Charging or Changing: The Question for China's Electric Vehicle Market
Lihui Xu, Jochen Alleyne
Recently, the choice of the electric vehicle charging mode once again became the hot topic in China.
The debate started last year, when State Grid Corporation of China (SGCC) and China Southern Power Grid (CSG) together announced that their EV charging strategy is to focus on battery swapping mode instead of charging mode.
This argument immediately caused a controversy in China’s industry that continues today.
The power grids argue that by using swapping mode, customers only need to drive into a swapping station with a nearly exhausted battery and drive out within five minutes with a freshly charged one. The recharging station will centralize battery charging during the off-peak time of the power grid and then distribute fully recharged batteries to swapping stations.
SGCC named this business model the Smart Charging Service Network. Battery replacement is the principal means of powering vehicles, and plug-in charging is supplemental.
However, the opposing auto makers say that the swapping mode has safety issues due to the current lack of unified technological standards for making batteries. If battery specifications are different, it would be impossible for the swapping station to replace all types of batteries safely for diverse car brands.
Gasoline suppliers like Sinopec and PetroChina also oppose swapping mode. They wish to build EV recharging stations just beside existing gas stations. They refer to this model as the Refueling Recharging Integration Station.
Both groups of objectors are concerned about a monopoly in the battery charging network by the state owned power grids.
Superficially, the dispute of these two modes is a fight over EV charging operation methods, but digging deeper will reveal it is a dispute of interests. The industry players are competing to control the power of the EV’s battery charging network in China.
Such players include four giant Chinese central enterprises - State Grid Corporation of China, China Southern Power Grid, Sinopec and PetroChina - who were all quick to join the fight for the EV charging station market in China.
Industry Players Seize the Initiative
According to the Chinese news agency Xinhua, China’s new energy vehicle plan aims to have more than 500,000 electric, hybrid and fuel-cell vehicles on the road by 2015 and five million by 2020. 
To meet the requirements of electric vehicle development, SGCC, China’s largest power grid state company plans to invest 20 billion CNY to build 2,351 EV recharging and swapping stations and 220,000 recharging poles during the period of the 12th Five-Year Plan. 
By the end of 2011, SGCC had completed construction of 243 charging and battery swapping stations and 13,283 AC charging posts.
Back in 2009, two of China’s leading corporations established a joint venture company, Potevio-CNOOC New Energy Power Corp, which focused solely on the EV’s energy supply network. One is the state owned IT & telecommunications leader, China Potevio Group, and the other is the state owned China National Offshore Oil Company (CNOOC).
Meanwhile, the Sinopec Beijing Petroleum Company deputy general manager Wenjing Wang disclosed that Sinopec will build and refurbish 275 refuelling and charging comprehensive service stations in China during the 12th Five-Year plan.
In February 2010, Sinopec announced that they had stepped into the EV charging field. Sinopec’s Beijing oil branch and Beijing Capital Group Company jointly established Beijing Sinopec Xinke Energy Technology. The joint venture company will convert the existing refuelling stations to be Refuelling Recharging Integration Stations.
In November 2011, Sinopec started trial operations of their first Refuelling Recharging Integration Station at Daxing Caiyu Economic Development Zone in Beijing.
Automakers have weighed in against battery swapping.
They claim that the battery replacement model will not work with the current technology, and that an unanchored battery will cause unexpected problems during jolt driving. More importantly, designing a new car for the swapping mode requires an investment of more than two years and about ten million CNY. If the existing charging mode were to change, this would send automakers back to square one.
BYD, a Warren Buffett-backed Chinese battery and car maker, declared it would insist on their battery charging model. In fact, many automakers including SAIC Motor, Dongfeng Motor, Changan Automobile, Nissan Motor and BMW have expressed the same sentiment as BYD, and do not want to redesign their cars to fit the battery replacement model.
The lack of related government policy for charging stations and the absence of unified standards on charging devices have also hindered the industry’s growth in China.
Prior to the release of new standards in December 2011, there were two different interfaces between EV’s batteries and recharging poles. This caused inconvenience to customers, who had to bridge those two different interfaces with a universal connector in order to charge successfully.
The four new standards issued by the Ministry of Industry and Information Technology will be effective on March 1, 2012. 
The release of the standards will establish a unified standard for connecting devices between automobile makers and power grids. This should end the chaotic status of the industry, which is a significant barrier to the government’s initiatives on renewable energy vehicles.
There is no doubt that China's standards for EV charging stations have been influenced by the national grid.
Junqing Yang, chief expert of Smart Grid, EV & Renewable Energy at Schneider Electric in China, told SGT Research that compared with Europe and the United States, China's electricity demand continues to grow quickly. The construction of EV charging stations heavily depends on the power grid. Obviously, the increased construction of EV charging stations will lead to higher demands on the grid, noted Yang, who added that Schneider was able to accommodate either charging or swapping.
Regardless of the outcome of the debate, companies hoping to enter the market should remember that the development of electric vehicles in China is still in its infancy. China’s market is opening up for those who aspire to be success in the industry. After all, China is a huge market for the EV industry, and no single company can go it alone to complete the growth required to reach China’s goals.
About SGT Research
SGT Research is a global market research and advisory firm serving the smart grid industry value chain including electric power infrastructure, renewable energy, clean technologies and capital investment. SGT Research provides strategic consulting services including analysis of market drivers, business models and technology trends for smart grid development. SGT Research also provides market entry services for smart grid firms seeking opportunities in China. With SGT Research’s local and international experience, clients will have added competitive advantages of bringing high-value products and services to the Chinese market faster.
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