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Better batteries to drive Chinese EV demand, says Barclays

By Wayne Yamada
Published: Tuesday, 19 January 2016

Consumer demand for longer driving ranges and shorter charging times are expected to be met by the next generation of EV-powering batteries in China, which have so far lagged behind the equivalent technologies developed in Japan and South Korea.

Developments in battery technology are expected to drive up Chinese electric vehicle (EV) demand, according to UK investment bank, Barclays.

 Chinese EV_V.T. Polywoda, via Flickr
Chinese drivers are demanding more from their EVs, with better batteries expected to deliver performance improvements (source: V.T. Polywoda, via Flickr). 

Chinese drivers expect EVs to have a driving range of 250km and shorter charging times than are currently required to fully power-up cars. Fortunately, these demands match the specifications of second generation batteries, set to roll off production lines in the next couple of years.

"As manufacturers continue to squeeze improvements out of the current generation batteries, the second generation battery technology is likely to kick in around 2017-18, which promises much-improved driving range," Barclays analyst, Chi Zhang, said.

The average driving range of early model EVs in China was 120km, rising to 150km for cars released in 2014. Some vehicles sold last year claimed to be able to travel up to 300km on a single charge, but in general, Chinese battery technology has remained behind that of Japanese and South Korean competitors.

"Battery quality, stability, charging time and tech services remain consumer concerns,” Zhang said. “For example, the Nielsen survey reveals that the current six-to-eight hours of full charging time far exceeds the 4.7 hours (or 20 minutes quick charge) preferred by consumers," Zhang added.

Over the last few years, China has seen a large uptake in EVs, with the government encouraging rapid growth of electrically-powered transport to reduce oil product imports, cut air pollution, and to develop a domestic EV manufacturing sector. 

Figures are debated, but Chinese EV sales may have already overtaken those in the US, and China’s government has announced ambitious goals for future sector expansion to 2020.

"The government has set a target to lift EV sales from 75,000 in 2014 to around 1.5m units (5% market share) by 2020, with cumulative sales reaching 5m," Barclays said.

State initiatives to encourage EV usage comprise subsidies and waiving sales and licence taxes for EVs. Other measures include encouraging local government to switch to EVs for public buses, taxis, and official cars. Official guidelines state that EVs must account for at least 30% of the annual procurement of such vehicles in 2014-16.

The Barclays report did not say what type of battery chemistry was likely to facilitate the anticipated improvement in EV performance, however many industry observers have speculated that lithium-ion (Li-ion) is likely to be the preferred technology for electric transport.

Recharging ahead

China is also investing in recharging infrastructure, with the latest policy goal to add 12,000 charging stations and 4.8m distributed charging piles to serve a fleet of 5m EVs by 2020.

"EV growth far outpaced China’s total automobile sales of 7% in 2014 and an estimated 4% in 2015," Barclays’ Zhang said.

But the bank has also warned of possible challenges that could hinder the uptake of electric transportation. Failure to satisfactorily extend driving ranges and reduce recharging times could deter consumers, while any removal of government subsidies and slow construction of public charging stations would make it practically difficult for drivers to adopt EVs in place of hydrocarbon-fuelled cars.

"On balance, we think battery technology development will help accelerate China’s EV penetration in the next five years, given the extension of driving ranges and reduced costs, but we think challenges are likely to result in less robust EV growth than the government targets,” Zhang said.

“Charging infrastructure constraint and gradual EV and service market growth are likely to cause a slower EV acceptance and adoption by consumers," Zhang added.

 



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