China, the biggest auto market worldwide, with about 17.2 million vehicles sold last year, now wants to take a significant lead in electric vehicle development and sales—and it is pressuring international partners to help make that a reality.
There are 86 electric or hybrid vehicles at the 14th Shanghai International Automobile Industry Exhibition, starting this week, including the domestic Geely Holding Group’s two-seat McCar, Dongfeng Motor Corporation’s Shuaike microvan, and the four-seat M1 REEV from Chery Automobile Company.
“They see [the electric vehicle market] as a big opportunity. They want to be dominant in some vehicle market and the old technologies have already been taken,” comments Deborah Seligsohn, a researcher in Beijing for the Washington, D.C.-based World Resources Institute.
But foreign brands at the show also have ambitions for EV development and domination—and they are concerned about draft investment rules issued in China last month.
Beijing already requires that, for a foreign manufacturer to produce an electric car in China, its local joint venture must own the technology for one of the three “core components”—the battery, the motor, or the power-management system. The new investment rules would allow foreigners to own only a minority stake in Chinese manufacturers of electric car components.
What’s more, next month, Beijing is due to release a 10-year industry development plan for “new energy vehicles,” and foreign manufacturers are concerned that they might be required to hand over valuable technology and help local partners create “indigenous brands” as the price of being allowed to sell electric cars in China.
Beijing has long pushed for technology transfer in fields from high-speed rail to clean energy as a condition of contracts or licenses. China's bullet trains are based on European and Japanese technology, but are being marketed in Latin America and the Middle East—prompting complaints it is violating the spirit of such agreements.
China's auto manufacturing policies have provoked disputes with Washington and other trading partners. The United States, Europe, and Canada launched a World Trade Organization case in 2006 challenging Beijing's effort to compel automakers to use Chinese-made components by imposing higher taxes on cars made with more than 40 percent foreign parts. The WTO ruled against Beijing in 2008, but by then automakers had developed local suppliers.
The scenario for foreign automakers now seems grim. Quite simply, while China pushes its fledgling automakers to create their own products, it also is pressing global producers that operate in China to hand over know-how and limiting their access to its market.
“[Foreign automakers] certainly worry about that,” said John Zeng of JD Power and Associates, a global marketing information firm based in California. “They are still at the stage of investing heavily in research and development. So right now, they are not ready to transfer technology.”
And they might be right. Su Bo, vice minister of industry and information technology said yesterday, at a press preview, that the auto market in China is not likely to repeat the explosive growth seen in the past during which the domestic industry ignored innovation and the development of China's own brands.
“The fundamentals and positive long-term prospects of our auto industry haven't changed,” Su said. “However, while we are fast expanding the scale, competition in product quality is getting more intense. It's imperative for the auto industry to boost innovation capacity, transform [its] growth model, and upgrade technology.”
At the show this year, manufacturers are aggressively selling vehicles—produced both abroad and domestically. Volkswagen is showing its new Beetle. In addition, the local joint venture, Shanghai Volkswagen, will introduce its new Passat mid-to-high range sedan, which is tailor-made for the Chinese and United States markets.
However, some automakers are pulling back rather than offering to share proprietary information. While the Dongfeng plug-in Shuaike is produced in a joint venture with Nissan, the Japanese company now plans to import its all-electric Leaf rather than produce it in China.
Ford Motor Co. is monitoring developments, even as it announces that it will provide three hybrid and all-electric vehicles to government agencies and later to consumers, in order to study how Chinese drivers use them, according to Nancy Goia, Ford’s director of global electrification.
According to Associated Press reports, Gioia said Ford talked to Chinese officials about the industry plan, but Joe Hinrichs, CEO of Ford China, said it would withhold comment until the plan is released.
“The good news is, we have a … dialogue going on,” Gioia said.
Cheryl Kaften is an accomplished communicator who has written for consumer and corporate audiences. She has worked extensively for MasterCard (News - Alert) Worldwide, Philip Morris USA (Altria), and KPMG, and has consulted for Estee Lauder and the Philadelphia Inquirer Newspapers. To read more of her articles, please visit her columnist page.
Edited by Jennifer Russell