Given China's rapid rise in the global auto industry, there is no shortage of optimistic forecasts for its electric vehicle (EV) market.

Consultants at McKinsey, for example, forecast that by 2030 EV sales in China will reach between 700 billion yuan and 1.5 trillion yuan (US$105 billion and US$225 billion), making China the world's largest market for EVs as well as for vehicles with conventional internal combustion engines.

Such bullish predictions owe much to the support of China's government for EVs. Beijing intends to invest 100 billion yuan in the next 10 years on domestic EV development.

"China has great potential to lead the EV market because it is in the national interest to go electric, for many reasons: energy security, air quality and escalation of its car population," says Bill Russo, senior adviser at consulting firm Booz & Co and former head of Chrysler China.

But the government's motivation goes beyond growing concern about the nation's dependence on imported crude oil and international pressure for it to reduce greenhouse gases. Its vision for the sector is also intertwined with its new drive promoting both indigenous innovation and domestic consumption.

Can China's auto industry live up to the heady hopes? EV sales today account for only 0.06 percent of all vehicle sales in China, and the supporting infrastructure, notably charging stations, required to ignite the market is sorely lacking.

Meanwhile, there are doubts about whether Chinese auto makers and suppliers - best known for low-cost business models that might not adapt to EVs - will be able to make much headway on their own, especially since the rise of China's auto industry has depended heavily on the involvement of foreign auto makers, whose joint ventures account for 70 percent of all sales today.

But this isn't stopping the locals from trying. The Chinese government's latest blueprint for the auto sector, which is in the final stages of approval, calls for the country to become the world's largest EV market by 2020, with five million "new energy" vehicles on the road, 10 times 2015's forecast.

Yet Xin Tianshu, managing director of IHS Automotive Group in China, a unit of the Colorado-based research house, reckons Beijing is being overly optimistic. "We expect China to have 510,000 plug-in hybrids and 430,000 battery electric vehicles by 2020."

In that case, EV sales would only be a fraction of the total 20 million passenger car sales in 2020.

Chance to catch up

But much is working in the local industry's favor. Notably, China's push toward greener energy has been made without the battle seen in other countries, like the US, with fractious legislative and strong domestic resistance.

China's relatively short history of private auto making has conferred another advantage over foreign car makers - there is no legacy of conventional car development to contend with. Says Russo: "If you look at conventional car technology, it is very much dominated by foreign brands. They have 100 years of experience. With EVs, no company has more than 10 or 15 years of experience. China's manufacturers have a chance to catch up or go ahead."

But there are challenges.

Even BYD - China's biggest maker of both batteries and electric cars - hasn't yet proven its EV commercially. Its pure battery E6 sells for about US$40,000 and its plug-in-hybrid, F3Dm, sells for about US$16,000.

No other Chinese EV makers are selling plug-in hybrids or pure battery cars in China yet.

As part of BYD's strategy to first focus on government sales, 40 E6s are operating as taxis in Shenzhen, where BYD is based. They can travel in ideal conditions up to 300 kilometers per charge, at a maximum speed of 140 km/h, and consume 21.5 kilowatts an hour per 100 kilometers, according to the company.

Although it has launched its F3DM plug-in hybrid and its E6 pure electric car, these vehicles are used only for demonstrations or fleet use so sales have been minor.

The export market is proving equally tough. "As far as I know, BYD has pushed back its original plan to export its EV car, the E6, to the US from the second half of this year to next year," Xin says.

A BYD spokesman insists that the company is sticking to its plan, but with the E6 still in trials, exports to the US may not be imminent.

Some experts foresee a larger role for state-owned auto makers.

Planned investment in EVs by SAIC and FAW, respectively China's numbers one and two state-owned auto makers, dwarfs that made by local private-sector players thus far.

(Reproduced with permission from China Knowledge@Wharton, http://knowledgeatwharton.com.cn. All rights reserved. Shanghai Daily condensed the article.)

Read more: http://www.shanghaidaily.com/article/?id=455001&type=Opinion&page=2#ixzz15h9QlTd0