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General Motors Europe president Nick Reilly recently fretted that Asian suppliers would dominate the market when it comes to supplying electric vehicles. Perhaps, but it won’t happen without help from foreign technology.

A few weeks ago I met Andy Burke, a professor at the University of California Davis, at the Electric Vehicle Consumer Adoption Summit in San Francisco. Burke is connected to the UC Davis Institute of Transportation Studies, and specializes in hybrid vehicle technology.

He visits China often, and the Institute of Transportation collaborates with Chinese universities. http://chinacenter.its.ucdavis.edu/activity.html

Burke says he is amazed at the poor quality of some Chinese EV batteries. “They’re useless for hybrid electric vehicles,” says Burke. Chinese batteries tend to be high resistance batteries with relatively low power, he says.  They are designed for the kind of electric vehicles China has a lot of—low performance, neighborhood EV types.

Well, despite all the talk about pure electric vehicles, just about everyone thinks that hybrid vehicles will account for the bulk of electric vehicle sales, at least in the medium term.

So, Chinese suppliers will miss the boat, right?

No. Because they are acquiring the technology to build better batteries for all types of electric vehicles, hybrid and otherwise, Foreign companies are giving it to China through their collaboration with Chinese companies.

Take Maxwell Technologies Inc. of San Diego. Maxwell makes ultra-capacitors, which allow a battery to charge and recharge very quickly without wearing out. In 2007, it began cooperating with Tianjin Lishen Battery Joint Stock Co. Ltd. to develop applications combining Maxwell’s ultra-capacitors and Lishen’s lithium ion batteries for hybrid vehicles.  (This is the same Tianjin Lishen that recently formed a joint venture with Coda Automotive to manufacture lithium-ion batteries). Lishen also assembles ultra-capacitor products for Maxwell.

Lishen produces lithium ion batteries for consumer electronics for Apple and Motorola. But the state-owned company is “very focused on automotive now,” says Mike Sund, vice president of investor relations and communications at Maxwell.

Maxwell has proprietary electrode technology. Maxwell president David Schramm assured investors in an earnings call in February of 2010 that fabrication of Maxwell’s proprietary electrode material “remains under lock-and-key inside Maxwell and won’t be going offshore.” Precautions aside, however, as Maxwell deepens its cooperation with Lishen some tech transfer is bound to occur, admits Maxwell.

Producing in China does save money, and the supply chain in China for batteries of all kinds is very well developed. But it also comes with the hidden cost of creating your future competitors.

So Nick Reilly’s fears aren’t unfounded. Asian suppliers may dominate some sectors of the EV supply chain. But foreign firms will be complicit in that process.