Jinping has subsequently categorised “new-energy and green vehicles” amongst the most important strategic and emerging industries in China, after signs that the combination of research grants, infrastructure investments and consumer subsidies have started to yield results.
Xi’s rhetoric was backed up by a commitment to inject $1.5 trillion to ensure Chinese firms not only curb pollution, reduce their dependence on imported oil and leapfrog traditional automotive manufacturing, but become preeminent players on par with US, Japanese and German firms.
Due to China’s global dominance in rare earth materials (REE) they are also well placed to lead innovation in battery technology. These strategic moves – in solar, wind and now electric energy – have put China in the top spot as the largest state investor in green technology. Vital if the country is to use green energy to power the estimated 5 million EVs that will be on the road by 2020.
The new environmental and economic benefits of China’s strategy gives us insight into why EV manufacturers Tesla and VIA Motors, are expanding into the world’s largest automotive market. Traditional car manufacturers are also expanding their offerings. BMW who recently launched their hybrid i3 and i8 cars are working with Chinese tech giant Baidu on electric driverless cars, and Apple has invested heavily in Didi Chuxing, China’s car-sharing app that is making ride-sharing and mobility the increasingly preferred way to travel.
New companies and old are both clamouring to become market leaders as the size of that market is phenomenal. Gerald Page, VIA’s China Director, stated that “the estimate of 5 million EVs forecasted by 2020, could easily double as China accelerates the installation of charging infrastructure with over $20 billion of approved investment from the Central Government.”
Having previously underperformed in the sector, partly due to a lack of personal charging facilities, China is now likely to become the epicentre of competition amongst the new-energy vehicle players. International companies have started to enter the arena in joint ventures to help China tackle such challenges and to establish an increasingly sophisticated market. Currently, this has not provided any logistical problems with different charging stations and charging piles.
Tea leaf nations
The United Kingdom too is another leader in the EV space. A fine example is Aston Martin partnering with Chinese tech giant LeEco . They are combining forces to launch the Rapid-E in China by 2018. CEO Andy Palmer is so confident that he stated that Aston Martin is the true “trailblazer in luxury electrics” and is now, he claims, in a league above US rival Tesla.
All across the supply chain British expertise can contribute to, and grow from, these opportunities across China. British research, design, high-tech and engineering firms are well placed. With funding from the government, the European Union and various car manufacturers – notably Jaguar Land Rover (JLR) and Nissan – the UK is in a prime position to utilise its research and development (R&D) knowledge and industrial expertise in China. Currently, one in four European EVs is built in the UK. British financial institutions could further exploit the opportunities by following the lead of Berkshire Hathaway, Warren Buffet’s firm that invested in China’s BYD Auto, the world’s largest provider of EVs.
It is also fitting that Formula-E, the emission-free Grand Prix, began in Beijing and finished in London.
It’s worth noting, however, that it won’t just be the multinational giants that will shake up the new-energy market. After all, it’s the smaller, more dynamic enterprises that account for most growth and job creation. For example, Gloucestershire-based Ecotricity’s has built Nemesis, the UK’s fastest EV, powered by wind energy. The increased demand for such EVs will require a vast amount of green and efficient energy production in the UK and China alike. As such, firms that can predict weather patterns will be well placed to help Chinese energy providers better harness energy. As will those that are able to utilise convection energy.
Petrol stations will have to diversify to cope with falling oil sales and consumers having to power their cars with clean energy, in the meantime providing entertainment, food and beverages while cars recharge. Jostins of Coventry university, stresses the benefits of hydrogen-powered vehicles, which can be “refilled in minutes”. This means there would be “no need to build whole new charging infrastructure because filling stations similar to gas stations are all that is required.” This has been backed up the Automotive Council, which sees the UK leading the market in a diverse way and not merely limiting infrastructure to EVs.
Yet for all these known opportunities in China’s new-energy industry, little has been said on the place where we park and, in the future, will charge our cars. For producers of new-energy vehicles and for the green tech mavericks, the development of charge parks could also prove to be a goldmine – especially as this vast project has significant backing from the Communist Party.
Everyone has a chauffeur
Boston Consulting Group estimates that beyond EVs, the driverless car market will be worth $42 billion by 2025. Autonomous cars will reshape the industry, with far-reaching implications for governments and insurance firms that go beyond emission and traffic reduction: “The range of automotive development going on in the UK is staggering. It’s not just energy technology but driver assistance, autonomous vehicles, connected vehicles, drive by wire, new lighting systems, intelligent road signage, accident avoidance…the scope is endless. Many of these are not just in-car technological developments but they require whole infrastructure changes, changes to policy and regulations, new levels of safety and require new ownership and insurance models,” states Jostins.
Rio-Tinto, an Anglo-Australian mining firm, is already using driverless cars to shift tonnes of materials, as is the military to transport troops and search out landmines. Despite the likes of Uber, nuTonomy and Baidu, that have been piloting driverless EVs, JLR has bucked the trend as they do not consider their “passengers to be cargo”. Yet in February 2016, JLR joined a $7.9 million programme, led by Bosch a German industrial firm, to further autonomous driving research and development, aiming to gather data on driving habits and test vehicle communications technology.
Whilst many argue the technology for self-driving cars is already there, the challenges that still remain are mainly legislative. Setting the rules for autonomous vehicles (AVs) is rife with challenges, especially in regions such as China where the rules of the road and the rules on the road aren’t always aligned. For example, if the driverless car is programmed to reduce speed when driving on a motorway to ensure a 70 metre gap remained between it and the car in front, the autonomous car in China would end up at a standstill as drivers would nop into the gaping gap left in front of the autonomous car. Likewise, programming cars to cause their own drivers to continue into an oncoming truck rather than allowing them to swerve onto a class of school kids on the pavement are decisions that are hard to make for both manufacturers and governments. However teams from both sides are busy at work and as more AVs hit the streets, it is expected that the number of car accidents will continue to reduce.
Start your (eco-)engines
So, due to the energised political will to go green (and a serious lack of space to park your car) British inventors and entrepreneurs are being presented with a fantastic electric opportunity.
In an age of climate change and sluggish growth, governments should not merely be pursuing austerity (or retreating from the world), but should rather focus on unleashing human ingenuity and creating partnerships in priority markets. This approach helped ignite the Industrial Revolution of the 19th century, where economic growth was the bi-product of human dynamism and progress.
If the Economist‘s prescription of innovation is indeed the cure, we must continue to connect with global markets, transfer knowledge and pursue sustainable growth. The industrious folk who brought us the car gave us time, travel and connectivity. Today’s tech wizards have re-invented it to suit the challenges facing the 21st Century, only this time without compromising the quality of our air and our water. Welcome to the Green Tech Revolution. Please remember to put your car on charge.
Fact box
- In 2015 China overtook the US to become the largest market for new-energy vehicles
- Beijing is 3.5 million car parking units short of demand
- Every 10 households in the city share 3-5 parking spaces
- Beijingers now have to purchase a car-parking space before they are able to acquire a car
- The waiting list to buy a car is turning people to EVs, which does not use the lottery system
- There are funding incentives for fleet operators to make the move to electric
- Pick-up trucks that were previously banned in China’s CBDs are making a return in four provinces – total sales of EV trucks will boom if this policy is expanded to other provinces
- Growth in charging station ownership has jumped from 76 stations in 2010 to 3,600 in 2015
- Subsidies are gradually being phased out, but China’s RMB 37 billion investment over the last five years will be supplemented by an additional RMB 63 billion over the next five years
- In August, LeEco signed a $3 billion investment cooperation agreement with Zhejiang Provincial Government to establish an auto park
- Local governments receive funding to build charging stations relative to how many new-energy vehicles are sold
- 10 million electric car parking units will be built by 2020
- By 2022, EVs will cost the same as their combustion engine counterparts. This moment will be pivotal
- China will half its peak CO2 emissions by 2030. The use of EVs will be essential in achieving this target
- By 2040, over 50 percent of all new cars bought will be electric
