A record-breaking dry heatwave has been searing vast swathes of central China in recent months, affecting power supply, agricultural production and the general livelihoods of citizens, stretching from the plains of Sichuan down to the mouth of the Yangtze River near Shanghai.
As the catastrophic consequences of rising global temperatures become increasingly evident, governments have been scrambling to adopt various measures that could mitigate carbon emissions. Authorities in Beijing, for instance, are now pursuing ambitious plans to transform the country’s transportation infrastructure away from fossil fuels and encourage the mass adoption of new energy vehicles (NEVs).
In a stroke of tragic irony, many early adopters – Chinese NEV owners in the recent heatwave’s path – have been among the most impacted by ensuing power shortages, with temporary limitations on vehicle charging having forced them to seek alternative means of transportation.
China’s rapid urbanization throughout that past few decades has led to the emergence of densely populated megacities, meaning that a significant proportion of the country’s NEV owners rely on public charging infrastructure to get around, as opposed to the United States, where home chargers prevail.
In response to power restrictions, major providers of public NEV charging spots in the affected areas – including Tesla and Nio – announced last week that they would be pausing operations at some locations. Other third-party charging service platforms abounded with apology messages to customers, with one frustrated driver in central Chengdu writing on TGood’s (特来电) WeChat mini-program, “When will these outages end? The impact is too great!”
Some enterprising locals have seized on this novel market opportunity. Reports surfaced last week of so-called “reverse battery swaps” (link in Chinese), whereby NEV owners with access to functioning home chargers drove their cars to nearby charging points with halted services and traded their full battery with near-empty ones for an informal negotiated price.
By now, most charging stations have returned to normal as energy flows across central China are stabilized. But the psychological impact of such unpredictable disruptions on would-be NEV consumers in the region may linger.
Investors are bullish. In an interview with Pandaily, Derek Dong (董和孟), Executive Director of CPE Fund and an expert on China’s NEV industry, said that the regional power crunch is unlikely to have a major impact on car sales for the foreseeable future. He added that one of the primary hurdles for the adoption of NEVs is ensuring a vehicle range that allows drivers to confidently complete round trips between city centers and suburbs without requiring a stop to charge.
China’s automotive field has been rapidly transforming in the past decade, as a wave of fresh entrants frequently grouped together by the buzz phrase “new automaking force” (造车新势力) threaten to supplant established industry giants. Major new players include XPeng, Nio and Li Auto, as well as some of the country’s major tech companies such as Xiaomi.
These rising firms have benefited from years of generous subsidies from Chinese authorities, motivated by the flagship Made in China 2025 plan, as well as ambitious targets to achieve national carbon peaking in 2030 and full carbon neutrality by 2060.
By 2030, the country aims for 40% of all car sales to be NEVs. Ahead of the curve, China’s southern island province of Hainan announced it would completely ban the sale of fuel-based consumer vehicles in 2030.
All of this growth will require major investment in the country’s public vehicle charging infrastructure, which, as clearly exposed by the past month’s experience in Sichuan and Chongqing, can be vulnerable to fluctuating energy supply.
When asked whether such uncertainties brought about by climate change instill worries among investors, Derek Dong said that the deficiencies could eventually prove fruitful for charging facility operators in the country, revealing urgent demand that could offer major market opportunities.
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Another major component of China’s aggressive push to develop its domestic NEV sector is car batteries. While not yet a global household name, Fujian-based CATL has quietly become one of the greatest beneficiaries of the ongoing transition to a greener economy.
It’s not only Chinese firms that are aiming to capitalize on the vast country’s drive to encourage mass-adoption of electric vehicles. CATL has also been supplying batteries for global elite players in the automotive sector, including Tesla, Volkswagen and BMW.
Tesla in particular has big plans for the Chinese market and is banking on its manufacturing capabilities to drive its global development. But recent snags, such as the recent power crunch and Shanghai’s extended Covid lockdown earlier in the summer, may threaten such confidence.
In addition to the supply chain difficulties and inability to get workers to job sites earlier in the summer, the recent heatwave has also impacted domestic production. Last week, the disruption forced Li Auto to announce delays to shipments of its L9 model. The knock-on effects were not limited to the Sichuan and Chongqing region, as production for Shanghai-based SAIC was also reportedly impacted.
As climate crises proliferate, the urgency of initiatives such as China’s NEV transition plan becomes increasingly obvious. The challenge will deriving solutions for how to balance these goals with ever more volatile power grids.