Chinese Companies Should Dig for Gold in Electric Cars
Scooting about in China
Here I am ready to talk about energy again. But this time, instead of saying that the prices of oil will skyrocket again soon: because in the downturn oil prices are low and therefore the oil companies are not investing in increased capacity, and therefore when demand increases again there will probably be a shock. No, I am going to talk about something different. This time, I would like to talk about something that can be of interest to Chinese classmates and companies.
Before writing this article I was wondering why many cities around the world are so concerned about electric transportation now. Why did Warren Buffet invest in BYD? Why do so many countries want to take the lead in producing electric cars, buses, trams and metros? Why are there Smart electric cars all around London and how come GM has developed the Volt and Toyota the Prius?
I thought that the main reason was to reduce the pollution that blights some big cities around the world. But there are better ways to do that, for example the way that London did, making all cars that go to the center of the city pay a congestion tax. Other cities encourage the use of bicycles: my hometown Seville, in Spain, has blocked some lanes to cars to allow bicycle traffic. Others encourage the use of public transport.
But then, using Google I started to do some basic research. And I discovered several amazing things. For example I discovered that the combustion engines that normal cars and motorbikes use are very inefficient. They only use around 20% of the energy they consume in form of gasoline or gas oil.
If the engine is a Hybrid one, like the one in the Toyota Prius and the Honda Insight, the efficiency increases to around 30%. That means that at least 70% of the energy burned in the engine is released in the form of heat (without use).
Then I continued my research and found that electric engines are much better in that sense, with an efficiency of at least 85-90%. Then everything started to be clearer.
Combined-cycle thermal power generation plants have around 55% efficiency. Therefore if we use all the fuels we use for cars and transport to produce electricity and then use the electricity to move electric cars we can do the following calculations.
For X amount of fuel: conventional cars 20% efficiency.
For X amount of fuel: CCPP 55% efficiency. Electric cars: 90% efficiency. 55x0.9=49.5% efficiency.
That implies that using electric cars would require less than half the fuel of conventional cars or, with the same amount of fuel they could travel twice the distance of conventional cars.
That is probably why everybody around the world is talking about the future of electric transportation. Of course this means that we should change our way of life. This means that there should be places to plug the cars in cities, and that the whole auto industry has to change production.
But we’ll benefit from cleaner air in our cities, much less noise, more efficient use of resources, and reduction of greenhouse gases.
But let’s come back to China. Looking at any city in China we can see that use of electric two-wheeled vehicles, ranging from bicycles to motorbikes, is widespread. Therefore some Chinese companies have the know-how to produce these kinds of vehicles and their parts.
I think this is a great opportunity for Chinese companies to sell products abroad. It’s time some Chinese companies went abroad, developed their marketing skills and sold something that’s ahead of the curve. Chinese companies are in position to break into this market ahead of other countries.
Spanish-born Jorge Menendez graduated from CEIBS with an MBA in 2008. This story was originally published in the CEIBS student magazine Shenme in Summer 2009.
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