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Overcome by deja vu as a U.S. company gets psyched about a Chinese car

July 30, 2010

I’m impressed by the enthusiasm and sincerity of the people I talk to that are diving into the brave new world of electric vehicles. It sometimes nearly thaws my cold, skeptical heart where China-related things are concerned.

Steven Fly, chairman and CEO of Green Automotive Co. Inc. www.usaelectricauto.com in the Dallas suburb Addison, TX  is such a person. His company aims to begin importing by the end of this year pure electric SUVs produced by Zotye Holding Group, www.zotye.com a small Chinese automaker.

Steven Fly with Addison, TX mayor Joe Chow.

I figured my talk with him would be like most of the conversations I had when I was the China bureau chief for Automotive News regarding this or that Chinese automaker and the prospects for selling its cars in the U.S. My advice then was always “be extremely cautious and do thorough due diligence.”  I would hang up and think “sucker.”

Perhaps it is that Fly is a fellow Texan. Perhaps it was just late in the day. But after our phone conversation I thought, hmm, maybe. Just maybe, though. We’ll get to that later.

Fly calls himself as a “car guy.” He started working in dealerships right out of college, and worked in just about every position except service manager, he says. About two years ago he got interested in importing cars from China. Electric vehicles seemed the way to go, to avoid having to pass the EPA emissions tests, says Fly. He got burned by his first attempt. But, he was sold on the concept. And, “when somebody tells me it won’t work, that just fuels me,” says the tall Texan.

Green Automotive has already signed up some dealers, including Bob Rohrman Auto Group of Lafayette, IN. Fly says he has about 30 points so far, though not all are firm commitments. “If we opened up tomorrow, we would have a firm 10 dealerships,” he says. Some of the dealers have put down a deposit, from $25,000 to $50,000. Others are waiting for the cars to arrive.

Initially, Fly figures sales may only total 1,000 EVs a month for all the dealers.  It’s a cautious figure, but “we’re taking baby steps ‘cause we don’t want to be like Mahindra and have a bunch of pissed off dealers,” says Fly. Passing U.S.- mandated safety and emissions tests is taking longer than Mahindra & Mahindra Ltd anticipated, and the Indian automaker is being sued by its U.S. distributor because of delays in bringing its diesel pickups to the U.S.  

 Since the Zotye SUV is fully electric—and thus emission-free—the vehicle won’t have a problem with emissions testing. It still has to pass crash tests, however. Ten of the small SUVs will arrive in the U.S. in late August for crash testing, says Fly. “The biggest thing is to make sure we’re Federal Motor Vehicle Safety Standard compliant,” he says.

It looks good from the outside.

The electric SUVs will sell for around $35,000 before tax incentives, says Fly. To lower the cost, Green Automotive will later seek government funding. The first buyers will likely be people who “really want to go green, not just the pretenders,” he says. 

The SUV’s range is advertised as up to 250 miles, but “that’s doing like 28 miles an hour,” says Fly. Fly says he has driven his Zotye electric SUV 150 miles doing 60 miles per hour, in the Texas heat. The airco runs off a separate 12-volt battery, he says.

Fly has visited Zotye in China, and one of Green Automotive’s eight employees is in China now working with the Chinese automaker to make sure the vehicle’s fit and finish meet U.S. consumer standards.

And this is where the skeptical section begins. Privately-owned Zotye, in the east China province of Zhejiang (which is famous for its private businessmen, by the way), has only been producing vehicles since 2003, according to its website. The SUV, which comes in both electric and gasoline-powered versions, is based on the Daihatsu Terios platform. Zotye also produces a very small car based on a Fiat platform. It also produces engines and components. The Chinese automakers sold around 45,000 units in 2009.

This isn’t the first time news of a Zotye SUV coming to the U.S. has appeared. In 2008, stories circulated that the Zotye electric SUV would be arriving. Nothing happened, possibly because Zotye didn’t have an electric SUV yet.

 In 2009, Zotye raised 720 million RMB (US $105 million at the exchange rate then) through a share sale to private investors. The money was to go to developing an electric vehicle. Zotye’s president said the automaker planned mass production of electric vehicles by the end of 2009.

In 2010, Zotye is finally producing an electric SUV—known as the 2008EV. The numbers seem very limited.  About 30 of the EVs are now on offer as rental cars in the lovely city of Hangzhou.  

A Green Automotive exec got to drive one around what appears to be West Lake, in the center of Hangzhou. Here’s a rather disjointed video of that drive: http://www.youtube.com/watch?v=yC7yVKB6J2Y

And a wander about of the vehicle (if you watch it you will see why I do not call it a walk about):

http://www.youtube.com/watch?v=1_NYtHhpglQ&feature=related

At least one electric SUV has been sold to an actual consumer in China, says Fly (and he is driving one in Dallas). But, Zotye has said that selling the electric vehicle in China is not realistic because of the high price of the electric vehicle, double that of the gas-powered SUV, says Kevin Huang, an automotive analyst based in Guangzhou.

Huang sees a motive behind Zotye’s push to sell electric vehicles in the U.S., even though it isn’t selling them in China. The automaker is preparing for an initial public offering in Hong Kong. Launching a vehicle in the U.S. may help Zotye attract overseas investors, says Huang. That would give the company money to develop new models, whether electric or conventional, he says.

For now, Zotye should concentrate on improving the electric SUV’s fit and finish.

The gasoline-powered SUVs are not high-quality, says Bill Fisher, COO of AmAsia International  www.amasia.biz. AmAsia is a consultancy in Florida that aims to help Chinese and U.S. companies understand markets. Its ultimate goal is to import Chinese vehicles.

Fisher has visited many Chinese auto manufacturers, though not Zotye.  He checked out Zotye’s vehicles at out at this year’s Auto China in Beijing, however. “Their fit and finish is not up to U.S. standards, says Fisher.

Fly admits the early versions of the electric vehicle were not impressive. But Zotye has made a lot of improvements, he says. “I had my doubts,” says Fly. “But the (new and improved) fit and finish is extraordinary.

“The product is much better than we thought it would be, but it is going to be even better,” he adds.

The Zotye project is probably giving Fly gray hairs (China gave me gray hairs, or at least that’s how I claim they got there).  “I haven’t slept at night for the last year and a half,” he says.

He probably won’t get any sleep for some time to come.

But I look forward to following Green Automotive’s progress. I don’t think we’ll see Zotye electric SUVs in the U.S. by the end of this year. But maybe in 2011.  I don’t want to have to assign my fellow Texan to the “sucker” category.

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2 Comments leave one →
  1. Katherine permalink
    August 15, 2010 7:26 pm

    I’m still skeptical. Any Chinese vehicle in the US (electric or not), is going to take much longer – 2020, maybe. It all reminds me of when Chinese companies first started going public in the U.S. on NASDAQ and people went crazy buying the shares only to be stuck with worthless stocks 6 months down the road. One analyst in your blog said Zotye is making this move to track investors so it can go public in HK – that should be a red flag. Don’t you think the Chinese automaker that makes it to the U.S. will be one of the state owned ones?

  2. August 16, 2010 11:08 pm

    Well, I’m a professional skeptic where China is concerned, but I think 2020 is way too pessimistic. First let’s define “makes it to the U.S.” Do you mean has volume sales in the U.S.? Or starts selling vehicles in the U.S.? And are you lumping together EVs and traditional internal combution engine models?

    I think China will begin selling EVs here in the next few years. The volumes may be small. It will depend on the size of the overall market for EVs. Which will likely not be that large, at least in the next few years.

    I just finished visiting with Tom Gage, president of AC Propulsion, a CA-based company that makes electric vehicle drivetrains. It is talking to many Chinese companies. He thinks there could be a place for Chinese EVs in the U.S. market. He was not as dismissive as I generally am of the fit and finish. “They looked pretty good to me,” he said.

    As for a big SOE making it here first, my answer is no for EVs. Private companies are farther along that road that SOEs. And I haven’t heard of any SOEs looking at the U.S. market. Though they are all talking about producing NEVS, natch, since that’s what Beijing has said it will support.
    Alysha

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