Chinese power sector could crash electric-car plans
The country's power-grid giants could make life harder for automakers by pushing a costly and difficult requirement for electric vehicles.
This will support growth of electric-vehicle (EV) sales and hybrid sales over the medium-term, spelling good news for automakers such as General Motors (GM), Ford (F), Toyota (TM), Honda (HMC) and Tesla Motors (TSLA), which have been investing heavily to develop fuel-efficient and electric vehicles.
However, China's power-grid giants -- China Southern Grid and State Grid -- can throw a wrench in these plans by insisting on battery swap as a principal operational mode in support of the country's efforts in vehicle electrification, which will be difficult to implement given the present technology level.
Battery swap versus charging
The two operational modes that can support electric-vehicle battery charging are battery swapping and charging. In battery-swapping mode, a user swaps a new battery once the older battery runs out of charge.
This requires a standardized battery pack for all vehicles, which is difficult to realize with the current technology and which can possibly lead to monopoly by Chinese power grid majors. Power grids claim that battery technology isn't developed enough to support fast charges. They also argue that with battery swap, batteries will be separate from cars, allowing automakers to sell EVs without batteries and lowering the initial cost for consumers.
The normal charging mode connects vehicles to a power source for overnight charging. Some argue that installing charging poles will be a cheap and convenient alternative to massive charging stations.
Most Chinese users prefer normal charging poles over battery swapping, according to a survey.
Can increase costs and erode margins for automakers
While most automakers are looking at China for growth, with the global economic crisis taking a toll on sales in Europe and the U.S., such a debate will add to their uncertainty and willingness to invest.
GM plans to start importing Chevrolet Volt for sales in China this year and also plans to develop electric cars there through a joint venture with a Chinese automaker. GM would transfer battery and other electric-car technology to the venture. Toyota also plans to produce all-electric vehicles for China market next year. Ford and Honda are mulling building electric vehicles in China.
If China shifts away from charging mode, changes required in battery technology can potentially raise costs for automakers to make EVs compliant with battery swapping mode. Losing control over their electric-vehicle battery technology can also erode their margins.
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