GM aims for China e-bike riders with a cheap electric car, but will it be cheap enough?

I just returned from two and an half weeks in China.  I found that, despite a government target of producing one million new energy vehicles by 2020  http://af.reuters.com/article/energyOilNews/idAFTOE69F00L20101016, companies who will be major players in China’s new energy vehicle sector are uncertain about how big the sector will actually be. Nonetheless, they are ramping up to supply EVs to China’s masses. 

And I learned something! Well, quite a few things. One of the most interesting is that GM wants to produce a low-cost, basic transportation electric vehicle for China. GM’s thinking is this: China has hundreds of millions of electric bicycle riders, especially in smaller cities. Those people would love to have an electric car, which might cost a bit more but offer protection from the rain, and be safer than, an electric bike.

As an example, GM offers its EN-V, a two-wheeled Jetsons-like vehicle it is showing at the Shanghai Expo (and in the lobby of its office building in Pudong). http://media.gm.com/content/media/us/en/news/news_detail.globalnews.html/content/Pages/news/global/en/2010/0817_env_capabilities

GM showed its vision of the cheap EV future at the Shanghai Expo. The little pod includes software that keeps it from crashing into other little pods.

“This is like upgrading from a black and white TV to a color TV ,” says John Du, director of GM’s Science Lab.

I disagree with Du’s assessment. Deceptively simple-looking, the EN-V includes technology that talks to other vehicles to avoid collisions. A television upgrade might involve a 100 RMB additional investment. Upgrading from an electric bike to an electric car, no matter how basic, would involve considerably more. Especially if it was as technologically-rich as the EN-V.

 “There is a definite movement in China to create a segment of low-end electric vehicles to replace the low-end auto segment,” says former GM China executive Frank Chou, now with consultancy PAC Group in Shanghai. http://www.pacgroup.com/

But price will be a major factor. A e-bike costs as little as 2,000 RMB. An entry level mini car such as Chery’s QQ or BYD’s F0 costs a bit more than 30,000 RMB.

To hit the sweet spot between those two choices, GM needs to price its electric vehicle at no more than 25,000 RMB, figures Chou. If it can’t get the price that low, “GM is just dreaming,” he says.

Du admits GM doesn’t yet know what the acceptable price range would be for an entry-level electric vehicle, or even who the target consumer is.

Says Du: “We are going to do research on this. But we are pretty sure the 200 million e-bike riders will view this as like a TV upgrade.”

There may also be competition in that segment. In May, Chinese automaker BYD Co.  http://www.bydauto.com/  and German automaker Daimler AG formed a joint venture. http://www.daimler.com/dccom/0-5-7153-1-1298502-1-0-0-0-0-0-8-7145-0-0-0-0-0-0-0.html

A BYD executive says the venture aims to produce a low-cost electric vehicle. He questions if GM can get its battery price down enough to be competitive.

That’s what John Du hopes to find out. The China Science Lab, which Du calls “my baby,” is so far just a dirt field in the Shanghai district of Pudong.  But it will do research in half a dozen areas, including person- vehicle interaction, battery materials basic research, and alternative powertrains.  http://www.theautochannel.com/news/2009/09/25/478974.html

One project his China Science Lab will work on is lithium-ion battery composition.  “We are hoping to make a better lithium-ion battery,” Chou says. Better, okay. But it will also need to be pretty darn cheap.