The U.S. needs a coherent, unified energy policy with respect to vehicle electrification and automation if it wants to keep up with China, write Leonard Hyman and William Tilles. U.S. and European auto manufacturers have equal or greater resources than their Chinese counterparts. But they don’t have the same level of government support – and therefore cannot rely on their domestic markets. Courtesy Oilprice.com.
Recently, William Clay “Bill” Ford Jr., executive chairman of Ford Motor Co., said China was “at the heart” of the electric vehicle and the “mobility” movements. It was an interesting statement from the head of a company once identified as the heart and soul of the U.S.’s industrial Midwest.
Ford is now developing a self driving car with a Chinese partner. And General Motors plans to sell only electric vehicles in China by 2025. China’s SAIC Motor Corporation, with sales of 6.9 million cars and net income of $5 billion, boasts that it “strives to grasp the trend of industrial development and speed up the innovation driven industrial transformation…” Sounds like a plan, a five year plan perhaps, but at least a plan nevertheless.
But if there is any doubt of direction, take a look at Tongji University’s special supplement in Science, one of the world’s most prestigious scientific journals. Tongji, a prestigious government sponsored institution in Shanghai explained its vision for the “new energy vehicle” (NEV). Given what the Tongji authors assume to be “strong support from the Chinese government and large market demand in China”, they estimate five million NEVs cruising China’s roads by 2020.
Tongji’s various departments are engaged in propulsion related research involving: fuel cells, hydrogen energy, batteries, motor systems, lightweight materials, hybrids, intelligent vehicles, automated and connected vehicles and car sharing. The Tongji article gave little attention to the electricity grid. All that electricity for this new industry has to be produced somewhere.
Power grid
In China, the state controls the power grid. This means that major plant investment, for better or worse, is made with little or no regard for profitability. And the government’s clear intent is for China to be a world leader in electric vehicles. China’s giant internet firms, which depend on government tolerance to stay in business, have already invested in ride sharing and vehicle automation technologies.
U.S. and European auto manufacturers and internet giants probably have equal or greater resources than their Chinese counterparts. But we cannot assume they have the same level of government support which provides at a minimum a domestic market. Furthermore, the electricity industry in the U.S. for example consists of a multitude of public and privately-owned utilities often regulated differently from state to state and operating within three huge, transmission-interconnected areas.
The likelihood that an industry as structurally fragmented as ours can agree on uniform nationwide strategies to enable electric vehicles without government prodding or coercion is slim. Some say that we don’t need a strategy.
More ambitiously, others have even argued for the coming irrelevance of the electric utility industry. In this view of the future, owners of electric vehicles will no longer require a grid connection. Their electricity will be provided by a combination of solar panels, windmills and batteries. While certainly possible, this still seems a bit farfetched. The USA and China have substantial electric generating capacity and the transmis-sion system already in place to bring economic renewable energy produced on a large scale to the consumer. The grid is already there. Will they just ignore it?
Industrial policy
This brings us to the matter of industrial policy. China’s industrial policy is clearly dedicated to developing a robust domestic market for electric vehicles. If the government insists on construction of the infrastructure, Chinese NEV manufacturers will flourish in their home market. They have the opportunity to develop the scale and to be a dominant player in the worldwide electric vehicle market.
In the U.S., on the other hand, buyers of electric vehicles may have to purchase and install their own charging stations if commonly used stations are not nearby. Rules, rates and regulations often vary by state. That absence of uniformity at least in the near term discourages early adoption of the American EV products. Failing to obtain market share early could doom some Western manufacturers.
Over a century ago, the United Kingdom’s laissez faire politicians decided to abdicate their role with respect to industrial development. They permitted local governments and fledgling markets to decide the direction of the nation’s energy infrastructure development. This lackadaisical attitude toward the nation’s industrial policy greatly hampered the UK vis-à -vis other European nations. The UK’s policy is a case study in ignoring reality locally while all the competitors had come to grips with reality.
What do we need? A coherent, unified energy policy with respect to vehicle electrification and automation. And we need it soon. What we don’t need is more support for aging, politically-influenced industries—even if it’s under the guise of improving reliability.
Editor’s Note
The post, Can The U.S. Compete In The Electric Car War?, was first published on OilPrice.com and is republished here with permission.
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Nigel West says
I am not aware of any Chinese designed or produced cars with ICE engines on UK roads. Perhaps EU import duties are a problem in terms of competing with European producers. To grab the interest of UK car buyers China would need to produce attractive well designed vehicles that stand up to comparison with European produced vehicles. As their ICE powered cars appear to be rare in Europe, China is likely to struggle selling EVs to Europe based on Chinese designs.
The quality of European produced cars is such that many wealthy Chinese buyers want European made cars. European manufacturers setting up production facilities in China will I expect face significant import tariffs for their Chinese produced vehicles should they wish to produce cars to European designs and standards outside of Europe and then import to Europe. The same is likely to apply to N. America under the current administration wishing to avoid further job losses to China.
I don’t agree with the penultimate paragraph suggesting the UK’s national Government wasn’t involved with energy infrastructure development. Almost a century ago, in 1926 the Government set-up the Central Electricity Board that built one of first grids in the world to interconnect the UK’s supply system. An immediate benefit was a reduction in the level of reserve capacity needed which lowered costs and improved security of supply.