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China Charges Up – The Electric Vehicle Opportunity

November 11, 2008. China Charges Up – The Electric Vehicle Opportunity. JUCCCE China Energy Forum.

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China Charges Up – The Electric Vehicle Opportunity

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  1. November 11, 2008 China Charges Up – The Electric Vehicle Opportunity JUCCCE China Energy Forum This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey & Company, Inc. This material was used by McKinsey & Company, Inc., during an oral presentation; it is not a complete record of the discussion.

  2. 22 Passenger vehicles in China By 2030, CO2 emissions from passenger vehicles in China could contribute a significant share of the global total CO2 emissions in 2030*, percent • Global passenger vehicle CO2 emissions, by region • Total CO2 emissions in China, by industry • Agriculture/waste • Japan • India • Europe • Buildings • Powergeneration • Other • Passenger vehicle • China • Othertransport • Industrial • North America *Emissions from vehicles, not life cycle emission Source:Press search; McKinsey analysis BVA-222301-166-20081107-GE2-v6

  3. 50 • Additional reduction with more "non-coal electricity" New power-train technologies can significantly cut carbon emissions Life-cycle carbon abatement potential* of various powertrain technologiescompared to today's gasoline-powered ICE, percent • Full hybrid (Gasoline) • Compressed Natural Gaswith Improvement** • Gasoline with improvement** • Diesel with improvement** • Electric (PHEV*** & BEV) • 49 * Including emissions produced by the vehicles as well as those produced during the entire carbon life-cycle of the vehicle, from power generation to the transportation of fuel ** Assuming the same type of improvements are applied to gasoline, diesel, or CNG vehicles *** Emissions in PHEV electric mode Source: McKinsey analysis BVA-222301-166-20081107-GE2-v6

  4. 55 Electric vehicles are the best choice for China Comparison of technological options on single-vehicle basis, standard segment Best Worst • Oilconsumptionreduction • Percent • Technologicaloptions • TCO saving in 2030* • RMB • Independentinnovation** • Electric vehicle*** • 100 • 25,760 • Full hybrid (Gasoline) • 56 • 16,451 • CNG with • improvement • 51 • 18,581 • Gasoline with • Improvement • 50 • 14,982 • Diesel with • improvement • 41 • 13,592 * Incremental TCO from consumer perspective as defined earlier ** Opportunity that Chinese auto sector could independently develop core technologies *** Pure electric vehicle as example Source: McKinsey analysis BVA-222301-166-20081107-GE2-v6

  5. 5.5 Electric vehicles will contribute to national energy security by reducing oil imports Crude oil import reduction driven by penetration of electric vehicle Crude oil imports, Billion bbl • -11% • 2006 • 2030 IEA projection • 2030 with impact from EV Source: International Energy Agency “World Energy Outlook 2007”; McKinsey analysis BVA-222301-166-20081107-GE2-v6

  6. 20 Rising gas prices will make electric vehicles a more affordable choice for consumers Economic benefit of plug-in hybrid vehicle* • Retail gasoline price • RMB/liter • Economic • Current price* • Not economic • 15 • 30** • 45 • 60 • Initial incremental cost to OEM • RMB thousands * In October 2008, the retail gasoline price in China ranged between 6.37 RMB/liter to 6.78 RMB/liter ** Projected incremental production cost for BYD's new plug-in hybrid versus its gasoline model Source: Press articles; McKinsey analysis BVA-222301-166-20081107-GE2-v6

  7. Key challenges • High upfront cost • Insufficient recharginginfrastructure • Gap in driving performance Upfront cost, infrastructure and driving performance are the major challenges for electric vehicles Source: Expert interview; McKinsey analysis BVA-222301-166-20081107-GE2-v6

  8. Key questions • How quickly can battery players significantly improve battery performance and reduce cost? • How much will consumers be willing to pay upfront, and to what extent will they sacrifice driving performance for them to adopt electric vehicles? • How can JUCCCE help to promote electric vehicles? BVA-222301-166-20081107-GE2-v6

  9. For more information… • Sha Sha • Arthur Wang • : sha_sha@mckinsey.com • : arthur_wang@mckinsey.com • McKinsey & Company Source: McKinsey BVA-222301-166-20081107-GE2-v6

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