China Autos:Key Takeaways,Dr Ray Chen on the EV space in China
HSBC Local Insights hosted Ray Chen, Ph.D. to present a talk on “Electric VehicleSpace in China & Globally: Powertrain and Component Makers, Demand & Trend”.
The trend is to combine EV with networking and autopilot. Dr. Chen’s topic isprimarily EV Powertrain systems (Battery/Motor/Controller). Fundamentally EVs aresimpler to make than traditional ICE; but key to the powertrain system is integrationof components and systems to optimise the system efficiency, torque, and speed.
China’s current policies are resulting in:(1) a focus on higher power density andefficiency both on battery packs and motors;(2) policy limits on ICE production havepushed many traditional auto makers to form JVs with local EV makers;(3) thecurrent EV map is more on smaller vehicle production. This trend is tending tocontinue for the time being. YTD A00EVs make up 60% of the EV/PHEV market.Over the past three years there has also been an increase of EV relative to PHEV.Dr Chen sees a lot of demand in China’s 3rd and 4th tier cities, where BYD is alsomaking a push with micro EVs to serve this market.
Battery technology is key differentiator for all the EV manufacturers. Motor andmotor controller is a relatively smaller cost component but is also a key differentiatorfor OEMs vs. other companies.
During this current rapid growth phase, securing customers and maintaining scaleis the key for component makers to survive and compete – not necessarily having thebest technology. On battery cost, Dr Chen believes only big players are makingmeaningful profits, whilst smaller battery producers can barely break even due to alack of sizable orders from OEMs.
Non-OEMs (such as internet companies) are also entering the EV space and willresult in oversupply of NEV capacity post 2020, which may thereafter result in industryconsolidation. China’s EV market growth is not as fast as the increases in capacity.
Dr Chen thinks more EV makers are going to make controllers and motors in-houserather than outsourcing, which is a counter-consensus view.