Electric and hybrid cars are a clearly prioritised area in Sweden, as they are in many other countries, as one of the components of a fossil fuel independent vehicle fleet. This report presents a picture of the current status of four central actors on the global playing field in this area: China, Japan, India and South Korea.
The aim is to describe the processes, political and otherwise, that control development in the respective countries and indicate the primary driving forces and the factors that are slowing development down. The starting point is the innovation system surrounding electric and hybrid cars and the governance structures that influence the emergence, introduction and diffusion of new technology.
This section summarises the main features of these structures in the respective countries and the conclusions that are drawn in the report.
In all the countries studied, development of electric and hybrid vehicles has been driven by a greater need for energy security (first and foremost reduce oil imports) and hopes on the part of the domestic car industry for a massive global upswing in the demand for such vehicles. Another reason, whose importance seems to vary between countries and over time, is these vehicles’ significance for a better environment; both as regards the acute pollution situation in Asian mega-cities and also as regards global climate change. As can be seen from the objectives, this means that the countries studied have objectives to produce electric and hybrid vehicles and to have a national vehicle fleet consisting to a considerable extent of such vehicles.
The varying terminology used in the different countries is also worth mentioning. While people in China say ”new energy vehicles”, the most common term in Japan is ”next generation vehicles” and in South Korea ”green cars”. In India, the term xEV is used. It should be pointed out that these terms also include different technologies in the different countries but where BEV and PHEV are the main types. The table below summarises the different terms used in the report.
The government has played an important role in all the countries as a driver of development, from R&D to implementation and infrastructure construction, and national plans with stated objectives have been drawn up to support development. Development has also taken place in all the countries in close collaboration with national industrial actors, primarily the major car manufacturers. (At the time of writing it is still unclear how far the new South Korean president will prioritise electric and hybrid cars.)
A general lack of clarity can be discerned on the part of the governments as regards policy, including standardisation. One reason for this is that they are waiting to see how technology develops and they do not want to “choose”a particular technology too early for fear of being stuck with the “wrong” technology. The Japanese government has hitherto maintained a technology-neutral attitude towards the issue (which also includes CDVs and “mini-vehicles”). There is also a degree of scepticism in Japan as regards standardisation since it is feared that it may lead to copying, primarily by other Asian companies. Technological neutrality also applies in principle to India, but here we find a hint of priority order on the basis of consumer demand, which is expected to be for HEVs, PHEVs and BEVs and in that order. State subsidies in India, however, are highest for BEVs since these vehicles are most economical on fuel. In China, the preferred long-term technology is BEVs, while PHEVs act as a transformation technology. (Here again, state subsidies are higher for BEVs.) At the same time, China has not closed the door on FCV or other technologies currently at the R&D stage. In South Korea, BEVs have been prioritised but the new president’s possible technological preferences are, as stated earlier, as yet unknown but it is probable that HEVs will be lifted out of the “eco-car portfolio” since the technology is perceived as insufficiently mature to be able to survive on its own merits in South Korea. In all, this waiting to see as regards policy development, including standardisation, has led to greater uncertainty and potential buyers of electric and hybrid vehicles also waiting, as is industry where stable rules of play are a recurring “order” from the governments of the different countries.
As regards concrete measures to increase demand for electric and hybrid cars the countries show a wide range, with the exception of India which is still at too early a stage and any subsidies have yet to appear.
In Japan companies, organisations and individuals can be granted different levels of tax exemption and relief when they buy “green” vehicles depending on the type they choose. It is also possible to receive direct subsidies to purchase and install charging devices.
The South Korean model is currently based on subsidies for public vehicles (buses) while subsidies for passenger cars are still being discussed. Other measures include better (and cheaper) parking possibilities and lower road tolls for electric and hybrid vehicles. (In South Korea, legally binding environment-related objectives have been set for the car industry to either achieve certain fuel efficiency or greenhouse gas emission objectives.
In China, a variety of incentives and technologies to introduce so-called new energy vehicles are being tested in a number of pilot cities. In some cities the central government subsidises purchases of public vehicles, primarily buses and taxis. In other cases the subsidies go direct to private consumers. In addition to the state subsidies (it is unclear whether this applies to all cities) the local governments contribute extra financial support – often of the same magnitude as that provided by the state. These forms of direct support have also been complemented for some years by road and other taxes that strongly favour new energy vehicles while they increase with increasing engine size for traditional petrol-fuelled vehicles. In some of China’s mega-cities pilot projects have been conducted where people who buy electric and hybrid vehicles are allowed to avoid the restrictions that have been introduced for car purchases in those cities. For example, in Peking people do not need to take part in the monthly licence plate lotteries and in Shanghai they do not need to take part in the monthly auctions for licence plates (which currently cost between SEK 70,000 and 80,000).
Common to all the countries is that the objective of the subsidies is to primarily or exclusively favour the domestic car industry with its associated clusters.
On the supply side, the countries studied focus research on a broad palette of issues related to industrialisation and implementation of electric and hybrid vehicles with an emphasis on battery development and infrastructure. The research projects are conducted strikingly often in direct collaboration between the state, the domestic car industry and national research institutes.
The primary role of the state in this context is to fund the research. In China, the state has however taken on a greater role and has much more direct influence on the direction and depth of knowledge development.
The countries studied have hitherto found it difficult to attain the goals set or the process is at far too early a stage (especially in India) for a clear picture of future goal attainment to be presented. Exceptions from this are HEV vehicles (alongside PHEVs) in Japan and to a certain extent South Korea, where mass production is well under way.
It can be said that the governments’ hopes have proven to be over-enthusiastic and to a certain degree naive as regards the challenges, not only concerning the technology in itself but also the possibilities to plan the sector’s development in general. The biggest obstacles are that the technology, especially in respect of the battery, has proven to be more difficult to overcome than expected, the lack of infrastructure expansion and unfavourable prices. Another restricting factor is a lack of clarity on the part of the government as regards policy, including standardisation, which forces industrial actors and also potential customers to adopt a wait-and-see attitude.
In all, this has led to low demand in general and in particular from private consumers who meet drastic price differences between eco-vehicles and conventional vehicles. Even in China and South Korea, where public actors are obliged to purchase electric and hybrid vehicles and thus create an initial demand, interest on the part of these actors is restrained.
Despite certain differences, there are a great many similarities as regards the development of electric and hybrid vehicles in the different countries. Energy security, future export opportunities and limiting emissions are factors that have driven development in all the countries. Another common factor is the governments’ role as a driving force, jointly with domestic industry. The national research institutes and universities also fill an important function.
All the countries, with the possible exception of India, are also trying to create a domestic demand by means of various forms of subsidies – which are also designed to favour domestic industry – and other policies.
So far, however, success has not been forthcoming. The fact that the battery technology has proven to be more difficult to master than expected, alongside a lack of infrastructure expansion, unfavourable prices and a lack of clarity on the part of the government as regards policy, including standardisation, have been and continue to be obstacles to progress.
What separates the countries most distinctly from each other is how far they have come with development. Japan stands out as the country that has undeniably advanced furthest. This is probably also true in a global context. Then follow South Korea, China and India – in that order. Where South Korea has already attained a degree of industrialisation regarding electric and hybrid vehicles, China is poised to shift from having a few prototypes to beginning mass production and India is still at an early stage where the government is drawing up plans and strategies. The factors that above all else seem to have created the differences in how far the countries have come in the area of electric and hybrid vehicles is the combination of general level of development, the state’s overarching ability to plan and implement and the domestic car industry’s degree of maturity.
Governance for electric vehicle innovation - Lessons from South Korea, India, China and Japan