In Focus
January 2023

The evolution of Internal Combustion Engines (ICE) and New Energy Vehicles (NEV) in China – A review and outlook for the industry

The evolution of Internal Combustion Engines (ICE) and New Energy Vehicles (NEV) in China – A review and outlook for the industry

China's auto industry, the 2nd most important pillar for the country's economic development after the real estate sector, has achieved exceptional growth results over the past two decades. According to the China Association of Automobile Manufacturers (CAAM) statistical yearbook, total automobile production and vehicle sales in China have increased tenfold. The number of vehicles sold in 2001 was 2.37 million units, which more than doubled to 5.76 million by 2005 and reached 18.06 million in 2010. 24.6 million units were sold in 2015, rising to 26.27 million in 2021 as the country recovered from its 2020 COVID-19 slowdown. According to data from the traffic administration department of the Ministry of Public Security, the number of motor vehicles in China in 2021 was 395 million, of which 300 million were cars.

In 2021, the total output value of China's automobile industry exceeded 10 trillion yuan, accounting for nearly 10% of the country’s total GDP.

Since 2008, China has become the world's largest producer and seller of internal combustion engines, which make up the vast majority of the industry. Since 2011, China has continuously produced and sold 75 million internal combustion engines with an annual output value of 800 billion yuan. In total, China has produced more than 600 million internal combustion engines. The annual output value for basic industry and related sectors is estimated at 20 trillion yuan. The internal combustion engine consumes 60% of China's oil every year.

In recent years, the production and market share of New Energy Vehicles (NEV) has increased significantly. CAAM statistics show that NEVs will account for about 30% of the sales of passenger car market in 2022. In November of this year, 732,000 NEVs were sold out of a total of 2.33 million passenger cars. The annual sales growth rate for NEVs is maintained at around 100%.

From insignificant sales in 2011, the NEV market in China grew to 474,200 units in 2016, when China bought more NEVs than the rest of the world combined. The number has grown to 3.5 million units by 2021, compared to a global total of around 6.8 million units.

CAAM is the most important industry association for China's automotive sector. It holds annual summits, where it discusses current issues and challenges for the Chinese automobile industry and proposes various solutions and technical analysis. Senior government officials from the Ministry of Industry and Information Technology and others often attend this forum to communicate the government guidance with stakeholders.

Six suggestions were discussed at this year’s CAAM media events, focusing on the administration and regulation of ICEs and NEVs. The topics can be categorized in three main conceptions and aspects:

  • How to deal with the development of NEVs and ICEs, including the question of whether to continue to improve or abandon the diesel engine.
    Shareholders’ views on this topic drifted towards putting ICE technology onto a development plan for increasing thermal efficiency, reducing or enhancing hydrogen utilization without changing the engine to achieve zero emissions.
    This appears to be opening a path for the high-quality development of technical innovations for the internal combustion engine industry until 2035. The China Internal Combustion Engine Association under the guidance of the Ministry of Industry and Information Technology Equipment Industry Division II, has been appointed to produce a desired market environment planning report.
  • Develop low-carbon and zero-emission vehicles through multiple technological paths, which appears to be the most controversial and difficult issue to choose at present.
    Electric vehicles, hybrid electric vehicles, hydrogen internal combustion engines, fuel cell vehicles, etc. provide plenty of positive factors to demonstrate that their development is justified, and at the same time highlight a range of deficiencies.
    Ongoing technical developments and breakthroughs for NEVs are yet to be tested and lack sufficient market penetration. This is seen as an opportunity for the ICE to also develop technical improvements on carbon emission reductions and other clean fuel developments. However, the urge from Beijing on developing new energy technologies has intensified in recent years, particularly so in 2022.
  • The third proposal is suggested not to engage in compulsory management and administrative means in the process of solving the carbon emission problem, which is equally seen as an opportunity for ICEs to reduce carbon emissions.

Among the technical innovation possibilities for ICEs is the real-time intelligent control technology of combustion process with transient process control is being looked at. Professor Shuai Shijin of Tsinghua University hopes to compare and analyse the combustion curves of each real-time intelligent control and different chemical fuel ratios in the process of fuel combustion. He is seeking help from petrochemical experts to come up with chemical analyses based on fuel indices and fraction ratios to produce a more efficient engine fuel with full combustion.

Beyond this, the development of intelligent combustion injection systems, high efficiency supercharging and electric supercharging and key sensors, energy recovery and energy saving technologies are being looked at.

The China Internal Combustion Engine Association is meant to come up with a three-step development strategy. The first step by 2025 should show the technological breakthrough and achievements of the achievements. Part 2 is to demonstrate the independent control functionality by 2030. The third step by 2035 should produce the desired 20% reduction in carbon emissions.

The industry needs to come up with a solution for digitalization and intelligence of internal combustion engine power systems, followed by the technological breakthrough of advanced fuels for highly enhanced internal combustion engines.

If this plan is being developed, China's ICE market will have a bright future, showing a sustainable viability for both, the ICE and NEV industry. However, on October 20, 2020 the General Office of the State Council of the People's Republic of China issued a special document, which was distributed to provinces, municipalities and autonomous regions, which shows that the NEV technology development is the strategy, endorsed by China’s government.

Till date, it is not really clear which path China will take. While NEVs will grow the presence in the market place, new challenges will emerge simultaneously. The ICE industry has the opportunity to co-exist by producing required adjustments and technical breakthroughs.  

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