China Will Lead Electric Vehicles as U.S. Remains Conflicted

China could lead the race to roll out electric vehicles and will deploy new transport technologies more quickly than the United States, according to a report by Accenture (NYSE: ACN). However, the U.S. could lead a global biotechnology-based agricultural revolution that will generate more biofuel breakthroughs.

The report, “The US and China: The Race to Disruptive Transport Technologies,” claims that China’s state-backed focus on electric vehicles (EVs), its domestic supplies of lithium and current battery production capacity will give it a competitive advantage over the U.S. in EVs.

The free market approach in the United States will cause a more gradual development of new technologies, according to Accenture. Such a conclusion refutes the oft repeated mantra that a free-market is always beneficial, and that government directed markets or a targeted industrial policy is bad.

It’s simple: U.S. federal funding – since it has a large element of pork and is spread across many special interests – is actually a disadvantage due to our “pay to play” politics. The U.S. government has committed billions of borrowed taxpayer dollars to work on energy independence, but the subsidies are divided among many technologies, almost by Congressional district, when compared to the $15 billion the Chinese Government has committed to EV deployment for the next 10 years. And existing energy providers and multi-national corporations thwart energy impendence.

New fuel technologies and greater fuel efficiency will ultimately give both countries greater energy independence, according to the study. The reduction in gasoline demand in the US could be up to 22 billion gallons per year by 2030 if vehicle miles travelled (VMT) remained roughly the same as today, according to an Accenture analysis. However, other historical studies show that as efficiency improves, the miles travelled increase.

Accenture claims more efficiency and constant mileage could cut U.S. crude oil imports by 1 billion barrels per year, a 34% reduction from the 3.3 billion barrels imported in 2009. China, which imports more than half its petroleum, could reduce crude oil imports by 676 million barrels per year by 2020, a drop of 21% from today.

Hydrocarbon Winners and Losers

The rise of new fuels will have a negative impact on the U.S. refining industry, according to Accenture. Increased fuel efficiency standards and the blending of biofuels could replace more than 30% of U.S. gasoline and diesel demand by 2030 compared to 2010 if – big if in my view – VMT stayed the same. The reduction in gasoline demand will impact refineries currently configured to maximize gasoline production and favor those refineries that can more easily adjust their product mix.

However in China there will be no losers, Accenture claims. Even though China intends for alternative energy to make up 30% of transport fuels by 2020, Accenture estimates that car ownership will almost triple between now and 2020 to approximately 200 million, creating growth for the biofuel, EV and oil industries.

“The US 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,” Stark said.

About Ken Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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