China is winning the war when it comes to electric vehicles (EV), according to a new report from Accenture. But EVs are not the only alternative-fuel technology being developed—and the U.S. is investing in numerous such technologies, including electric vehicles.
The report, “The US and China: The Race to Disruptive Transport Technologies”, concludes that the state-backed focus of China along with its domestic supplies of lithium and current battery production capabilities gives it a competitive edge over the U.S, at least when it comes to manufacturing electric vehicles at this point in time.
There is plenty of good news for America. That same report predicts the U.S. is positioned to lead the way in engine efficiency on two fronts. The large natural gas supply here and scientific breakthroughs that could result in a biotechnology-based agricultural revolution will generate a greater range of biofuel products.
“The U.S. already has a competitive advantage in agriculture and conditions that make it the home of completely new technologies, but China’s policy decisiveness will allow it to scale specific new transport technologies more rapidly,” said Melissa Stark, global lead of the Clean Energy Practice at Accenture. “However, these respective strengths will not guarantee long term competitiveness and policy makers and investors in both countries will need to put in place major structural changes to ensure their industries adapt and can compete globally.”
The U.S. approach will lead to a more gradual development of new technologies, the report said, creating more innovations across many platforms, such as advanced combustion engines, electric, and advanced biofuels.
“Assuming continued long-term government support for alternative energy and allocation of funds to R&D and deployment, our expectation is that China will be able to achieve its targets faster, but in a narrower field of technologies,” the report noted in its findings. “While the United States may be slower in its development, its openness to new and ‘disruptive’ technologies is more likely to generate a breakthrough [alternative fuel] solution.”
Accenture said the U.S. could see a 22 billion-gal. reduction in gasoline demand by 2030—resulting in a 34% reduction in the number of barrels of crude oil imported each year. China is poised to see a 21% drop in gasoline demand.
That the U.S. will pursue alternative fuels along a wider front dovetails well with a trucking-industry tracking survey conducted by Frost & Sullivan last year. That study found that U.S. fleet managers are now far more willing to invest in a wider range of alternative-fuel technologies than before – if said investments will help them significantly reduce operating costs.
“The common theme among the fleet managers we interviewed, regardless of their type of trucking operation, is that they’ll invest in anything that reduces their operating expenses – even if it means paying higher upfront costs to get it,” Sandeep Kar, global program manager-commercial vehicle research for Frost & Sullivan, told Fleet Owner.
The Frost & Sullivan study, “2010 U.S. Fleet Managers Desirability and Willingness to Pay for Advanced Truck Technologies,” focuses on key powertrain, chassis, safety, telematics and regulation compliance technologies that are currently offered to U.S. fleet managers.
“We also found that fleets use their own metrics to calculate payback, be it from lubricants, hybrid vehicles, safety technologies, telematics, etc.,” Kar added. “It’s not just about ROI [return on investment] figures; fleet managers look at reliability, regulation compliance support, lifecycle cost, brand names, innovation and supplier support among many other factors that lead them to choose one solution over another.”
Accenture also found there could be several negative impacts to improved fuel efficiency and use of biofuels on other parts of the U.S. economy. Specifically, success of such efforts could hurt the U.S. refining industry, replacing as much as 30% of gasoline and diesel demand by 2030 if vehicle miles travelled remain flat. Because of this, Accenture believes that refineries capable of adjusting their product mix will be better positioned for success.
“New transport fuels will make the U.S. refining industry less competitive in the face of falling gasoline demand and crude oil imports. This structural change in fuel demand will favor larger, more complex refineries with lower marginal costs and production flexibility to make different product slates including ‘fuel switching’ or the ability to incrementally increase diesel production [or gasoline] if demand dictates,” the report said.
In China, though, everyone will win because Accenture predicts car ownership in that country will triple between now and 2020, creating plenty of growth opportunity for biofuels, electric vehicles, and the oil industry, too.
China’s lead in the EV race is simply because the Chinese government has tightly focused on this technology. Accenture reports that China has committed $15 billion over the next 10 years for EV development.
The U.S. has also committed billions to developing alternative-fuel vehicles, but those monies are spread over a variety of different technologies.
In addition, 60% of the U.S.’s lithium imports are from Asia and Latin America-- and China already supplies 20% of the world’s batteries.
And when it comes to rolling out new fuels, China’s progress could be slowed by supply chain bottlenecks and feedstock availability issues, the report noted.
“The U.S. has to manage the transition of its legacy infrastructure to one that will accommodate new fuels to ensure that this transition occurs at the lowest possible investment cost,” said Accenture’s Stark. “The U.S. does not have a blank piece of paper while China, in many ways, does. China’s challenge is to balance implementation with innovation if it is to compete well in the long term race for new transport technologies. Both countries need to leverage their respective advantages.”
Interestingly, while the U.S. EPA has focused on reducing greenhouse gases, the report indicates that that objective is not a key driver for either country in the development of alternative fuels.
“ As Accenture has discussed in past studies, what is important for governments is the domestic agenda and setting policy that balances three key objectives: energy security, improving economics and climate change,” the report stated. “Trading relationships and trade flows will change. The ramifications of these technologies scaling could lead to potential shifts in power around the globe and a changed picture of trade with and between the United States and China.”