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Senior Analyst – UK
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With a background in computational biology, Rueben Scriven joined Interact Analysis two years ago and leads the warehouse automation and on-highway commercial vehicle research areas. Rueben has spoken at some of the leading industry events and moderated several panel discussions on the topic of commercial vehicle electrification. He’s also appeared on CNBC to provide insight on the global electric bus market.

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Maya Xiao Author
Research Analyst - China
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Maya has an interdisciplinary technical background in vehicle electrification, system automation and robotics. She is now the lead analyst for Interact Analysis’ Li-ion battery and forklift research, also covering markets for industrial and collaborative robots. 

Last week on the 16th September, Wang Binggang, head of the National New Energy Vehicle Innovation Engineering Project Expert Group, revealed at the 2nd Global New Energy Vehicle Supply Chain Innovation Conference that the ‘Energy Saving and New Energy Vehicle Technology Roadmap (version 2) has been through expert review’, with the biggest change being the position on hybridisation of ‘traditional energy’ vehicles (i.e. not plug-in-hybrid, fuel cell electric or battery electric).

This change in position will have a monumental impact on the global electrified vehicle landscape, in particular mild and full hybrids. The announcement states that by 2030, New Energy Vehicles should account for 30% of new sales in China while hybrids should account for 75% of ‘traditional energy’ vehicles.

That said, whilst some information has been released, the exact nature and structure of the policy has yet to be announced. What we do know, however, is that the policy will shift away from a purchase subsidy to what the government describes as a ‘user-orientated encouragement policy’.

Whilst slightly ambiguous, we assume this refers to incentives such as lane priority for electrified vehicles, which has proved highly successful in China already, along with low emission zones similar to those  used in Europe. The government could also extent the dual credit system, which incentivises OEMs to produce a certain number of New Energy Vehicles per year, to include ‘Energy Saving Vehicles’.

Why this is so significant to the global electrified vehicle supply chain

Commercial lithium ion cells have been optimized for either high power density or high energy density. High energy density batteries are able to store more energy and are favoured in battery electric vehicles where they can be used to maximise range. High power density batteries can release energy more quickly and are suited to being used in hybrid vehicles and consumer electronics. China’s New Energy Vehicle incentives, such as those which tie the level of subsidies received to the size of the battery (in kWh), have been hugely successful in developing a battery industry optimized for high energy applications.

However, with the market for mild hybrids expected to grow significantly over the next 10 years – especially in Europe, China’s new policy direction will optimise its position in the electrified vehicle supply chain as it builds up its high power density battery manufacturing capabilities to supply the growing domestic and international demand for hybrid vehicles.

This would allow China to sell into what will become a huge market for high power batteries over the next 10 years. Japanese companies, such as Panasonic and Toshiba, are currently the main suppliers of high power batteries which are sold into its domestic hybrid vehicle automakers such as Toyota and Honda, as well as consumer electronics. However, China’s shift towards hybrid technology poses a serious risk to Japanese battery manufactures as China looks to grow its domestic production of high power batteries. Furthermore, whilst this policy shift could result in a short-term boon for Japanese automakers, able to capitalise on the rebranding of hybrid technology, long term, Japanese automakers will face significant competition from Chinese OEMs as they ramp up production of hybrid models and will likely outcompete Toyota and Honda on price.

Final thoughts

It is clear that China’s updated policy will have a huge impact on its domestic automotive market. What is less clear is what impact this will have on the global market. While the policy will position China’s automotive market such that it has the potential to capitalise on Europe’s growing mild hybrid market, geo-political factors like trade tariffs and tensions between China and Europe over domestic and international policies may hinder export growth

To find out why we think this policy could result in 700,000 additional medium and heavy-duty commercial vehicles registered this decade, click here.

Posted by Rueben Scriven

Graduating from Durham University with a first-class degree in Biochemistry, Rueben is leveraging his background in science and computer modelling by joining our growing analyst team.