When was the last time you watched Alonso versus Schumacher on a Formula One circuit? The pre-season testing session in Bahrain and the newly-released Netflix documentary, Formula 1: Drive to Survive Season 3, have hyped up the coming season with the return of Aston Martin, two-time champion Fernando Alonso, and the introduction of rookie Mick Schumacher.
Off the track, the Fédération Internationale de l'Automobile (FIA) has committed to becoming carbon neutral from this year and achieving net-zero carbon emissions by 2030 by working with energy companies and engine manufacturers. Formula One has conducted a detailed carbon emission assessment that 256,551 tonnes of CO2 were produced in the 2019 season, mainly contributed by logistics and business travel1. The goal is to significantly reduce the environmental impacts of motorsports from factories to racing tracks. For instance, one of the developments is to implement a mandatory 100% sustainable fuel to power Formula One cars, refined by biowaste.
We all know that the carbon emission of Formula One is only the tip of an iceberg of global CO2 emission. Three-quarters of global emissions are from road vehicles, especially passenger vehicles (up to 45%) including cars, motorcycles, buses and taxis. China is one of the major contributors in recent decades as more people can afford cars and the demand will only increase. It is therefore paramount for China to adopt new technologies that could decarbonise the country in the next decades. The Chinese government is very supportive of electric vehicles and the State Council approved the New Energy Vehicle Industry Development Plan (2021 – 2035) in 2020. It pledges to work on clean energy-related infrastructure such as power charging and hydrogenation as well as a public fast-charging network.
So what does the Chinese electric vehicle market look like? It was reported that there were 1.3 million EVs sold last year, which represented 41% of global sales2. Towards the end of the New Energy Vehicle Industry Development Plan, Goldman Sachs estimate that there will be 8.8 million EVs sold by 2035 in China3. EVs only account for 6% of overall car sales in 2020 and the government has indicated to increase the ratio to 20% by 2025.
In terms of market leaders, Tesla and BYD are the obvious winners, followed by BAIC, SAIC and Geely. Wuling has the best-selling EV model in 2020 with a top speed of 62 mph and an estimated range of 110 miles, predominately for urban use. It costs only £3,200, compared to the £27,000 Tesla Model 3 manufactured by Tesla Gigafactory in Shanghai. There are a few new contenders such as Xpeng, NIO, Aiways and Li Auto, who are planning to explore both domestic and European markets. These new names focus on intelligentize technologies and customer services to build their communities of users.When Elon Musk was asked who, in his opinion, are Tesla’s competitors, he said the traditional car companies still have opportunities in the competition of EVs, Volkswagen is moving towards electrification and the transformation of electrification of Chinese companies is very fast. The most competitive company for Tesla may come from China. If the real-life Iron Man regards Chinese EV manufacturers as strong contenders for the top spot, it is probably a space worthy of watching out for, either to pick up world-class companies or check up on the progress China will make on reducing carbon emission and become carbon neutral by 2060.
1. F1 Sustainability Strategy
2. Canalys – China electric vehicle sales 2021
3. Goldman Sachs – What’s Next V: Energy density advances: Cathodes, anodes, all solid state batteries and more
4. Evergrande Research Institute – China EV Development Report 2020