Race for e-mobility value chain is on in China

May 20, 2011 // By Christoph Hammerschmidt
The race for e-car technology and e-mobility will be decided in China. This finding of a study from management consulting company Oliver Wyman might not be overly surprising. The consulting company however has analyzed the specific strengths of Chinese and international automotive companies. Result: Joint ventures with Chinese technology companies can pay out - for specific technologies.

Given its dynamic spending for electromobility R&D in the past couple of years, it seems obvious that China is on the fast track. The country is strong in battery technology, has access to raw materials, and its settlement structure with many megacities favors the acceptance of e-cars. Many European automotive OEMs and tier ones know this and have already established production and R&D settlements in China.

Nevertheless, Oliver Wyman still encourages international companies to go out and find partners in China. The reason: many companies in the Middle Kingdom have a "strong potential to catch up", Oliver Wyman writes in his study - a polite transcription for a technological backlog. Chinas strengths are well known: cost effective manufacturing and access to raw materials - in the case of electromobility this refers to rare earth metals for permanent magnet motors as well as lithium for batteries.

Oliver Wyman provides a differentiated analysis on strengths and weaknesses of the Chinese industrial landscape. With respect to batteries, the Chinese industry offers an outstanding cost level and excellent manufacturing capacities. Also the access to raw material is very good. Less excellent is technological expertise and product quality. Similarly, the country offers very good cost competitiveness with respect to power electronics, albeit not at the same level as batteries. Manufacturing capacities for power electronics are slightly better that in the international average while R&D quality and technology expertise for this product segment are weaker than what international companies typically can offer. Product quality has been rated significantly worse than the international average.

For the third relevant product segment, electric motors, the picture looks similar: Excellent cost competitiveness, production capacities and access to raw material contrast to limited technology expertise and R&D quality and, worst of all, product quality.

Nevertheless, international companies interested in finding partners in China should not wait too long. "The race for the most attractive companies in China has already begun", the