2. Table of Contents
1. Executive Summary
2. China - Key Macroeconomic Indicators
3. Growth Opportunities In Technology Value Chain – A China Perspective
4. Factors Affecting China’s Powertrain Landscape from Industry Perspective
5. Factors Triggering New Technology Growth from Regional Perspective – A Comparative Analysis
6. Factors Affecting New Technology Growth from Regional Perspective – A Comparative Analysis
7. Automotive Powertrains – Key Trends in Value Chain
8. Market Shifts - Six major value chain shifts until 2030
9. China – Future Powertrain Technologies
10. China’s Support Programs Under 12th Five-Year Plan – Export Restrictions and Provincial Subsidies
3. The global market for automotive powertrains will be more than double by
2030 to US$ 521 billion, per some estimates. Globalization and electro-mobility
are the key drivers. The internal combustion engine (ICE) will be standard for
the foreseeable future, but the new and more efficient technologies are on its
way. Numerous technologies such as optimized, low-emission ICE (eg. 3-
cylinder), hybrid and electric vehicle will co-exist
This is turning the automotive powertrain industry into a portfolio game and
exposing it to high uncertainty, as dramatic paradigm shifts will transform the
value chain entirely. With this, the race is on to capture attractive growth
opportunities to gain early advantage, and manage constant rising challenges in
the transforming powertrain industry
Powertrains will become a business area composed of a variety of
technological and business models, triggered by forthcoming regulations
restricting vehicle carbon emissions and drastic variances in consumer behavior
Although at least 90 per cent vehicles will still run on an ICE, it is still too early
to say which technology will prevail and thrive. Simultaneously, the automotive
industry is gaining momentum: automotive powertrain market revenue –
driven by electro-mobility and globalization – will be more than double from
US$ 215 billion to US$ 521 billion by 2030, with new players enter the market
4. Real GDP Growth Estimates (%)
Vehicle Ownership per 1000 people , 2014
Source: Statista, IMF World Economic Outlook 2011, China Ministry of Transport
Total Urban Population (m)
Total Length of Paved Highway (m. km)
Key Inference
Robust GDP growth coupled with increasing
urbanization rate, low vehicle ownership rate and
highway expansion support China’s long term vehicle
demand
5. Source: Statista, LMC Analysis, Industry Estimates
• Growth in Triad
markets limited
between 0.1% and
1.2% per annum till
2015
• More robust growth
in BRIC markets,
ranging 1.2% to 10.7%
per annum in China
• CEE and Russia will
converge close to
European and
Japanese standards by
2025
CAGR 2010-
2025
0.1% 0.4% 1.2% 10.7% 1.2% 4.4% 1.3% 4.4%
Cars per 1,000 inhabitants 2010-2025 (‘000 vehicles) Projections
BICTriad CEE + Russia
Key Inferences
6. Source: Industry Analysis & Estimates, LMC Analysis
The global automotive market is expected to grow at a CAGR of 6.3% from 2014 to 2020, but the global hybrid vehicle market is
expected to grow at a much higher rate. Presently, the global hybrid vehicle penetration in the overall automotive production is 3-5%,
which has increased from 1-2% in 2012
Industry experts believe that one in five vehicles sold around the world are expected to be powered by a hybrid powertrain in 2020. The
volume of the global hybrid vehicles market is expected to double from 2014 to 2020; primarily on the back of research and
development efforts by automakers towards efficient utilization of fuel, and government initiatives to create awareness and acceptance
of hybrid cars. However, the high cost of hybrid cars acts as an inhibitor to the market growth
China understands that embracing hybrid powertrains could help it not only to manage its energy dependency and environmental
challenges but also to build an industry that could leapfrog its global peers in this sector for which the country needs a strategy
alignment
A phased introduction of new vehicles – starting with more cost effective and less technologically sophisticated extended range, plug-in
hybrids is required
For China, market for hybrid electric vehicles from 2014 to 2020 is expected to grow. In order to have a stronghold of this segment,
China as a region, seek to lower their fuel expenditure and manufacturers are compelled by regulations to decrease vehicle CO2
emissions. Promotional activities by automakers are likely to raise awareness regarding hybrid vehicles across the globe. The low
emission internal combustion engine (ICE) is expected to be the dominant power source for hybrid vehicles.
Future demand for hybrid cars is expected to grow, and Asia Pacific region is expected to experience the highest growth as it is still an
underpenetrated region when compared to Japan and US. Also, prices of hybrid and other types of electric vehicles are expected to
decline that is considered to be one of the most critical factors to succeed in regional perspective on the back of industry consolidation
Powertrain electrification will shape the current mobility value chain, forcing consolidation and new partnerships and at the same time,
opening up new revenue and profit pools for existing and new players. The future depends upon addressing the need to capture four key
growth markets, most of which are heavily influenced by industrial policy
7. Source: Industry Estimates, Roland Berger Analysis
• High-power and High-energy batteries (a US$ 11 bn to 33 bn market by 2020)
While companies such as Phostec Lithium, 3M, BASF and others have a strong position for active battery materials, Japanese and
Korean players are dominating cell manufacturing. Chinese peers are fast closing the gap leveraging extensive government
support and unique access to critical raw materials. Because of the massive R&D and CAPEX needs, fast consolidation is likely,
with fewer than ten companies dominating cell manufacturing by 2020
• Equipment for battery cell manufacturing (a US$ 4 bn to 9 bn market by 2020 for automotive applications alone)
In the current scenario, this market is dominated by Japanese and US manufacturers. Due to high automation of cell
manufacturing, China can only participate if it would be able to leverage its expertise in precision engineering
• Electric motors / e-machines (a US$ 4.5 bn to 10 bn market by 2020)
Incumbent manufacturers are today’s leaders in terms of technology. However, they face a major threat from Chinese peers who
have better access to rate earths material needed for electric motors that rely on permanent magnets. Suppliers from triad
market, hence, need to increase their efforts to develop alternative technical solutions in order to be in line with this business
segment
• Energy, Infrastructure and additional services (a US$ 3.2 bn to 11 bn market by 2020, plus several times that in additional
revenue opportunities)
Utilities, globally are struggling to gain their positions and are being constantly challenged by new players. The new players take
advantage of global reach and invest heavily in additional services and new technologies to enhance customer value. OEMs need a
clear strategy to participate here as well, so as not to be marginalized by a long-term shift to provide mobility services
Overall, Governments and industrial policies play a crucial role in market penetration and new technology development, as they
are required to support market development by facilitating essential investments. China, in order to have a strong regional long-
term competitive advantage, need to increase its efforts immensely
8. Source: Industry Estimates, KPMG Survey Analysis, AD Little Analysis
Customers
Total cost of ownership
(TCO)
Functional Performance (FN)
Image (IM)
Reliability (RB)
Safety (SF)
Convenience (CN)
GovernmentMain Product Suppliers Complementary
Suppliers
International and
local OEMs’
powertrain and
alternative
powertrain offerings
Powertrain tier-one
suppliers offerings
Subsidies and Taxes
(OEMs’,
complementary
suppliers, end-users)
Regulatory (fuel
economy, emissions)
Fuel supply and
price
Re-fuel
Infrastructure
Analysis depicts that large number of
consumers are still fixated on traditional
product issues such as fuel efficiency,
environment-friendly engines, safety
and comfort
One factor that has leapt in significance
is enhanced vehicle lifespan, which is
now the second most important factor
influencing the buyer decision after fuel
efficiency
The use of alternative fuel technologies
remains a low priority, suggesting
strongly, that the consumer purchase
decision is driven more by the cost
consciousness than the conscience
Note: % of respondents rating a product issue as extremely important; Figures represent 2015, 2014, and 2013 as a survey period from left to right
Key Inferences
9. Source: EY Survey Insights
Fuel savings, environmental impact
and government incentives are three
broad parameters that could
motivate buyers, with fuel savings
clearly the most important factor.
This indicates that while
environmental and other factors are
on consumer’s mind, the new
technology has to make economic
sense
Fuel savings
Environmental
Impact
Government
Incentives
Safety
Design &
Appearance
Access to
Advanced
Technologies
Style
Statement
Popularity
China 86% 82% 60% 69% 49% 59% 35% 22%
Japan 88% 56% 59% 46% 34% 22% 4% 8%
US 91% 63% 55% 56% 38% 23% 5% 9%
Europe
France 92% 81% 56% 28% 20% 23% 13% 6%
Germany 88% 61% 66% 34% 29% 22% 14% 10%
Italy 89% 73% 61% 50% 29% 30% 8% 6%
UK 88% 58% 45% 34% 30% 10% 3% 13%
Average 89% 67% 58% 52% 37% 31% 13% 12%
Highest Response Rate Lowest Response Rate
Key Inferences
The significance of incentives to lower
the total cost of ownership is an issue
of higher importance in the transition
to this new technology platform and
must be addressed in a comprehensive
and collaborative manner at the
federal, state or municipal levels. The
market will likely produce several
forms of incentives to further motivate
purchase
As for China, most factors seem to play
a key role for a large number of
consumers, which supports the
assumption that Chinese buyers are
more enthusiastic towards PHEV’s or
EV’s than consumers from other
markets
10. Source: EY Survey Insights
Access to charging stations, vehicle
price, and battery driving range are
the most critical factors, which if not
addressed, could lead consumers
away from purchase
Price is not crucial as an issue among
Chinese consumers, whereas safety
rates much higher in China than other
regions
Access to
Charging
Stations
Price
Battery
Driving
Range
Reliability
Performance
and Handling
Lack of clear
understanding of
cost advantage
Battery
Disposal
Safety
Technology
Obsolescence
Seating
Capacity
China 69%
57%
73% 64% 57% 49% 54% 64% 28% 24%
Japan 60% 73% 43% 36% 35% 44% 26% 32% 10% 9%
US 75% 74% 75% 57% 49% 49% 50% 41% 30% 33%
Europe
France 74% 63% 81% 26% 46% 23% 26% 19% 14% 16%
Germany 74% 66% 75% 42% 52% 48% 36% 26% 27% 20%
Italy 64% 62% 62% 46% 54% 44% 33% 28% 22% 19%
UK 71% 60% 71% 47% 50% 44% 36% 31% 23% 27%
Average 69% 67% 66% 49% 48% 45% 41% 41% 22% 21%
Highest Response Rate Lowest Response Rate
Key Inferences
Most consumers are not willing to
compromise key performance
characteristics to drive alternatively
powered vehicles. Complex new
technologies must be delivered
without any material sacrifice of fit,
function, and finish
In China, 7 of the 10 factors are a
concern for over 50% of consumers,
reflecting the need for vehicle
manufacturers to address more issues
simultaneously to enhance the
likelihood of adoption. Technological
obsolescence and seating capacity are
the least mentioned unfavorable
factors in each country
11. • Globally, the automotive industry is currently dealing with a
number of discontinuities that will turn the powertrain into a
portfolio of various technologies. One of the major
discontinuities is a stricter CO2 regulation.
•This will result in optimization of current ICE technology with a
trend towards smaller, highly-charged engines, turbochargers,
compressors, and sophisticated direct injection
• The industry is now seeing a tremendous growth in emerging
markets, mostly in BRIC countries, as powertrain production is
shifting in these markets
• Technological variances across regions are large as customer
needs and regulatory requirements vary immensely
• Discontinuity in customer preferences creates ultra-low price
segment outperformance. In contrast, the premium market is
showing above average growth rates. This evolution will trigger
technology acceleration that massively reduce CO2 emissions
for larger vehicles and push highly cost-competitive
technologies for small vehicles
• From consumer perspective, their vehicles are now losing
ground as status symbol, and eco-friendly, green technologies
are gaining more traction. This has seen the evolution of new
mobility concepts, especially among young people
• Overall, a variety of powertrain technologies and business
models operating in the same space will be seen with
significant activities to reduce vehicle weight
Source: Industry Analysis, Technology Survey Insights
Technology Focus and
Priorities
CombustionEngine
Conventional
ICE
+ stop-start
recuperation
Integrated
hybrid
+ boost, short
E-drive
+ plug-in
E-Drive with ICE
range extender
Pure EV
EV with Fuel
Cell range
extender
Full
Hybrid
Electrical Propulsion
Key Inferences
Regulation is driving new technology
and innovation to higher efficiency
The vehicle efficiency dominated by ICE
technology in the short / medium term
Both evolutionary and disruptive
technologies are likely to be successful
12. Source: Industry Analysis, McKinsey Analysis
Technology shifts from
ICE to xEV
xEV market will be
twice the size of ICE
market
xEV market will be
twice the size of ICE
market
Regional shifts from
industrialized to
emerging countries
China’s and India’s
market will grow
three times faster
than triad markets
China’s and India’s
market will grow
three times faster
than triad markets
Value-add shifts
between players and
business opportunities
To keep value-add
share stable,
coverage of 50% of
electric motor and all
battery packaging
and integration is
required
To keep value-add
share stable,
coverage of 50% of
electric motor and all
battery packaging
and integration is
required
Competence shifts
Skill shifts from
mechanics to
“me-chem-tronics”
Skill shifts from
mechanics to
“me-chem-tronics”
Employment shifts
from industrialized to
emerging countries
420,000 additional
workforce in global
powertrain, more
than half of that in
China / India
420,000 additional
workforce in global
powertrain, more
than half of that in
China / India
Raw material shifts
from steel to copper
and neodymium
While demand for
steel and aluminum
almost doubles,
demand for copper,
neodymium and
lithium will grow up
200 times of today
While demand for
steel and aluminum
almost doubles,
demand for copper,
neodymium and
lithium will grow up
200 times of today
The major shift is
primarily
induced by the
electrification
starting with
micro hybrids. By
2030, the market
for xEV
components –
battery, electric
motor - will be
twice the size of
the market for
ICE components.
Components
that will profit
from increasing
complexity
(transmission
and
turbocharger)
will continue
growing in
revenue through
2020
Market growth
for all major
regions is
expected, but
while the triad
markets of
Europe, North
America, and
Japan will grow
only by 2 to 4 %
annually until
2030, China and
India will attain
the growth three
times as fast,
growing by 9
percent per yea.
This rate of
growth will make
China and India
the third largest
powertrain
market by 2030
To take
advantage of the
powertrain
evolution, it is
crucial to get the
component
portfolio right –
capture growth
opportunities,
manages market
decreases and
hedge against
technological
uncertainties.
Strategic
partnerships will
be essential to
have a
competitive
advantage and
build
competencies
with shared risks
for all
technologies
As per some
estimates, there
will be a demand
for 4,20,000
additional
workforce in the
powertrain
industry globally,
in the next 20
years. But the
skills and
competencies
required will
change
dramatically.
Overall, the
share of
chemicals and
electronics
specialists will
double from the
current levels of
20% to 40% of
powertrain
workforce in
2030
Asian regions
might have
advantages in
labor cost,
subsidies, raw
material access,
but triad
markets might
compete with
their automation
and engineering
power. With an
assumption that
all components
are produced in
the region where
the production
occurs, more
than half of the
required
4,20,000
workforce in the
industry will be
located in China
and India
Managing raw
materials will be
essential. New
components that
are facing
shortages today
– such as rare
earth elements –
will be stretched
to a much
greater extent.
Gaining
excellence in raw
materials
management
and developing
new
competencies,
will prove to be a
vital step in
securing access
to these raw
materials
13. Source: www.world-nuclear.org/info/Non-Power-Nuclear-Applications/Transport/Electricity-and-Cars/Industry Analysis, Regional Powertrain Study Estimates
China will see the largest EV share but also have a large share of more
affordable SHEV powertrains. Higher capital cost of hybrids is offset by
the prospect of slightly lower running costs and lower emissions. Better
batteries will allow greater use of electricity in driving, and will also
mean that charging them can be done from mains power, as well as
from the motor and regenerative braking
Major changes towards 2025 across technologies
ICE
• Significant decrease in market share
• Remaining volumes mainly in cost sensitive smaller
vehicle segments
MHEV
• Peak around 2020 due to low cost solution to reduce
fuel consumption
• Potential to become “standard equipment” towards
2025
SHEV
• Strong growth towards 2025 as affordable alternative
compared to PHEV and EV
• Benefits from comparable low battery prices in China
EV/REX
• Moderate growth until 2020 but specifically, EVs with
double digit share in 2025, prominently in basic segment
(government subsidies)
14. Comparing with mature markets, China stands out as a significant opportunity and seems more
ready to introduce EV
Source: Booz & Company Analysis
China
Market is a
Significant
Opportunity
• Chinese government is driven by
greater environmental pressure
and energy consumption
• The government started stronger
incentives to promote cleaner
technologies in automobile
industry
• China’s automobile industry has
lagged behind from foreign OEMs’
in the ICE era
• Emergence of EV offers great
opportunity for China to catch up
Government
Support
• Passenger ownership per
capita in China suggest a very
low vehicle penetration
• Consumer habit in China is still
in forming process due to
relatively short driving history
• Consumer acceptance to EV is
comparatively high than mature
markets
• Meanwhile, the switching cost
is expected to be low
Consumer
Acceptance
• China possess ample resources to
achieve low cost production
• Established battery manufacturers with
large-scale capacity; supply lithium
battery to cell phone/laptop industry
Mass
Production
Environment
Readiness for EV
Mature Markets
China
15. China uses a wide array of measures to achieve its goals in the automobile and parts sectors. Government support measures available to
producers in China include outright grants, preferential tax rates, discounted land, loans from state-owned banks, export credits and
guarantees at concessional rates, and access to inputs at subsidized prices. In addition, the government provides vehicle purchase
subsidies for public and private purchases of domestically-produced vehicles, particularly new-energy vehicles. Finally, the government
continues to play a strong role in guiding foreign investment into China, and has recently announced plans to extend its joint venture
requirements for automobile production to the production of key components for new-energy vehicles
In March of 2011, the National People’s Congress approved the 12th Five-Year Economic and Social Development Plan, the blueprint for
China’s economy from 2011 through 2015. Hybrid and electric vehicles have taken on an unprecedented level of importance in the 12th
Five-Year Plan, and prioritizing that segment of the industry provides the key means by which China hopes to become a top-tier global
automaker
New-energy automobiles have been identified as one of seven “strategic and emerging industries” in the plan. China aims for these
industries to grow by 35 percent per year, and reportedly plans to invest $1.5 trillion in the seven industries over the next five years
in order to achieve this goal. By 2030, China aims to be the global leader in each of the seven areas, including new-energy automobiles
The 12th Five-Year Plan sets out two core sets of goals for the Chinese automotive sector over the next five years. First, the plan aims to
improve domestic automakers’ capability to produce entire vehicles in addition to parts, and it aims to develop an independent
indigenous capacity to produce key components. Second, the plan places particular focus on new-energy vehicles, and it identifies the
production of such hybrid and electric vehicles as the key means by which China will be able to develop the technology to leapfrog over
its competitors and become a global player in world auto market
In addition to continuing China’s drive to strengthen and promote its indigenous automobile industries, the 12th
Five-Year Plan marks a
departure in its aggressive support for a sub-sector of the automotive industry – namely, the hybrid and electric vehicle and parts
industry
The Government of China will establish special development funds, improve supportive tax policies, and encourage the provision of
increased credit support for companies in the seven “strategic and emerging industries” (SEIs). Additionally, the Government of China
will
increase market demand for the industries, develop a supportive infrastructure for new product applications, and accelerate the
establishment of industry and technical standards to support the industries
Source: Whitepaper “China’s Support Programs For Automobiles and Auto Parts Under The 12th
Five-Year Plan” Insights
16. Restraints of Exports of Raw Materials
Export restraints on raw materials, such as taxes, quotas, and licensing requirements, restrict supplies on world markets while
increasing the domestic supply of such products, increasing the costs for users in foreign countries while lowering input costs for
domestic manufacturers of value-added downstream goods
In 2012, China is imposing export duties on 316 individual six-digit tariff lines, nearly four times the number of six-digit line items
permitted under its accession protocol. Many of the items to which China applies export duties are raw materials that are
essential to the manufacture of automotive products
Raw Material
2012 Export Duty
Rate
Applications
Antimony 5% - 20% Brake pads, flame retardants, composites, alloys
Chromium 15% - 20% Stainless steel alloys and super-alloys
Cobalt 10% - 15% Rechargeable batteries and super-alloys
Copper 10% Wiring, cables, circuitry, and computer chips
Germanium 5% Transistors
Graphite 20% Fuel cells and batteries, heat resistant components, Lubricants
Indium 5% Coatings and alloys
Manganese 10% Improves corrosion resistance of aluminum alloys, also used in and micro-electronic capacitors
Molybdenum 5% - 20% High-performance alloys and coatings
Nickel 10% - 20% Plating and batteries
Niobium 20% Special alloys for engines
Rare earths 5% – 25% Rechargeable batteries, fuel cells, electric and hybrid vehicles and parts, electronic devices, alloys, displays, specialty glass
Silver 10% Electronics and batteries
Talc 5% - 10% Catalytic converters, filters, anti-corrosive coatings, plastics and rubber
Tin 10% Plating, alloy, circuits, and glass
Titanium 10% - 20% Alloys and microcapacitors
Tungsten 5% - 20% Electronics
Vanadium 20% Alloys and plating
Source: Whitepaper “China’s Support Programs For Automobiles and Auto Parts Under The 12th
Five-Year Plan” Insights
17. China’s export restrictions on rare earths have tightened significantly since 2009. In 2010, China slashed its export quotas
for rare earths by 37 percent from the previous year. In the first half of 2011, the volume of rare earths permitted to be
exported under the quotas was cut by another 35 percent. China has also created a new, separate category for ferro-
alloys containing rare earth elements in its 2011 and 2012 export duty schedules, and the export duty rate for the item
increased from 20 percent in 2010 to 25 percent 2011 and 2012
Source: Whitepaper “China’s Support Programs For Automobiles and Auto Parts Under The 12th
Five-Year Plan” Insights
Provincial Subsidies
Consistent with central government policies to support China’s automobile and parts producers, numerous provinces and
localities also maintain policies to subsidize the automotive industry. For example, pursuant to the 2009 auto industry
stimulus plan, the 2011 Energy-Saving and New-Energy Automotive Industry Plan, and the identification of new-energy
automobiles as a strategic and emerging industry in the 12th
Five-Year Plan, several provinces and cities have enacted
policies to support the development and production of the new-energy automobiles and parts industry. The policies
pledge billions of yuan of government funding for the industry, identify specific technologies for priority support, and set
ambitious production targets for the years to come. Selected examples of the subsidies offered to promote an industry in
the region are:
• In 2009, the city of Shanghai enacted several policy measures to promote the development of the local new-energy
automotive industry. The measures authorize direct financial support in the form of capital injections, loan interest
subsidies, and investment subsidies totaling up to 10 percent of new investments in projects listed in the city’s high-tech
and indigenous innovation catalogues and up to 30 percent of new investments in important technology breakthroughs,
including in key parts such as batteries, electric motors, electronic controls, and the construction of public charging
platforms. Other subsidies provided under the policy include preferential tax treatment, including for technology transfer,
the provision of land and funding by towns and counties, and subsidies to consumers and battery leasing companies
• In July of 2011, Guangdong province issued its policies to support the strategic and emerging industries identified in the
12th Five-Year Plan, including new-energy automobiles. The province will invest RMB 22 billion (US$ 3.5 billion) in three of
the industries, including new-energy vehicles. Specific technologies targeted for support include batteries, electric motors
and controls, and charging equipment. Subsidies to be made available to the production of such equipment include tax
reductions and exemptions, grants, loan interest subsidies, loan guarantee subsidies, direct infusions of capital,
cooperation between the government, companies, and banks, exemption from administrative fees, and a 30 percent
discount in land prices
18. • The city of Beijing also implemented policies to support the development of pure electric and plug-in hybrid
vehicles, with a focus on batteries, motors, and electronic controls. The city aims to invest RMB 20 billion (US$ 3.1
billion) to support the development of strategic and emerging industries, including the new-energy vehicle industry.
Specific support measures include preferential tax treatment, guiding financial institutions to provide credit and
guarantee support, government procurement, and consumption subsidies
• Liaoning Province aims to have an annual production capacity of half a million new-energy vehicles by 2015. To
attain these goals, the province will provide increased fiscal support to the industry, encourage local governments to
develop special funds to support the industry, and intensify support from financial institutions such as local state-
owned commercial and policy banks. Additionally, the province will establish a RMB 2 billion (US$ 314 million)
venture capital fund to support emerging industries, provide land and other production factors on a preferential
basis, and give such industries priority access to provincial credit guarantees
• Apart from these provincial subsidies, benefits available to the manufacturing facilities located in China’s economic
development zones, high-tech Industrial development zones, and other specially designated zones include
preferential tax treatment, VAT refunds, rent subsidies, training subsidies, preferential rates for water and electricity,
exemption from certain utility fees, cash awards for technological achievements
Source: Whitepaper “China’s Support Programs For Automobiles and Auto Parts Under The 12th
Five-Year Plan” Insights
19. A number of Chinese players see EVs and PHEVs, in the value chain, as a way of closing the gap to leading established
global automotive players. The Chinese government is strongly supporting their efforts
Chinese OEMs can challenge established OEMs particularly on the cost side. The region enjoy lower raw material
costs for Li-Ion batteries and key components for electric motors, such as rare earths for permanent magnets. They
can also keep manufacturing costs down by using domestically produced production equipment and leveraging their
lower labor costs. Chinese universities are also placing a strong focus on these topics and postgraduates are
increasingly being employed by leading players in the sector
The success of individual players will very much depend on how well they understand the market dynamics of their
specific section of the value chain. They must formulate a focused business strategy, either defending or expanding
on their current position
Ultimately, the industry feels that the future for China rely solely on addressing some of the most critical questions,
both at the government and regional level, in terms of how aggressively do the government and the industry view
the future potential in this area. How well the industry design a general strategic roadmap that clearly identify
technology development and its effective implementation. Also, if there exists other opportunities to create
additional value from end consumer point of view
