If Chinese EVs come to the U.S., U.S. engineers better get ready to get down

Tom Gage, CEO of AC Propulsion, www.acpropulsion.com made a telling statement to me today. He told me that I might see a China-made vehicle powered by an AC Propulsion electric drive train on the road in the U.S. within five years.

“We are talking to many automakers in China, and I think they all have plans to export,” he said.

I’ve scoffed at the chances for Chinese automaker BYD’s e6 www.byd.com/showroom.php?car=f6    electric sedan to succeed in the U.S. market. Ditto for Coda Automotive’s plain jane electric sedan http://www.codaautomotive.com/all-electric-car/with a Chinese body. Of course, the Coda is pretty pricey at $37,400 after a federal tax rebate.  Even with a lower priced car, however, I still think U.S. consumers will demand a similar level of refinement in their electric vehicles as they do in their current cars.

Gage argues that ain’t so. He believes that there is a market in the U.S. for China-made electric vehicles with less content than competitors, at a lower-price. If he is right, the China competition could benefit U.S. consumers by forcing other automakers to innovate at the low-end in the electric vehicle segment. That’s what happened in China with regular cars.

Now, because this is my blog, I am allowed to digress without a subhead and give you some background on AC Propulsion’s recent activities in China.

AC Propulsion just announced it is building a new electric drivetrain plant in Beijing.  The plant is due to start production in late 2012. The capacity will be more than double that of AC Propulsion’s current plant in Shanghai, says Gage. That plant produces between 1,000 and 2,000 units annually, he says. Most of the output of the new plant is destined for the greater China market, though a few hundred units will be exported, says Gage.

“We are planning for the era (in China) five years and beyond when people are saying there will be one to five million EVs on the road,” says Gage. He doesn’t necessarily believe those numbers, he says, but does believe the market will be substantial.

AC Propulsion, which is based in the Los Angeles suburb of San Dimas, provided the drive train for BMW’s Mini E. In China, it has signed preliminary agreements with some Chinese automakers, says Gage. He wouldn’t reveal any names.

If some of those EVs eventually end up in the U.S., it will create an interesting market dynamic. Will that create a low-end EV segment? Will Chinese EVs dominate the low-end EV segment in the U.S., the way they initially did in China?

We all know what happened when the low-end segment for traditional cars in China took off. Okay, we don’t all know. What happened was that foreign automakers found ways to make cars for less, so they could compete in that segment too. For example, Shanghai General Motors launched the New Sail,  http://media.gm.com/media/cn/en/vehicles/chevrolet/NewSail/2010.brand_gm.html a domestically-developed small car that costs only 56,800 RMB, or US $8,530 at current exchange rates. J.D. Power and Associates http://businesscenter.jdpower.com/     says the SGM New Sail “not only grabs market share from its peers in (the sub-compact) segment, but also from high-end mini cars.”

General Motors just announced it is hiring 1,000 engineers and researchers  http://www.bloomberg.com/news/2010-11-30/general-motors-said-to-hire-1-000-electric-vehicle-engineers-in-michigan.htmlto work on electrification. They better start honing their low-cost production skills. If Gage is right, the Chinese are coming.