China to see electric vehicle boom before the rest of the world: Tom Tan, President of BorgWarner China

Like computing, changes in transportation accelerate every year. China, the world’s largest automobile market, is recording a spectacular growth of the New Energy Vehicle (NEV) with 200-plus companies in the industry.

Tom Tan, Vice President of BorgWarner Inc. and President of BorgWarner China, recently talked with us to share his thoughts on the rise of NEV in China and on current trends in the automobile industry. The following are edited excerpts from the interview.

What will be the prospect for China’s automotive industry in the coming ten years? 

China’s auto industry will continue to grow over the next decade, albeit at a much slower pace than the double-digit growth of the last ten years. Overall growth in the low single digits is to be expected.

There are four important trends at work here: 1) China’s population is the largest in the world and urbanizing rapidly; 2) The nation has an ever-increasing middle-class, with growing purchasing power and changing lifestyles; 3) Air pollution is becoming a serious issue; 4) The government has announced an energy strategy that will cap oil importation at the current 60+% level and gradually reduce it.

The first two trends are certainly supporting the continued growth of the automotive industry in China, while concerns about air quality and foreign oil dependency are prompting the government to establish more rigorous fuel and emission standards. Taken together, these four trends provide a major motivation for the government to accelerate the development of New Energy Vehicles (NEVs) such as electric vehicles (EVs), hybrid electric vehicles (HEVs), and plug-in hybrid electric vehicles (PHEVs), along with highly efficient low-emission combustion engines.

In recent years, China’s government has made a huge effort to promote NEVs, largely to reduce oil importation. As this effort continues, we will see the overall auto market gradually increase, but with HEV and EV growing at a much faster rate, with HEV dominating in the next five years and EV in the five years after that.

It is believed there will be a shift from combustion to electric propulsion systems in the near future. What is your view on this? 

I expect that the market for traditional combustion vehicles will be flat over the next seven years. The growth rate for pure EV will be much higher, but we’re starting from such a small base and the current cost is high, as is user inconvenience, so I expect that the market share will be less than 2% worldwide.

The story could be different in China, though. With strong government incentives and policy guidance, pure EV and plug-in hybrid EV will likely achieve 4%-5% of the total China market, which could be well above one million units a year in five to seven years’ time. We understand that there are now more than ten new companies in China dedicated to building EVs, and most claims to have raised capital of more than $1 billion in first-round financing. We should see the first EVs from these companies in the 2018 to 2020 period.

Due to the advantages of HEVs in terms of technology, cost, and CAFE achievability, we will see hybrids take off faster and on a larger scale in China. The most aggressive forecast is that HEVs will reach 20% market share in 10 years.

How long before we have fully autonomous vehicles on the road? What are the challenges of product innovation?

When we talk about fully autonomous vehicles, we really mean the ultimate SAE Level 5 self-driving car with no steering wheel, pedals, or human driver….it may take another 10 or more years before we see fully autonomous vehicles on the road in any meaningful number.

There are many challenges to overcome including the navigation systems (using radar, lidar, GPS, sensor, vision, laser, or satellite mapping) and the vehicle-to-vehicle (v2v) and vehicle-to-infrastructure (v2i) communication systems that allow vehicles to communicate even under extreme conditions, such as city chaos or heavy snow.

It has been said that over time, as self-driving cars as well as ride-hailing and on-demand service becomes more prevalent, that the demand for car purchases will decrease. Do you agree?

Yes, to some extent I do agree. A certain number of people will choose to not own a vehicle when self-driving cars and ride-hailing services become mainstream. However, I believe that the majority of people will choose to own their own vehicle for quite a long time.

Certainly, there will be a lot more vehicle-sharing options on the market when self-driving vehicles become mainstream. We will likely see some reduction in private vehicle ownership, especially in cities where parking is problematic and expensive. Car ownership will carry some inconvenience in the future, but this will not necessary mean that most people will want to give up the enjoyment of driving their own vehicle.  There is a social meaning to car ownership that won’t quickly change.

 Image credits: BorgWarner