The Rise of Electric Two-wheelers in China: Factors for their Success and Implications for the Future

This dissertation examines the rise, present use, and future growth of the electric two-wheeler (E2W, a.k.a. E2W or e-scooter) in China, the world’s most successful electricdrive vehicle. The E2W market has been experiencing tremendous growth with over 30 million now in regular use on Chinese streets. The adoption of E2W technology is significant because, along with their air quality and energy (low-carbon) benefits compared to gasoline powered motorcycles, E2Ws are driving the development of improved and lower cost batteries and may lead to a shift toward larger three-and fourwheel electric vehicles (EV). This dissertation explores three questions: why the E2W market grew so rapidly in China, what factors are driving and resisting its growth, and how future growth might impact the adoption of electric vehicles. Because these three questions intersect in any domains, such as technology, economics, industrial organization, consumer behavior (the market), and public policy, a multi-disciplinary approach has been used throughout the analysis. In Chapter 1, the context for this analysis is built by describing China’s transportation past, present, and future challenges. E2Ws are also introduced and compared with gasoline-powered motorcycles on several metrics, such as performance, air emissions, and energy use. In Chapter 2, data from the literature was collected and analyzed to understand the history and important reasons for E2W growth in China. To supplement these data, the author and colleagues interviewed leaders of E2W and battery companies and toured several manufacturing plants. In Chapter 3, E2W and bicycles users were surveyed to understand how and why they use (or don’tuse) E2Ws. In Chapter 4, valve-regulated lead-acid (VRLA) batteries commonly used in today’s E2Ws were laboratory tested to determine their performance characteristics. Data were also compiled on their cost, and on the cost and performance of Li-ion batteries. In Chapter 5, the future of E2Ws in China was assessed by integrating data from the previous three chapters and from the literature to create a force-field analysis of the E2W market. This chapter concludes by examining the spillover effects E2W market growth may have on the development of a market for larger electric vehicles. Chapter 6 provides recommendations for policy makers on E2Ws and suggestions of future areas of research on this topic. In answer to the first question, E2Ws have been successful in China for three principal reasons: gasoline-powered motorcycle bans in large city centers removed E2Ws strongest competitor; E2W technology, specifically motors and batteries, improved significantly during the late 1990’s; and due to improving economic conditions nationally, urban household incomes rose causing surging demand for inexpensive private transportation. The history of E2Ws provides an important lesson on the powerful impact of regulatory policy when the evolution of technology produces a market acceptable product. In answer to the second question on factors driving and resisting growth of the E2W market, three factors are identified as driving growth. First, there were improvements in E2Ws and E2W batteries, both in terms of cost and performance, which can be partially attributed to the unique E2W product architecture and industry structure. Second, growing air quality and traffic problems in cities in part due to rapid urbanization has led to strong political support for E2Ws at the local level in the form of motorcycle bans, and loose enforcement of E2W standards. Third, public transit systems in cities havebecome strained from the effects of urbanization and motorization, which has stimulated greater demand for “low-end” private transport. There are also formidable forces resisting E2W market growth. The superior performance of motorcycles is a powerful limiting factor, especially in areas where motorcycles are not banned and incomes are high. Bans on E2Ws, which have been enforced in a handful of cities already, could also limit their growth if they spread to more cities. Overall, the driving forces appear to outweigh the resisting forces for future E2W market growth. In answer to the third and final question regarding the adoption of larger EVs, there are two characteristics of the E2W industry that may hasten EV development. First, the high degree of component standardization in the industry due to E2W’s highly modular roduct design with simple component interfaces is driving down costs. Secondly, the unique structure of the E2W industry (open-modular with many competitors) is leading to continued improvements in battery cost and performance and the development of larger E2Ws. As preliminary evidence, some E2W manufacturers have already begun producing larger three- and four-wheel EVs. However, there are some major obstacles facing these EVs that will not be easy to overcome in China. The largest is the issue of echarging infrastructure, which will need to be built since EV batteries are not portable like E2W batteries. Cell variability, safety issues related to high-voltage and unstable battery chemistry in Li-ion are other obstacles