Development of Chinese New Energy Vehicle Industry: Business Model versus Technology Innovation

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Abstract:

This paper contrasts two approaches to the development of what might be termed the new energy vehicle industry in China. The Electric Vehicle (EV) segment of this industry is based upon finding a substitute for existing petrol driven vehicles. Its development relies on technological innovation and strong central government intervention, both through preferential policies and through significant capital investment, for its success. However, outside the EV sector another market for what might also be considered new energy vehicles has developed based around Low-Speed Electric Vehicles (LSEVs). The official classification for new energy vehicle covers pure electric and electric hybrid vehicles but does not include LSEVs, which are based on a simple and mature technology. The growth of this market stems from indigenous demand and a focus on business model innovation. Unlike the EV sector, the LSEV sector only has the support of a few regional governments, and yet, despite this more than 13 times more LSEVs were sold in China in 2011 than EVs. In this paper, we will compare the effectiveness of technology and business model driven innovation as motors for the Chinese Electric Vehicle industry.