The Rise of Chinese Leadership in the Plug-in Electric Vehicle Industry

name: title-slide
class: inverse, middle
background-size: contain
background-image: url(images/china.png)

]

## The Rise of Chinese Leadership in the<br>Plug-in Electric Vehicle Industry

<br>

### John Paul Helveston

### The George Washington University

### September 30, 2022

]

---

# Half of global PEV sales are in China

---

# Institutions

# Market Conditions

# Policies

---

# .orange[Institutions]

# Market Conditions

# Policies

]

<br>

## 1) The Joint Venture System

## 2) Local Protectionism

]

---

# The Chinese Joint Venture System

## 1980s: 以市场换技术 = “Exchange market for technology”

???

Past research suggests system has largely failed to transfer technology

(Brandt & Thun, 2010; Feng, 2010; Howell, 2016; Huang, 2003; Lazonick & Li, 2012; Nam, 2011)

---

### “这就像吸食鸦片一样，一旦你沾染上了就永远也无法戒掉。”

何光远, 中国前机械工业部部长

<br>

### “It's like opium. Once you've had it you will be addicted forever.”

Guangyuan He, Former Minister of Machinery and Industry (Reuters, 2012)

---

## JV system creates disincentives for<br>industry incumbents to innovate

<br>

### Multinational OEMs lack incentives to bring cutting-edge technologies

]

### Chinese JV partners lack incentives to independently innovate

]

---

background-color: #FFF
class: middle, center

### While MNEs dominate global vehicle markets,<br>Chinese firms sell most PEVs in China

---

background-color: #FFF
class: middle, center

### While MNEs dominate global vehicle markets,<br>Chinese firms sell most PEVs in China

---

background-color: #FFF
class: middle, center

## April 2018: JV requirement dropped for PEVs

---

## Local protectionism incubated early experimentation

---

# Institutions

# .orange[Market Conditions]

# Policies

]

<br>

## 1) Lower bar for selling PEVs

## 2) Infrastructure

]]

---

## Chinese buyers are more willing to adopt BEVs

]

.left[.font80[Helveston et al. (2015) "Will subsidies drive electric vehicle adoption? Measuring consumer preferences in the U.S. and China" _Transportation Research Part A: Policy and Practice_. 73, 96–112. DOI: [10.1016/j.tra.2015.01.002](https://www.sciencedirect.com/science/article/abs/pii/S0965856415000038)]]

]

---

### Chinese buyers are willing to accept relatively lower BEV driving ranges

---

# .center[Infrastructure]
 
<br>

### .center[World's largest charging network]

- End of 2020, China had 800,000 chargers installed.
- 112,000 chargers installed in December 2020 alone.

]

### .center[World's largest HSR network]

- China's high-speed rail network recently surpassed the length of the equator at just over 40,000 km long

]

---

# Institutions

# Market Conditions

# .orange[Policies]

]

## Bigger Sticks & Carrots

]

---

## .center[Consumers]

- **Purchase Subsidies**:
    - RMB 50,000 (USD $8,200) for PHEVs
    - RMB 60,000 (USD $9,800) for BEVs
- **PEV exemptions from restrictions**
    - Shanghai license plates auction for ~$15,000 (free for PEVs)
    - Unlimited driving during "Rush Hour" (7am – 8pm)

]

## .center[OEMs]

- **Dual Credit System**: require annual credits for meeting fuel economy standards & selling PEVs.
- Tesla earned $1.58 billion from credit sales in 2020<br>(.green[$721 million] profit would have been .red[-$859 million] loss).

]

---

# Policies that make ICEVs more expensive<br>than PEVs increase PEV adoption

---

# .center[The Future of China's PEV Industry]

<br>

## 1) What if the JVs break up?

## 2) Will local protectionism hinder growth?

## 3) An Emerging PEV Category: The Mini EV

---

# .center[What if the JVs break up?]

### .center[They probably won't]

- Sunk costs
- Knowledge / IP sharing not a real threat
- Chinese partners can help meet dual credit requirements

]

### .center[Even if they did,<br>not much would change]

- Leading Chinese firms don't have JVs (e.g. BYD, Geely, XPeng, NIO)

]

---

## .center[Will local protectionism hinder growth?]

<br>

- Central government cracking down on protectionism strategies

- China's PEV market already more competitive than many others.

???

- e-bike comparison: regional clusters supported by local governments were important in the early phases, but establishment of national standards was a critical step for greater industry maturation.
- central government cracking down on most blunt protectionism strategies
- With the entry of Tesla and other successful PEV startups, domestic PEV market is arguably already more competitive than other markets.

---

---

background-color: #FFF
class: center

## An Emerging PEV Category: **The Mini EV**

#### Typical Low-speed EV (LSEV)

]

#### The Wuling Hongguang Mini EV

]

---

## .center[An Emerging PEV Category: **The Mini EV**]

<br>

<table class="table" style="font-size: 30px; margin-left: auto; margin-right: auto;">
 <thead>
  <tr>
   <th style="text-align:left;"> Feature </th>
   <th style="text-align:left;"> Low-speed EV </th>
   <th style="text-align:left;"> Mini EV </th>
   <th style="text-align:left;"> BEV </th>
  </tr>
 </thead>
<tbody>
  <tr>
   <td style="text-align:left;"> Battery Chemistry </td>
   <td style="text-align:left;"> Lead-acid </td>
   <td style="text-align:left;"> Lithium-ion </td>
   <td style="text-align:left;"> Lithium-ion </td>
  </tr>
  <tr>
   <td style="text-align:left;"> Driving Range (km) </td>
   <td style="text-align:left;"> &lt; 120 </td>
   <td style="text-align:left;"> 120 - 200 </td>
   <td style="text-align:left;"> &gt; 200 </td>
  </tr>
  <tr>
   <td style="text-align:left;"> Top Speed (kph) </td>
   <td style="text-align:left;"> &lt; 60 </td>
   <td style="text-align:left;"> 60 - 80 </td>
   <td style="text-align:left;"> 80 - 120 </td>
  </tr>
  <tr>
   <td style="text-align:left;"> Price (1,000 RMB, after subsidies) </td>
   <td style="text-align:left;"> &lt; 30 </td>
   <td style="text-align:left;"> 40 - 80 </td>
   <td style="text-align:left;"> &gt; 80 </td>
  </tr>
</tbody>
</table>

---

name: final
class: inverse
background-size: contain
background-image: url(images/china.png)

## .center[Slides available at [https://slides.jhelvy.com/](https://slides.jhelvy.com/)]

@johnhelveston <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:white;overflow:visible;position:relative;"><path d="M459.4 151.7c.325 4.548 .325 9.097 .325 13.65 0 138.7-105.6 298.6-298.6 298.6-59.45 0-114.7-17.22-161.1-47.11 8.447 .974 16.57 1.299 25.34 1.299 49.06 0 94.21-16.57 130.3-44.83-46.13-.975-84.79-31.19-98.11-72.77 6.498 .974 12.99 1.624 19.82 1.624 9.421 0 18.84-1.3 27.61-3.573-48.08-9.747-84.14-51.98-84.14-102.1v-1.299c13.97 7.797 30.21 12.67 47.43 13.32-28.26-18.84-46.78-51.01-46.78-87.39 0-19.49 5.197-37.36 14.29-52.95 51.65 63.67 129.3 105.3 216.4 109.8-1.624-7.797-2.599-15.92-2.599-24.04 0-57.83 46.78-104.9 104.9-104.9 30.21 0 57.5 12.67 76.67 33.14 23.72-4.548 46.46-13.32 66.6-25.34-7.798 24.37-24.37 44.83-46.13 57.83 21.12-2.273 41.58-8.122 60.43-16.24-14.29 20.79-32.16 39.31-52.63 54.25z"/></svg><br>
@jhelvy <svg aria-hidden="true" role="img" viewBox="0 0 496 512" style="height:1em;width:0.97em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:white;overflow:visible;position:relative;"><path d="M165.9 397.4c0 2-2.3 3.6-5.2 3.6-3.3 .3-5.6-1.3-5.6-3.6 0-2 2.3-3.6 5.2-3.6 3-.3 5.6 1.3 5.6 3.6zm-31.1-4.5c-.7 2 1.3 4.3 4.3 4.9 2.6 1 5.6 0 6.2-2s-1.3-4.3-4.3-5.2c-2.6-.7-5.5 .3-6.2 2.3zm44.2-1.7c-2.9 .7-4.9 2.6-4.6 4.9 .3 2 2.9 3.3 5.9 2.6 2.9-.7 4.9-2.6 4.6-4.6-.3-1.9-3-3.2-5.9-2.9zM244.8 8C106.1 8 0 113.3 0 252c0 110.9 69.8 205.8 169.5 239.2 12.8 2.3 17.3-5.6 17.3-12.1 0-6.2-.3-40.4-.3-61.4 0 0-70 15-84.7-29.8 0 0-11.4-29.1-27.8-36.6 0 0-22.9-15.7 1.6-15.4 0 0 24.9 2 38.6 25.8 21.9 38.6 58.6 27.5 72.9 20.9 2.3-16 8.8-27.1 16-33.7-55.9-6.2-112.3-14.3-112.3-110.5 0-27.5 7.6-41.3 23.6-58.9-2.6-6.5-11.1-33.3 2.6-67.9 20.9-6.5 69 27 69 27 20-5.6 41.5-8.5 62.8-8.5s42.8 2.9 62.8 8.5c0 0 48.1-33.6 69-27 13.7 34.7 5.2 61.4 2.6 67.9 16 17.7 25.8 31.5 25.8 58.9 0 96.5-58.9 104.2-114.8 110.5 9.2 7.9 17 22.9 17 46.4 0 33.7-.3 75.4-.3 83.6 0 6.5 4.6 14.4 17.3 12.1C428.2 457.8 496 362.9 496 252 496 113.3 383.5 8 244.8 8zM97.2 352.9c-1.3 1-1 3.3 .7 5.2 1.6 1.6 3.9 2.3 5.2 1 1.3-1 1-3.3-.7-5.2-1.6-1.6-3.9-2.3-5.2-1zm-10.8-8.1c-.7 1.3 .3 2.9 2.3 3.9 1.6 1 3.6 .7 4.3-.7 .7-1.3-.3-2.9-2.3-3.9-2-.6-3.6-.3-4.3 .7zm32.4 35.6c-1.6 1.3-1 4.3 1.3 6.2 2.3 2.3 5.2 2.6 6.5 1 1.3-1.3 .7-4.3-1.3-6.2-2.2-2.3-5.2-2.6-6.5-1zm-11.4-14.7c-1.6 1-1.6 3.6 0 5.9 1.6 2.3 4.3 3.3 5.6 2.3 1.6-1.3 1.6-3.9 0-6.2-1.4-2.3-4-3.3-5.6-2z"/></svg><br>
@jhelvy <svg aria-hidden="true" role="img" viewBox="0 0 576 512" style="height:1em;width:1.12em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:white;overflow:visible;position:relative;"><path d="M385.2 167.6c6.4 0 12.6 .3 18.8 1.1C387.4 90.3 303.3 32 207.7 32 100.5 32 13 104.8 13 197.4c0 53.4 29.3 97.5 77.9 131.6l-19.3 58.6 68-34.1c24.4 4.8 43.8 9.7 68.2 9.7 6.2 0 12.1-.3 18.3-.8-4-12.9-6.2-26.6-6.2-40.8-.1-84.9 72.9-154 165.3-154zm-104.5-52.9c14.5 0 24.2 9.7 24.2 24.4 0 14.5-9.7 24.2-24.2 24.2-14.8 0-29.3-9.7-29.3-24.2 .1-14.7 14.6-24.4 29.3-24.4zm-136.4 48.6c-14.5 0-29.3-9.7-29.3-24.2 0-14.8 14.8-24.4 29.3-24.4 14.8 0 24.4 9.7 24.4 24.4 0 14.6-9.6 24.2-24.4 24.2zM563 319.4c0-77.9-77.9-141.3-165.4-141.3-92.7 0-165.4 63.4-165.4 141.3S305 460.7 397.6 460.7c19.3 0 38.9-5.1 58.6-9.9l53.4 29.3-14.8-48.6C534 402.1 563 363.2 563 319.4zm-219.1-24.5c-9.7 0-19.3-9.7-19.3-19.6 0-9.7 9.7-19.3 19.3-19.3 14.8 0 24.4 9.7 24.4 19.3 0 10-9.7 19.6-24.4 19.6zm107.1 0c-9.7 0-19.3-9.7-19.3-19.6 0-9.7 9.7-19.3 19.3-19.3 14.5 0 24.4 9.7 24.4 19.3 .1 10-9.9 19.6-24.4 19.6z"/></svg><br>
jhelvy.com <svg aria-hidden="true" role="img" viewBox="0 0 640 512" style="height:1em;width:1.25em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:white;overflow:visible;position:relative;"><path d="M172.5 131.1C228.1 75.51 320.5 75.51 376.1 131.1C426.1 181.1 433.5 260.8 392.4 318.3L391.3 319.9C381 334.2 361 337.6 346.7 327.3C332.3 317 328.9 297 339.2 282.7L340.3 281.1C363.2 249 359.6 205.1 331.7 177.2C300.3 145.8 249.2 145.8 217.7 177.2L105.5 289.5C73.99 320.1 73.99 372 105.5 403.5C133.3 431.4 177.3 435 209.3 412.1L210.9 410.1C225.3 400.7 245.3 404 255.5 418.4C265.8 432.8 262.5 452.8 248.1 463.1L246.5 464.2C188.1 505.3 110.2 498.7 60.21 448.8C3.741 392.3 3.741 300.7 60.21 244.3L172.5 131.1zM467.5 380C411 436.5 319.5 436.5 263 380C213 330 206.5 251.2 247.6 193.7L248.7 192.1C258.1 177.8 278.1 174.4 293.3 184.7C307.7 194.1 311.1 214.1 300.8 229.3L299.7 230.9C276.8 262.1 280.4 306.9 308.3 334.8C339.7 366.2 390.8 366.2 422.3 334.8L534.5 222.5C566 191 566 139.1 534.5 108.5C506.7 80.63 462.7 76.99 430.7 99.9L429.1 101C414.7 111.3 394.7 107.1 384.5 93.58C374.2 79.2 377.5 59.21 391.9 48.94L393.5 47.82C451 6.731 529.8 13.25 579.8 63.24C636.3 119.7 636.3 211.3 579.8 267.7L467.5 380z"/></svg><br>
jph@gwu.edu <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:white;overflow:visible;position:relative;"><path d="M511.6 36.86l-64 415.1c-1.5 9.734-7.375 18.22-15.97 23.05c-4.844 2.719-10.27 4.097-15.68 4.097c-4.188 0-8.319-.8154-12.29-2.472l-122.6-51.1l-50.86 76.29C226.3 508.5 219.8 512 212.8 512C201.3 512 192 502.7 192 491.2v-96.18c0-7.115 2.372-14.03 6.742-19.64L416 96l-293.7 264.3L19.69 317.5C8.438 312.8 .8125 302.2 .0625 289.1s5.469-23.72 16.06-29.77l448-255.1c10.69-6.109 23.88-5.547 34 1.406S513.5 24.72 511.6 36.86z"/></svg>

]]

---

# Extra slides

---

background-color: #EFEFEF
class: center

## Local protectionism incubated early experimentation

### **Beijing**

Only BEVs exempt from<br>license plate restrictions

]

### **Shanghai**

BEVs & PHEVs exempt from<br>license plate restrictions

]

---

background-color: #FFF
class: center

## Chinese automakers offer a greater variety of PEVs<br>at more affordable prices and driving ranges

---

background-color: #FFF
class: middle, center

---

# China's PEV Ambition

<br>

## - Energy Security
## - Pollution Reduction
## - Technology Leadership

---

background-color: #FFF
class: middle

# China's PEV Ambition

<br>

### - .green[Energy Security]
### - Pollution Reduction
### - Technology Leadership

]

]

---

background-color: #FFF
class: middle

# China's PEV Ambition

<br>

### - Energy Security
### - .green[Pollution Reduction]
### - Technology Leadership

]

]

---

background-color: #FFF
class: middle

# China's PEV Ambition

<br>

### - Energy Security
### - Pollution Reduction
### - .green[Technology Leadership]

]

]