Volvo, Electric Motors And A Dragon Powered By Lithium Ion Batteries

Volvo, Electric Motors And A Dragon Powered By Lithium Ion BatteriesVolvo in China 
Snapshot
  • Volvo’s plan to place electrification at the core of its future business appears to be more than an economic decision. Here’s why it may be part of a larger geostrategic Chinese plan.

Volvo’s announcement on 5 July, that every car it produces 2019 onwards will have an electric motor, set the world aflutter. Was it the beginning of an end brought on by the forces of economics and technology or by state action stemming from an urge to preserve the human race? Also, why was Volvo the one to commit to an electric future when one would have expected such a decision from Toyota first?

This announcement’s energy (transition) aspect has been discussed as a Quiet Revolution in a Swarajya piece here. A revolution it does signal, but a revolution is a far more complex phenomenon than a few trigger causes, borrowing the phrase from Andrew Cooper’s The Oil Kings. This announcement is a product of a more than a century-long historical process and carefully engineered geostrategic feats. Simply stating that Volvo Cars is held by a Chinese company does not adequately explain the decision. This post seeks to understand how a process initiated by the Dragon led to this moment.

It Is Not Peak Oil

It was long prophesied that the large-scale shift to electric sources of energy would be hastened by peak oil – the hypothetical point in time when the global production of oil reaches its maximum rate – but destiny had different plans. The switch, as it is happening before us, plays out as oil prices are low and there is a glut of supplies. The world over, this change owes much to the policy bias of governments towards promoting electrified transport. Having tamed stack emissions, the world turned its focus to the challenge of spiralling tailpipe emissions. Studies indicate that road transport is the only sector in the European Union which saw actual increase of carbon dioxide (CO2) emissions between 1990 and 2014, and that too by a whopping 20 per cent.

Till the time the infamous Volkswagen scandal struck the world, diesel usage was seen as the way to tame CO2 emissions. Lost in fine print was the fact that diesel vehicles emit higher amounts of other pollutants which are damaging to life on a much shorter time scale. No wonder then that even the hometown of BMW is pushing for a ban on diesel cars.

So, how can the targets of reduced emissions be met? The answer is located somewhere near, if not is, electric vehicles. These can be in the form of hybrids – where electric engines co-exist with internal combustion engines – or as electric-only cars. European car makers increasingly see hybridisation as a key transition step which keeps them relevant amidst ever-tightening regulations.

The New Great Game

The strategic dimension of this large-scale switch can be seen in China’s aspiration to dominate the automotive sector. China has realised that it has missed the ‘internal combustion engine (ICE)’ bus and has little hope to catch up on that front with its traditional rivals, Japan and South Korea. The Obama administration, on its part, believed that the United States (US) dominated the automobile sector because of its mastery of ICEs and its fuel; but it needs to dominate the electric drive technology to stay relevant in the twenty-first century.

And a key aspect of this race is the battery.

The Kodak Moment for the US

Following the 1973 oil shock, the US was looking for alternatives to oil. Soon, one of the most profitable oil companies, Exxon Mobil, invented the Lithium Ion battery and commercialised it, only to abruptly abandon the project as the memories of oil shock faded away. This was however picked up by Japan’s Sony, which released its much-improved version of the battery in 1991, drawing upon the work done by Japanese and American researchers.

The US had lost its lead for good.

Today, Japanese companies like Sony and Panasonic are the global leaders in this field, with South Korean and Chinese companies catching up.

The Chinese Gatecrash

In 1986, Deng Xiaoping launched the fabled 863 programme to jump start technological innovation in the Middle Kingdom. This programme has been regarded as the key measure responsible for China becoming a major player in the world of high technology. Indeed, it was only after this that China declared its intent to be a major player in the field of Lithium Ion batteries.

In 2007, the Chinese government, in an unconventional decision, brought in a former Audi engineer, Wan Gang, as the Minister of Science and Technology despite him not being a member of the ruling Communist Party. Wan Gang had expertise on electric cars and his appointment signalled that the Chinese acknowledged that the future of transportation lay in electric vehicles.

Wan Gang (VCG/VCG via Getty Images) 
Wan Gang (VCG/VCG via Getty Images) 

How US Taxpayers Funded Chinese Quest for Advanced Batteries

A123 was one of the most promising companies which was at the vanguard of American aspirations to regain leadership in battery technology. They won a grant of US$ 249 million in 2009 from the Obama administration, of which it received US$ 129 million before it folded up, becoming the fifth clean energy company funded by Obama administration to file for bankruptcy. A123 was relying largely on electric vehicles, a segment which failed to take off. Nevertheless, in 2012 it filed for bankruptcy and was promptly picked up by a Chinese company!

China Taking a Lead in Modern Automobiles

Though Ford escaped the ignominy of bankruptcy, it sold Volvo Cars, which it had acquired in 1999. In 2010, Volvo was picked up by a Chinese group.

The Chinese Ministry of Science and Technology still continues to be led by the czar of e-vehicles, Wan Gang. He also led the electric vehicle programme for the ‘863’ project. No wonder then that China now has access to the world’s most advanced battery technology, research facilities for mobile and stationary applications and also access to advanced automobile engineering. Volvo’s decision in view of this author is in sync with the larger Chinese aspiration to assume global leadership when it comes to Lithium Ion batteries.

Lessons for India

The 863 programme was a proposal of engineers, which was accepted and supported by the top political executives in China. What is its equivalent in India? Even including our space, atomic energy and part of defence work, we have no true equivalent of this programme which saw China jump start and leapfrog in several sectors. From Make in China, the country aspires to Create in China. Practically anything which one sees or touches has an element of China in it. This is a by-product of deliberate work by its technologists, with the bureaucracy working as facilitators and not as masters of destiny.

There is a need for a top-down programme, under credible people who can supply high-calibre leadership to build the absorptive capacity and to bridge technology gaps. The Government of India needs to urgently identify sectors which have massive dependence on imported technology (defence, railways, consumer electronics readily come to mind) and launch programmes to build absorptive capacity and unabashedly use its market size to gain access to technology.

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