BAIC purchase of Fisker wouldn’t advance China auto maker’s EV goals much
China’s Beijing Automotive Industry Corp – BAIC – is owned by the Beijing Municipal government. Given the central government’s plan to produce millions of electric vehicles, an automaker owned by its hometown should be at the forefront of electric vehicle production right?
Yeah, it should be, but it isn’t. That is likely partly due to technical restraints, but also because BAIC executives are likely also unenthusiastic about producing a product they see little demand for. Even state-owned enterprises like to make money. And since BAIC wants to list its passenger car subsidiary in Hong Kong, it would like to have a product portfolio that appeals to investors. http://www.bloomberg.com/news/2013-03-06/beijing-auto-to-list-car-unit-in-china-after-hong-kong.html
Even if it isn’t actually producing many EV, however, BAIC has been throwing money at the EV sector over the past few years including construction of a huge R&D center and a battery plant and an EV production plant, according to my industry friends in China. They aren’t sure if BAIC is actually producing much in those plants, however. And now BAIC apparently wants to waste even more money by purchasing Fisker Automotive. www.fiskerautomotive.com Not exactly a way to build investor confidence, I’d say. http://www.autoweek.com/article/20130717/CARNEWS/130719842
BAIC said in November of 2012 that it would invest 1.7 billion RMB through 2015 in research and production of new-energy vehicles. http://www.chinadaily.com.cn/china/2012-11/08/content_15891837.htm That would be used to construct three plants with total production capacity of 150,000 units. The plants would produce hybrids, PHEVs, BEVs, and fuel-cell vehicles. That’s pretty ambitious, but as no details were given it leaves plenty of wiggle room as to what type of EV the plants will actually produce. BAIC can wait to see what technology is most supported by the central government. Meanwhile, BAIC already has a plant in the Beijing suburbs to produce key components.
According to the local media, BAIC in 2012 produced 1,200 new energy vehicles. In 2013 it aims to produce 3,000 to 5,000. http://www.chinaknowledge.com/Newswires/NewsDetail.aspx?Cat=RND Those aren’t hugely ambitious production targets, but it also aims to have sales revenue of 1 billion RMB, which seems pretty much impossible given nobody wants to buy new energy vehicles. The central government should buy them, setting an example for the country. But it has not been especially vigorous in electrifying its fleets, indicating that it doesn’t have much confidence in the technology either.
What would BAIC obtain if it bought Fisker Automotive? Fisker laid off most of its engineers and other staff, so BAIC wouldn’t get that. It is most interested in the Atlantic, the sedan that Fisker wants to produce next, say reports. Henrik Fisker or the company itself must own the patents for some of the vehicle’s design. That could be useful to BAIC. I hear that Fisker doesn’t own much of the IP for its electric drivetrain, however. That is what made it less appealing to other Chinese suitors including Geely and Dongfeng. And the Fisker brand name isn’t exactly stellar given that the company failed.
BAIC could, however, rehire some of Fisker’s engineers. Or use its own engineers to re-start the production process. And it could turn out some nice looking – if not top-notch in quality – plug-in hybrid electric vehicles. Perhaps BAIC figures that it could enter China’s luxury segment with a PHEV using Fisker’s designs. The luxury segment is showing stronger growth than the auto market as a whole, and should continue to do so. But the BAIC brand doesn’t carry much cachet. And Chinese who could afford to buy a BAIC Fisker would know Fisker’s history, which includes quality problems. Is that worth the millions BAIC would have to pay for Fisker? I’d say not.
Then there is the question of whether BAIC would be allowed to buy Fisker. The PHEV maker received $192 million in federal funding. http://articles.latimes.com/2013/apr/22/autos/la-fi-hy-fisker-misses-federal-loan-payment-20130422 Would BAIC have to pay this back if it bought Fisker? In any case, if Wanxiang’s purchase of A123 is any indication, some congressmen would raise a real outcry at any move to allow BAIC buy Fisker. It might eventually succeed in buying Fisker, but BAIC should consult with Wanxiang America’s president Pin Ni before making any moves…. Actually Ni might welcome a BAIC purchase of Fisker. Fisker was the main customer for A123’s batteries. He could give BAIC free advice re: navigating congressional shoals. http://www.a123systems.com/about-us-asset-purchase-agreement-and-chapter-11-filing.htm
BAIC deputy general manager Zhang Xin recently said he aims to have an EV that can compete against the Tesla Model S by 2015. http://english.peopledaily.com.cn/90778/8330202.html Some in the U.S. press seems to be under the impression that Zhang mean compete against Tesla in the U.S. Of course he didn’t mean that. He means he wants to build a car that can compete with the Model S, but sell it in China. A Tesla spokesperson said “we plan to enter the (China) market in Beijing when we are ready.” When Tesla does enter the China market it seems unlikely that BAIC can compete against it. Technology aside, there is the question of brand name, marketing, and customer experience. At least Zhang has a high benchmark. Will buying Fisker advance that goal? I don’t think so.