Shanghai show reinforces my belief China is not ahead of the U.S. in electric vehicle development
I just returned from Shanghai, where two of the days I was there had the highest air pollution levels ever recorded. I have that China cold, or maybe its just a China pollution/respiratory thing. Anyway, I digress and I haven’t even started yet. I’m was there to attend the Shanghai auto show and to meet with a zillion sources and friends (often one and the same). It was a great visit. My visit to Wanxiang EV Co., where I met with the executive director, was a highlight. More on that later. First, the Shanghai auto show. I wrote a blog about the show for plugincars.com; I’m pasting it in below because A. I think it is pretty good and B. I don’t have time to write a new entry. Expect a string of interesting blogs from this trip in the next few weeks.
Meanwhile, here are my thoughts on the Shanghai show, and my thinking about China’s electric vehicle industry. I met a lot of suppliers here in Shanghai, which also influenced my thinking. One thing has increasingly become apparent to me; China’s EV industry and the EV industry in the U.S. are not so different. The U.S. has a growing number of programs to encourage EV development. It also has superior technology in many areas. Chinese companies are turning to U.S. (and European) suppliers for crucial EV technology. So the U.S. electric vehicle sector might not be steamrolled by China after all. (Though I never thought it would be.)
At the Shanghai show, I was surprised by what I found. It was as much about internal combustion engine vehicles as it was about electric vehicles. The Chinese government is pushing electric vehicles, and just about all of China’s automakers are developing one or more new energy vehicles, as they are called here. But China’s electric vehicle market faces the same barriers as the U.S., namely low consumer acceptance and immature and thus pricey technology.
So while Chinese automakers are developing electric vehicles, they seem to be doing so by, as the Chinese saying goes, crossing the river by feeling for the stones. Since some of the stones aren’t even laid yet, they are incrementally working on EVs while concurrently developing fuel-saving technologies for their internal combustion engine vehicles. And making cars that consumers can buy now.
Sound familiar? A lot like what automakers in other markets are doing, right? So maybe all that angst about China taking over the electric vehicle market is a bit premature.
The Chinese automakers themselves aren’t thrilled about having to put resources into developing vehicles for which there isn’t a market, the top executive at a major multinational supplier told me. Of course, suppliers are the ones who stand to benefit from this electric vehicle push. Both that exec and another, Tom Tan, president of Borg Warner China, www.borgwarner.com me that however big the EV market turns out to be in China, and whatever the Chinese want to do, they will be there for them.
At the Shanghai show, NEV models dominated a few automakers’ stands, and seemed to be a sideshow at others. But the Shanghai show is huge. It covers more than a dozen halls and suppliers are included in the show. So I may have missed some new energy vehicle models while walking the show floor. Some automakers displayed models in multiple locations. Dongfeng Motor Co., www.dfmc.com.cn example, seemed to be in multiple halls. In one of its displays, there were few or no NEVs. But, I found another Dongfeng display that was all NEVs.
And, it was hard to distinguish the new energy vehicles from the regular gas-powered vehicles at many stands. SAIC Motor www.saicmotor.com had a special section touting green technology, and it also had new energy vehicles at its stand at the show. Same with FAW. www.faw.com.cn Additionally, many Chinese automakers now have multiple brands, and perhaps the NEVs were mixed up among the different brands. Nonetheless, electric vehicles were not the main theme of the show, they were only one theme.
Brilliance was showing this prototype EV. Does it have an engine inside?
Some domestic automakers seem to be looking to NEVs to expand a small model portfolio. At the Brilliance Auto www.brillianceauto.com stand, for example, it seemed like some 80% of the models it was showing were new energy vehicles. Brilliance is leaning heavily on its partner BMW for alternative powertrain technology, and the two debuted a concept plug-in hybrid model of the long wheelbase BMW 5-series sedan at the Shanghai show. http://www.just-auto.com/news/brilliance-bmw-5-hybrid-gets-production-green-light_id110491.aspx While the model was developed in China for the China market, BMW’s expertise in alternative energy drivetrains was a crucial contribution.
Chery Automobile www.cheryinternational.com ranked third—far behind BYD and Toyota– in the list of automakers Chinese consumers most associated with battery electric technology, according to a recent study by market research firm Synovate. http://www.synovate.com/news/article/2011/04/consumer-product-experience-critical-to-market-success-for-battery-electric-vehicle-technology-in-mainland-china-reveals-new-study-by-synovate.html
But Chery wasn’t showing many new energy vehicles. Instead, it was showing off its models with continously variable transmission, which is a fuel-saving technology.
The new energy vehicle component of BYD’s www.byd.com stand at the show was surprisingly low-key. The automaker recently announced results of a test fleet of taxis in Shenzhen showing that the capacity of BYD’s batteries did not diminish after the fleet racked up 2.77 million kilometers (1.73 million miles). http://www.byd.com/press.php?index=0 BYD has been slow to prove the technology of its F3DM hybrid and e6 electric vehicle, after much bragging about it. So perhaps it was wise not to make too big a deal about new energy vehicles at the Shanghai show. (The license plate had fallen off the e6 EV on display at the show, not a big confidence booster in the car’s technology….)
BYD's e6 electric vehicle had license plate problems.
Actually, fleets are where the electric vehicle action will be in China, probably for the next decade or longer. That will be a bonanza for suppliers. And consumers can get more comfortable with the technology. But this visit to China has reinforced my belief that we aren’t going to see EVs take over any significant market share in China’s passenger car market for a very long time. And that predictions that China will lead the way in electric vehicle technology and adoption are unlikely to come true.
Among the seemingly hundreds (only a slight exaggeration) of press releases GM has sent out around the Shanghai auto show was one which said GM and SAIC would together develop a next generation electric vehicle architecture relevant to China. Which means cheaper than the current Volt platform. http://media.gmchina.com/content/media/cn/zh/news/news_detail.brand_GM.html/content/Pages/news/cn/zh/2011/Apr/041804
Well, in the blog below, which posted on the Chinese-language website Netease’s auto163.com site several weeks ago, http://alyshawebb.blog.163.com/ I said GM was launching the Volt in China to seed the market for a future model developed with SAIC. A model more appropriate for China’s market. I should have posted this blog on china-ev.org as well. Then I would seem prescient. Now I just seem late, sigh. Nonetheless, I’m posting it now.
From my March 28 auto163 blog:
The press here in the U.S. has jumped on General Motors www.gmchina.com for every small inaccuracy in its information on the Chevrolet Volt, the plug-in hybrid that won “2011 Green Car of the Year” award. Hopefully the press in China won’t jump all over those complaints when the Volt is introduced to China, which GM China chairman Kevin Wale last week said again would be in late 2011.
Rather than nitpicking those small issues, I would rather consider whether the Volt is appropriate for the China market, and what GM’s purpose in introducing the car in China is. I don’t think the Volt is that appropriate for the China market. But I think the technology could be. That’s why GM is introducing the model to China.
First, the complaints. GM touted the Volt as an electric car until someone pointed out that it does in fact have a gas engine. The engine generates electricity to turn the wheels when the battery runs low. So the car is really a plug-in hybrid—that is it uses both gasoline and a battery for power. After a few weeks of acrimonious press, GM got past that issue.
More recently, there was the range question. Consumer Reports, a respected company which evaluates products and publishes reviews, test drove the Volt in extremely cold weather and was able to drive only 26 miles on pure battery power before the electric engine kicked in. The headlines here in the U.S. screamed that the Volt had “fallen short on range.” To be fair, GM now says the Volt’s range is between 25 and 50 miles, though it initially advertised a 40-mile pure electric range for the Volt. And 26 miles is within the advertised range, plus that mileage was obtained in extreme conditions.
So I think those are really non-issues.
Now, how appropriate is the Volt for China?
I drove a Volt a few weeks ago at a friend’s dealership. It’s a roomy car, with good acceleration. I wouldn’t call it fun to drive (which I thought the Nissan Leaf was), but it was nice to drive. My friend, the dealer, has driven a Volt since December 31, 2010. He has driven it more than 3,000 miles and has averaged 230 miles per gallon.
He mainly drives it shorter distances, using only the battery, from his home to his several dealerships. They are all in the same area. That seems about the kind of driving many in China would be doing. So the Volt would be a good way to save money on gasoline.
But, recharging would be a hassle. It takes four to six hours to recharge the Volt using a 240V outlet. Where would a Chinese owner plug it in? Most people in China live in multi-unit housing, often many floors from the ground. Volt owners can buy a home recharging units for their car and install it in the garage. How many Chinese have a garage?
Then there’s the price. GM hasn’t said how much the Volt will sell for in China. In the U.S. it is priced at $41,000 before federal rebates. Volt deliveries to dealers started to trickle out in late 2010, and there’s quite a few people waiting for a Volt. There have even been reports of dealers trying to add as much as $20,000 to the price because of a shortage of the cars.
GM hasn’t announced how much the Volt will sell for in China. Probably not much more than it does here in the U.S.. But, the Volt qualifies for a $7,500 tax rebate here in the U.S. In China, it will not qualify for a government subsidy, according to GM spokesperson Hua Foley.
There will be an import tax on the Volt, which is produced a GM plant in Michigan. I’d bet that GM will absorb some of that import tax in order to keep the price down. Nonetheless, even with no markup from the U.S. price, it will be expensive for a car that size.
GM hasn’t announced where the Volt will be sold in China first. But at the EVS25 symposium in Shenzhen last November, Wale said that the dealerships would be chosen by Shanghai GM, and that the locations would be in cities where there were lot’s of the kinds of consumers GM figures will buy the Volt.
What kind of consumers are those? Just as in the rest of the world, they are tech-savvy, interested in urban renewal and the environment, said Wale. In China, the average Volt buyer would likely be a successful businessperson, and somewhat younger than the U.S., he said.
That is not news. But something else Wale said was very telling. The technology in the Volt can be used in other vehicles, he said. GM had made a sizable investment in the battery and electric vehicle technology, said Wale. “We obviously will want to use them in other vehicles.”
He also said GM plans to participate “very aggressively” in the China market with its partner SAIC to develop technology relevant to the China market that will increase the availability of electric vehicles to the Chinese people. He added, “that won’t change our strategy of introducing vehicles suitable for the China market.”
So I think GM doesn’t care if it sells many Volts in China. Those it does sell will be demos for the technology. But I bet there will be some SGM models—and maybe even SAIC models—on the China market in a few years with the same technology and a lower price tag.
No, Beijing can’t make Chinese buy EVs. But eventually they will. So get there early.
If you build it, will they come? For Jason Forcier, vice president of automotive solutions group at lithium ion battery cell manufacturer A123 Systems Inc., www.a123systems.com the answer is yes. Forcier is A123’s point man in its joint venture with Chinese automaker SAIC. www.saicgroup.com Advanced Battery Traction Systems, Co., as the JV is known, will develop battery packs for an SAIC electric vehicle to be launched in 2012. It will also sell battery packs to other automakers in China, said Forcier.
Forcier thinks the Chinese government can tell Chinese consumers to buy eletric vehicles. In any case, A123 wants to be in China now so it doesnt miss future market growth.
I asked him if he believed the ambitious targets put forth by the Chinese government for production and sales of hybrid and electric vehicles would be met. He said: “The Chinese government has the ability to drive change like no other government in the world. The same way China has the ability to build the cars they have the ability to get people to buy the cars. They have the same ability to drive adoption.”
I beg to differ. Beijing can tell its automakers they need to produce electric vehicles. Those automakers can play lip service to the request, announcing significant targets for electric and hybrid vehicle production. They can even build facilities to produce those vehicles. But the automakers don’t have to produce them. And, Chinese consumers certainly don’t have to buy them.
A just-released study by market research firm Synovate www.synovate.com found Chinese consumers are concerned that electric vehicles will be too expensive to buy, difficult to charge, and expensive to repair. The study also found consumers are concerned they will have no chance to test drive an electric vehicle before buying.
But eventually they will get to drive them. And they will buy them. China can’t artificially suppress the rising price of fuel forever. And technology will improve, so electric vehicles will become more affordable. It may take up to a decade for there to be real demand for electric vehicles in China (or anywhere else in the world). It depends on how quickly the technology develops, and how quickly the price comes down. So though I disagree with Forcier regarding the Chinese government’s ability to drive adoption, I think A123 is smart to get in the market early.
Forcier admits the adoption rate in China for electric vehicles will be slow for at least the next five years. Range anxiety is the biggest issue, he says. The enabler will be improved battery technology that doubles the energy density, thus increasing the range while the cost stays the same. In the next ten years that should be available, says Forcier.
A123 is taking the longer view where China is concerned. And trying to learn from history. Forcier mentions how some automakers—here you can fill in Ford—got to the market late and are now playing catch up.
A123, based in Waltham, MA, has made a smart choice where partners are concerned. SAIC is a powerhouse on China’s automotive scene. Shanghai GM www.shanghaigm.com and Shanghai VW together sold more than 2 million passenger cars in 2010, according to J.D. Power and Associates. www.jdpa.com Its light commercial vehicle and passenger car venture with SAIC and Wuling www.sgmw.com.cn sold nearly 1.2 million units.
Don’t think A123 wasn’t eyeing those connections to VW and GM when it formed the JV with SAIC. “We are working with both of them on the development level, and hope to provide cells to them in the future,” says Forcier. “That was one of the reasons to partner with SAIC.”
I have to think a contract to supply cells to GM would be especially sweet to A123. It lost by a hair to LG Chem in the competition to supply the battery to GM’s Volt hybrid. www.gmvolt.com At the time, it couldn’t manufacture the type of cell the Volt required, explained Forcier. Working with SAIC in China can, to use a Chinese phrase, allow A123 to use the hou men, or back door, to land a supplier agreement with GM. Says Forcier: “We have continued to work with GM on a development level; we believe we will be a supplier to GM in the future.”
SAIC’s ties to western auto manufacturers gave A123 another level of comfort with the Chinese automaker, says Forcier. The Chinese company is familiar with western business practices, he says. Other factors weighing in SAIC’s favor: “Lot’s of English is spoken,” says Forcier. And it is easy to get to Shanghai from A123’s east coast location. “It’s really hard to get to Changchun,” where FAW www.faw.com.cn is based, says Forcier. And it’s really cold in the winter there, I might add. Though the miles of FAW dormitories and schools and hospitals are fascinating. This is China’s original state-owned automaker remember. And the central government is the owner.
But I digress. In case you don’t know, dear reader, SAIC is also a state-owned company. The Shanghai government owns it. But, Shanghai is the commercial capital of China, and SAIC wants to make a buck as much as any western company. Its management does, finally, answer to the state, however. Fortunately for A123, the state’s interest align with its own for the time being.
That brings me back to the Chinese government’s ability to drive the market for electric vehicles in China. By 2020, the government’s plan calls for China to produce and sell one million battery- and plug-in hybrid EVs. Some five million such vehicles will be plying China’s roads by then, if all goes according to plan. Mild and full hybrid vehicles play a role, too. Annual production and sales are planned to hit 3 million by 2020.
Forcier admits A123 takes a “guarded look” at such volume estimates. But, he says, “Even if (the Chinese government) are half right, it is still a tremendous opportunity. To ignore it would be to your own peril.” And there is no doubt the Chinese government is committed to promoting the EV sector. As John Du, director of GM’s China Lab told me last year when I asked him if the government’s plans for the EV sector would be realized: “The train has already left the station.” The question, of course, is how meandering the track to an EV-filled future will be.
Chinese electric vehicles, no all EVs, need to be good for reasons beyond not using gas
- A Zotye electric SUV in Texas at Green Automotive Co.
I recently wrote a blog for http://www.plugincars.com about the Zotye all-electric SUV. www.zotye.com I was pretty critical of the vehicle. The comments to that posting strengthened a belief I already held: electric vehicle fanatics live in their own little fantasy world. In that world, a car that can’t pass U.S. safety standards, meet U.S. consumer demands for a non-electric car, and possibly not live up to the manufacturer’s claims, is just fine so long as it doesn’t use any gas. Fortunately, that is not the real world. Chinese automakers need to realize that, too.
I haven’t ridden in Zotye’s small SUV, I’ve just seen it in still photos and online. But I have talked with people who are very familiar with it, and they tell me it isn’t ready for the U.S. market.
One person I talked to, several months ago, was Wu Aibing, a Zotye executive who is over here in California working on starting imports. He told me then that Zotye had a lot of work to do before the car was ready for the U.S. market. He expressed the same thoughts to a friend of mine who met him at a dinner a few weeks ago. Another person familiar with the vehicle said it currently would not pass the side impact test and that the head and tail lights needed to be redesigned, among other issues.
Then, my friend received an email invite to a ride-and-drive of the Zotye electric SUV up in the San Francisco Bay Area. The invite came from someone named Ghyrn Loveness; Rong Yiwen of TZG Partners www.tzgpartners.com was cc’ed on the invite message. (It was cancelled due to rain.) Neither responded to my email.
So who are these folks? According the TZG Partners website, it is a Shanghai-based investment firm. As for Loveness, according to his Linkedin profile, he is a “technology entrepreneur and scientist in energy and infrastructure.”
He doesn’t seem to have taken a very scientific approach in his evaluation of the Zotye SUV. The invite is filled with inaccuracies large and small. A small inaccuracy: That the Zotye model at the ride and drive is the first in the U.S. At least one more has been here a while. There is an Facebook video of it driving around a Dallas, TX suburb. I wrote about Green Automotive, the company that wants to import the SUV, in an earlier blog. www.usaelectricauto.com Nine more Zotye SUVs are on the way to the U.S., or are already here, for the purposes of testing. Eight are electric; one is CNG.
A larger inaccuracy: The invite calls Zotye “the third largest auto-manufacturer in (China) with a little over 50,000 units sold each year.” That would be a surprise to FAW-VW, the actual third-largest manufacturer in China in 2010. According to J.D. Power and Associates, FAW-VW, a joint venture between First Auto Works and Volkswagen, produced more than 882,000 units in 2010.
Zotye sold just fewer than 100,000 units of its own brand in 2010, but only a handful was electric SUVs. And they were “sold” just so Zotye would have the bragging rights, figures an analyst friend in China.
Be patient, I’m getting around to the point of this blog, which is that people need to get a grip where electric vehicles, Chinese or otherwise, are concerned. And that Chinese automakers need to step up their game where EVs are concerned (you’ve heard that from me before).
Readers of my plugincars.com blog defended Zotye’s electric SUV merely because it is electric, even though most hadn’t ridden in or driven it, and had only seen photos of the vehicle. The tone of the comments ranged from virulently nasty to innocuously dumb. Here’s an innocuous example:
“Honestly, does anyone offer the “perfect” all-electric vehicle…I say not. Is this all-electric SUV a place to start towards a greener tomorrow, definitely!”
Actually, people do expect the perfect electric vehicle. Or at least a really good one. And in ways besides fuel economy.
“People aren’t willing compromise on anything,” says Ian Beavis, head of Nielsen Automotive, a division of The Nielsen Company. “They want anything they can get on their gas vehicle on an electric vehicle.”
The fact that electric vehicles are priced at a premium makes their quality even more important, says Beavis. “You have to be the best possible gas vehicle and then have the electric capability,” he says.
Bottom line: People don’t cut regular cars slack on fit and finish quality, or other extras such as accessories. And in the world beyond the EV dreamosphere, they aren’t going to cut electric vehicles that kind of slack, either.
For those who argue that Chinese electric vehicles will be cheaper than the EVs made by western OEs, so people will accept a lower quality, Beavis points out that the main extra cost for electric vehicles involves the battery, and Chinese companies can’t do much about that. So they will lose their cost advantage. When they start making batteries that are truly robustm that is.
Chinese battery makers might be able to produce batteries at lower prices than non-Chinese competitors right now. But they aren’t that good. If they make comparable batteries to competitors, the price will rise.
I’ve read many reports and talked to many people who say China’s battery technology is not yet mature. Indeed, Miao Wei, head of China’s Ministry of Industry and Information Technology, said as much recently at a forum in Beijing. http://www.miit.gov.cn/n11293472/n11293832/n11293907/n11368223/13643753.html
I don’t have anything against Chinese electric vehicle producers. I’d love for us to have a world free of cars powered by gasoline. And for Chinese brands to be a part of that world. Some may be. But to ignore shortcomings in any electric vehicle just because it is electric is foolish. EVs need to meet the same standards as other cars, and Chinese automakers are having trouble doing that. They need to step up their game, if they can.
I figured I should give the BYD F3DM hybrid car www.byd.com a chance to prove itself, so last week I dropped by the Housing Authority of the City of Los Angeles. The HACLA has ten F3DM cars (and some Toyota Priuii) in its fleet. http://www.hacla.org/byd-and-the-hacla-launch-electric-vehicle-testing-program/
The visit proved to me that BYD still has some work to do.
Lowie Bacierto, a housing inspector, is driving one of the BYD cars on his rounds. He took me for a spin around the neighborhood. Bacierto, an amiable guy who drives a Toyota Tacoma pickup when he is not at work, said he had no real complaints about the F3DM.
“It brings me from point A to point B. I’m happy,” he said.
Will that be enough for American consumers to spend their own money on this car? I think not.
For those of you who aren’t up on BYD models, the F3DM (DM stands for “dual mode”) runs on pure battery power for a while, then switches to a gas engine. BYD claims the battery recharges in about 7 hours on a 220 volt outlet. (Bacierto confirmed this.) With a special outlet –and it must be a really, really special one— BYD claims the battery can recharge 50% in 10 minutes.
One of the HACLA's fleet of BYD hybrids recharges in the garage. Takes about 7 hours at 220V.
BYD issued the hybrid to a few corporate entities in China in 2008. In March of 2010, it made the car available to private buyers. By the end of 2010, it had sold fewer than 1,000 units. http://chinaautoweb.com/2011/02/byd-delivered-only-33-units-of-e6-417-f3dm-in-2010/
That’s not surprising—the technology was new, and at RMB 169,800 (about US $25,800 at current exchange rates) before rebates–the price relatively high. The car is about the size of the Toyota Corolla, and it looks a lot like the Corolla, too (more on that later). The non-hybrid version of the F3 starts at around RMB 60,000.
Okay, pioneering technology costs money. But the technology has to be worth the extra cost, and I don’t think BYD’s F3DM is worth that premium.
To be sure, the F3DM feels okay to ride around the block in. That’s not a true test of a car, natch, but it didn’t make any ugly noises or stop unexpectedly. We ran on pure electric power for a few blocks, then Bacierto manually switched it to the gasoline engine. No loud noise, though he said that when the car makes the switch automatically , which occurs then the battery has about 25% charge left, it does sound like a car whose engine is cold in the morning trying to start up.
(That’s a much kinder description than that of Brad Berman, who reviewed it for the New York Times. He said it “screeches like a banshee.” We didn’t drive for very long, so I didn’t hear any screeching. ) http://www.nytimes.com/2011/02/20/automobiles/autoreviews/byd-f3-dm-review.html?pagewanted=1&_r=2&sq=BYD&st=cse&scp=1
Indeed, we only drove the F3DM for about 2 miles. The battery was 100% charged when we left the underground garage that houses the fleet. When we returned, the battery charge was down to 88%. Hmmmm. BYD claims the car will run on pure battery power for 62 miles. Perhaps, driven carefully on the highway with few stops. Bacierto said he drove it to San Pedro, about 49 miles, on all electric.
Bacierto said he always tries to drive the F3DM like a conscientious environmentalist. Okay, he didn’t put it exactly that way. But he did say that since it wasn’t his car, he tried not to stomp on the accelerator. Doing that drains the battery, he said.
Clearly, BYD’s Fe battery needs some improvement. Maybe a lot of improvement. To harp on a popular theme of mine, BYD should have its battery tested at Argonne National Lab www.anl.gov or a similar type of testing facility so we can know what it is truly capable of.
As for the F3DM’s appearance, “The first thing I said is it looks like a Corolla,” said Bacierto. And it does. An older Corolla. You be the judge.
http://www.toyota.com/corolla/
http://www.byd.com/showroom.php?car=f3dm&index=3
The interior is okay. Not bad, just boring and tan. http://www.byd.com/showroom.php?car=f3dm&index=3
Very much like the Coda electric car www.codaautomotive.com , the body and interior of which is produced in China . Must be a Chinese characteristic.
The display isn't exciting and high-tech like the Leaf, but it does provide the info you need, like the battery state of charge.
There are some issues with the design, however. The F3DM is not very roomy. One of the housing inspectors is nearly 7 feet tall, and he can’t fit in the F3DM at all, said Bacierto. Also, “the Chinese must drive on the opposite side of the street, the side mirrors are backward on this car,” said Bacierto. That is, the driver’s side mirror was for distance; the passenger side mirror for close up. No, the Chinese drive on the same side of the street as we do, I said. Oops.
A little whine—there are no cup holders in the middle. Not round ones, anyway. I’m not in Texas anymore so I don’t drink as many Diet Coke Big Gulps. Nonetheless, we Americans love our round cupholders.
BYD has said it is leasing the hybrid cars to the Housing Authority to learn about and work out these bugs. The design is tweakable, obviously. Still, how many tries does BYD need to get these simple things right? BYD has already redesigned the chassis so the battery pack hump doesn’t take up lot’s of room in the back seat. (Full disclosure: I forgot to check out the rear seat room.)
Those are very minor issues compared with the battery technology, however. And I’m not convinced BYD’s battery technology is very good.
Already, American consumers are disposed not to trust China-brand cars. His fellow inspectors didn’t want to drive the BYD car, said Bacierto. To overcome that skepticism, BYD needs to get it mostly right all at once, not incrementally. It needs to show us a really nice-looking hybrid or electric vehicle, with an interior that meets or beats the highest demands American consumers have for a non-luxury car that size. Since the F3DM looks so much like a Corolla, BYD could at least benchmark Corolla quality!
BYD people are meeting with Bacierto and others from the Housing Authority later this month for feedback. I don’t think they will like what they hear if he and others tell BYD hard truths.
Uber-investor (don’t know how to type an umlaut on this laptop…) Warren Buffett said in his latest note to investors that his investment company, Berkshire Hathaway www.berkshirehathaway.com , was looking to buy companies. I wonder if it has considered selling its stake in Chinese automaker BYD? www.byd.com
Because a recent move by BYD to end a slide in its car sales by cutting prices will not only fail to shore up its sagging sales, it will be bad for the brand, and will hurt the company’s attempt to portray itself as a high-tech pioneer.
Many seem to see the Buffett investment as a guarantee BYD won’t fail.
A New York Times reporter recently reviewed BYD’s F3DM hybrid vehicle. He wrote glowingly of its performance in electric mode. http://www.nytimes.com/2011/02/20/automobiles/autoreviews/byd-f3-dm-review.html?pagewanted=1&_r=2&sq=BYD&st=cse&scp=1
But, when the car switches to its gasoline engine, it “screeches like a banshee,” the steering wheel vibrates, and the dashboard hums, he added. That’s not all. Instead of becoming silently electric when the car stops, the engine “stays noisily on task,” wrote the NYT reporter.
He dismisses these problems as growing pains, and trots out Buffett’s investment as proof that BYD is capable of turning its alternative-fuel cars into inexpensive cars that Americans will want to buy. Besides, he points out, BYD had the best-selling compact car in China in 2010.
Well la di da, as Diane Keaton said in the Woody Allen classic “Annie Hall.” Has he ever seen, let alone ridden in or driven, an F3, as the compact is known?
Let’s dig a little deeper into the BYD story. Past Buffett’s investment.
Last week, BYD, based in the east China city of Shenzhen, announced it would cut prices on its models by up RMB 15,000 per model. http://www.cnbc.com/id/41656075/China_s_BYD_Says_Cuts_Car_Prices_by_Up_to_19
The cut represents an almost 20% reduction for some models.
Cutting prices is a business model that does not work, says Randy Berlin, global account director for Detroit-based consultancy Urban Science. www.urbanscience.com “BYD is putting things on a slippery slope for the perception of the brand, dealers’ profits, and the profitability of the company,” he says.
BYD has thrived in China’s cut-throat automotive market by offering affordable transportation, and until the second half of 2010 that strategy seemed to be working. BYD sales more than doubled in 2009 on the back of its best-selling F3 compact. The first half of 2010, sales continued to rise. Then the decline began. BYD’s sales fell each month for the last six months of 2010 compared to the previous year. It ended the year with a 17% sales increase, according to J.D. Power and Associates.
In most markets, that would be a triumph. But not in China, where the overall market for passenger vehicles grew by 37%, according to J.D. Power. In early 2010, BYD announced it would sell 800,000 vehicles in 2010. Instead, it sold fewer than 520,000.
Price isn’t the only problem BYD faces. Its standards for its cars haven’t kept pace with those of Chinese consumers’. Foreign automakers have come out with low-priced models for the domestic market, for example General Motor’s New Sail. www.gmchina.com Foreign brands are often perceived by Chinese consumers as higher quality, with justification. Suppliers say that BYD sometimes sacrifices quality to keep prices low.
The second half of 2010 had another unpleasant surprise for BYD. In October, land in Xian on which the company planned to build a plant was seized by the Ministry of Land and Resources, and BYD was fined RMB 2.95 million. The Ministry said the land’s zoning was illegally changed from agricultural to industrial. http://online.wsj.com/article/SB10001424052748704763904575549793829052072.html
That might turn out to be a blessing in disguise, however, as it appears BYD isn’t going to need the additional 200,000 unit capacity the Xian project would have added.
Here in the U.S., meanwhile, BYD is busy promoting itself as a high-tech company. Besides leasing a small number of hybrid cars to the Los Angeles Municipal Housing Authority, http://www.hacla.org/byd-and-the-hacla-launch-electric-vehicle-testing-program/ BYD has signed an agreement with the city to provide batteries as storage devices for a planned wind farm. http://mayor.lacity.org/PressRoom/PressReleases/LACITYP_011469
Last year, it showcased its solar panels, LED lighting, and home vehicle chargers at a model home in the Los Angeles suburb of Lancaster. http://www.evoasis.com/news/city-of-lancaster-byd-and-kb-home-provide-a-look-into-the-future-of-energy-efficiency/
After a press event showcasing that home, I said BYD might be successful with those technologies. It may still be. But its recent price cutting move dented my faith in the company’s ability to succeed. Even if Warren Buffett has invested in BYD.
I recently wrote a column for auto163.com, a Chinese-language automotive website, about how China and the U.S. could both be winners in the race to develop the electric vehicle sector. http://alyshawebb.blog.163.com/ Well, a fine example of that just fell right into my lap—the joint venture between battery maker Ener1 Inc. and Wanxiang Group. http://www.ener1.com/?q=content/ener1-press-releases
Talking with Tom Goesch, president of the transportation group at Ener1, made me realize the win can be on several levels—both market access and intellectual property protection.
In January, battery maker Ener1 Inc. www.ener1.com of New York and Wanxiang Group www.wanxiang.com of Hangzhou, a city in the east China province of Zhejiang, agreed to form a battery joint venture in China.
Wanxiang chairman Lu Guanqiu and Ener1 chairman and CEO Charles Gassenheimer shake on a deal to build batteries together in China.
Besides being one of China’s largest producers of universal joints, bearings, and CV joints, Wanxiang also produces electric vehicle batteries and entire electric vehicles. The Ener1 joint venture is with the Wanxiang Electric Vehicle Co. Ltd., a division of the Group. http://www.wanxiang.com/Wanxiang%20EV_general.pdf
“We are putting our entire intellectual property portfolio into this,” Tom Goesch, president of the transportation group at Ener1 told me. “In particular our experience in building large scale battery packs.”
Goesch, president of Ener1's transportation group, thinks having a strong Chinese partner is the best protection again intellectual property theft.
What!?! Isn’t he worried that his intellectual property will be stolen? Nope, said Goesch. “We feel the strategy of having a partner like Wanxiang, a China-based company, will provide us the best protection we can find. Wanxiang has all the reason in the world to protect that intellectual property.”
That assumes that Chinese companies have more than just cheap labor to contribute to a joint venture. Wanxiang brings both technology and connections to important customers to the partnership.
Wanxiang has been converting buses into electric vehicles since around 2006, said Pin Ni, president of Wanxiang America. It already buys some components from Ener1, and Wanxiang America is working with Ener1 here in the U.S., he said. The joint venture is a positive addition to that existing cooperation, said Ni.
“It’s better that we can join together to grow the market,” he told me.
The joint venture will produce lithium ion batteries aimed– initially at least– at China’s electric vehicle fleet market, said Goesch. It may also export to other countries in Asia eventually, he adds.
“For the foreseeable future we will concentrate on China,” said Goesch. “There is so much opportunity in China right now.”
Indeed, China has millions of buses in its municipal fleets, an area in which Wanxiang has much experience, and many connections. As Goesch put it, “Wanxiang has done a lot of customer development.”
In 2006, Wanxiang formed a joint venture with the government of the city of Hangzhou to build and operate a fleet of fully electric buses. That has expanded. Now, Wanxiang has fleets in 24 cities in China.
Wanxiang also provided 50% of the electric vehicle fleet and 100% of the hybrid fleet for the Shanghai Expo, a world’s fair-type event held in Shanghai in 2010.
“We have built hundreds of vans and busses,” said Ni.
That fleet experience is why Ener1 is comfortable with Wanxiang’s technology, said Goesch. It has proven itself. Ener1 also has sent some of its most senior technical people to Hangzhou, and done an internal analysis. “We have more investigation to do, but we are confident they have good technology under their belts,” he said.
Still, U.S. battery technology is more advanced than China’s, said Goesch, because companies in the U.S. have been producing batteries longer. Chinese battery manufacturers still have issues with getting all the different elements in an electric vehicle to talk to each other, and with producing large-scale battery packs.
Wanxiang will need that know-how in the very near future. Because Wanxiang is located in the city, Hangzhou received a grant from China’s central government to build a fleet of electric buses, said Ni. There is a catch, though. Rather than converting buses with internal combustion engines into electric buses, which is what it has been doing, Wanxiang must build a fleet of 1,000 electric buses from scratch.
Ener1 provides batteries for a fleet of fuel cell hybrid buses in northern California and has teamed with Sweden’s Think www.thinkev.com to provide electric drive trains for Japan’s postal fleet. That experience, combined with Wanxiang’s experience, should spell success. I’ll have to take an electric bus next time I’m in Hangzhou and see if it works!
In his State of the Union address on January 25, President Obama challenged the U.S. to be “the first country to have one million electric vehicles on the road by 2015.” http://abcnews.go.com/Politics/State_of_the_Union/state-of-the-union-2011-full-transcript/story?id=12759395
That may prove as elusive as China’s goal to have five million battery-electric and plug-in hybrid electric cars on the road by 2020. (China also aims to be producing one million such vehicles annually by 2020.) http://www.reuters.com/article/2010/10/16/retire-us-autos-china-idUSTRE69F0J820101016
Regardless of whether or not those targets are met, however, the race to grow the electric vehicle segment could be a win-win for China and the U.S.
China may grab the number one spot in the electric vehicle market, just as it has in the overall vehicle market. But that doesn’t mean foreign automakers and suppliers can’t benefit from China’s push to develop electric vehicles. And, foreign automakers can be major players in the electric vehicle market in China.
Let’s do a little comparison of some measures the two countries have announced to develop the sector (this is clearly not an exhaustive list.).
The day after the State of the Union address, Vice President Joe Biden laid out steps the government proposes to reach that goal:
http://detnews.com/article/20110127/AUTO01/101270345/Biden-touts-jolt-for-electric-cars
- Transform the US $7,500 tax credit consumers currently receive for purchasing certain alternative fuel vehicles to a rebate. That would allow the buyer to get the money back quickly rather than waiting until the tax returns are filed.
- Increase R&D investment in new vehicle technology in the 2012 budget by 30%.
- Include funding in the 2012 budget to offer up to US $10 million in competitive grants to 30 communities. To win the grant, the community would need to foster electric cars by building a recharging infrastructure and providing other incentives such as commuter lane access, streamlined regulations, and public vehicle fleet conversion to electric vehicles.
How does this compare to China’s plan to promote new energy vehicles? Measures include:
- Budgeted RMB 100 billion (US $15.2 billion) over the next decade to develop electric vehicles.
- Designated six cities to develop an electric vehicle recharging infrastructure.
- Offered up to RMB 60,000 (US $9,100) to manufacturers for each new energy vehicle sold.
- Subsidized electric vehicle fleet operators in 25 cities.
The U.S. should seriously xuexi (study) that fleet subsidy policy. But I digress.
Despite the large number of Chinese companies with plans to produce electric vehicles, China still lacks good battery management technology. It also has issues with product consistency. It needs foreign technology to develop its electric vehicle sector.
It is getting that—through joint ventures. There are new announcements all time about foreign firms teaming up with Chinese companies.
For example, battery manufacturer Ener1 Inc. www.ener1.com announced recently it would jointly manufacture batteries for the China market with Chinese supplier Wanxiang Electric Vehicle Group Ltd. http://www.wxev.com.cn/ (An aside: I interviewed Wanxiang Group founder Lu Guanqiu about eight years ago in his office in Hangzhou. He had a lot of chocolate bars in his little office fridge. Twix Bars, I think.)
So Ener1 will benefit from growth in China’s electric vehicle market.
American companies also need China’s low-cost manufacturing, even if they aim to sell in the U.S.
Atul Kapadia, CEO of storage systems manufacturer Envia Systems of Newark, CA, www.enviasystems.com told me a few days ago that Envia has 30 people in China producing Envia’s high-capacity manganese rich cathode battery cells. Why China, I asked?
The U.S. was simply too costly, he said. “China is the least expensive place, and business is all about finding the right resource,” said Kapadia.
Of course, the issue of intellectual property rights looms large. Kapadia emphasized that all of Envia’s core intellectual property will remain in the U.S.
Let’s face it, tech transfer—and some outright IP theft—is going to occur. As suppliers tell me all the time, it’s just part of doing business in China. As they also tell me, it just means they have to keep innovating.
As China’s electric vehicle market develops, who will grab market share? Well, let’s consider the market now. Though China’s domestic brands as a group hold about a third of the passenger vehicle market, none have more than about 3% market share. Volkswagen, Toyota, Hyundai, Nissan, and Honda were the top five brands in China in 2010. Why should the EV market be any different?
China is working with the Argonne National Laboratory www.anl.gov in Argonne, IL on a wide range of issues centered on batteries.
Said Jeff Chamberlain, leader of Argonne’s Energy Storage Initiative: “The complicated aspect is to find a way in which we can collaborate in the science while recognizing ultimately we will be competing.”
Competing, yes. But both countries can gain much from the race itself. So let the competition begin!
Murtaugh will have a tough job at Coda even if mission is selling electric vehicles in China
Coda Automotive announced last week that it had hired Phil Murtaugh to be the company’s permanent CEO. In the sense that he is replacing temporary CEO Mac Heller, that is. Heller was filling in for former CEO Kevin Czinger, who resigned in November because, Czinger told me at the LA Auto Show, he felt “there are different roles at different times in a movement.” (Coda sees itself as the initial vanguard of a movement away from dependence on oil and into a new reality, Czinger told an audience at the show.)
Is Phil the right man to lead Coda’s movement? Depends on what that movement really is.
To be sure, Murtaugh has more experience in China’s automotive industry than just about any other foreigner. In 1996 he negotiated the original agreement that paired SAIC www.saicmotor.com with General Motors www.gm.com , forming Shanghai GM www.shanghaigm.com . The partnership now encompasses multiple companies, and is arguably the most successful Sino-foreign partnership in the world.
Murtaugh said his job at Coda was to launch a new car into the market, the same situation he faced in China in 1996. “But I don’t have to negotiate the joint venture,” he said. He also said something I hadn’t previously heard from anyone at Coda–that Coda would sell its vehicles in China as well as the U.S.
Coda Automotive www.codaautomotive.com , based in Santa Monica, CA, is a manufacturer of electric vehicles. The chassis and body of the electric car it will launch is produced in China at Hafei Automobile Group www.hafeiauto.com.cn . The car is based on the same aged Mitsubishi model as Hafei’s Saibao, though Coda says the design has been substantially modified.
The battery is also produced in China, at Lio Energy Systems, a joint venture in the north China city of Tianjin between Coda and Tianjin Lishen Battery Joint-Stock Co. http://en.lishen.com.cn The remaining components are from multinational suppliers such as Delphi, Borg Warner, and Lear. Final assembly will take place in the U.S.
I like and respect Murtaugh, whom I have known for a decade. But I think he faces a much different task at Coda than he did at GM. He is not backed by General Motors, one of the world’s largest and, at the time, most successful, automakers. GM had a stable of proven, popular products it could bring to the joint venture.
China was, to be sure, a difficult market for a foreign company to do business in at that time. But GM had the help of SAIC, a well-connected state-owned company. And the competition was limited. Volkswagen was the only foreign automaker with successful joint ventures at the time—it had two, with First Auto Works www.faw.com and SAIC. (My friend/translator/editor Kevin Huang pointed out that the Guangzhou Auto and Peugeot joint venture was still limping along at that time, as well. It closed in 1997 because of poor sales.)
With Coda, Murtaugh has a relatively expensive, unproven vehicle. In the U.S., Coda is selling its electric car for $37,400 after a federal tax break. It will be fighting for share in a small market with many established brands.
Coda originally planned to deliver 14,000 units of its electric car in 2011. Now, the start of production has been delayed until the second half of 2011. It will deliver more than 10,000 units within a year of starting production, said Forrest Beanum, Coda’s vice president of public affairs and communications.
However, Coda has not yet finalized the location of its assembly plant in the United States.
As for the China market, Coda hasn’t given me any more details about the China electric vehicle launch plan–yet. I’ve submitted questions and have been nagging Beanum. But, the China market for electric vehicles will be at least as competitive as the U.S. market. And, the Saibao, the car on which the Coda is based, doesn’t have an especially good track record in China. Hafei sold fewer than 1,200 in 2010, according to J.D. Power and Associates www.jdpa.com . Of course, Coda did upgrade the small sedan’s looks. But it will also be trying to sell an electric vehicle, a segment for which there is essentially no market in China right now.
As I wrote last year, I think Coda is really just using the car as a marketing tool for the battery. Coda denies this publically, though people it has approached about investing have told me the company is upfront about the strategy. Coda does say it also aims to market the battery for electric utility grid storage.
Murtaugh said Coda’s product “is truly going to be a very, very competitive.” He also said Coda’s business model of marketing the battery as an electricity grid storage device had as much potential as the automotive applications. Well, if Phil is aiming to sell batteries as storage devices, there isn’t really a market for that yet, either. But it will probably develop.
If his aim is volume sales in China of Coda’s electric vehicle, the size of China’s electric vehicle market remains to be seen (as does the size of the U.S. market). But I think he faces an even tougher challenge than he did when he was at General Motors. Still, Coda couldn’t have found a better man to lead that movement.
Will plug standards be China’s perestroika?
A favorite phrase among China’s leadership these days is building a harmonious society. http://english.peopledaily.com.cn/200506/27/eng20050627_192495.html
If China hopes to supply electric vehicles to the world, the leadership needs to also promote a harmonious electric vehicle plug standard.
Recharging is a major concern for potential electric vehicle consumers, in China just as in the U.S. http://www.zpryme.com/
Without a widespread universal plug standard, a consumer could end up having to carry lots of plug convertors around, just as I already do when I go to China. (An aside: Hong Kong has four different kinds of plugs. I am not making that up.)
Just kidding. It’s unlikely that a convertor would be robust enough for an EV plug. So, if no standard is implemented, a driver could have the ability to recharge in, say the southeast China city of Shenzhen, http://www.shenzhen-standard.com/2010/11/08/electric-charging-stands-to-be-installed-thoughout-shenzhen/ which is already building out a recharge network using its own standard. But if the EV owner decides to drive to Fujian, a city in a neighboring province, he wouldn’t be able to “refill.”
Making a plug that is internationally compatible is an even bigger issue, if China’s EV makers want to one day export their vehicles. The cost of producing a compatible car for each country would be huge. Utilities and charge station producers have a stake in the game, too.
“To the extent that we can harmonize anywhere in the world, it is cheaper for the automaker,” says Kristen Helsel, vice president of EV solutions for AeroVironment Inc. of Monrovia, CA. http://www.avinc.com/ Also, “the infrastructure providers can build business models based on higher volumes.”
AeroVironment produces charging stations as well as systems to test EV batteries. It is supplying home recharging stations for the Nissan Leaf electric car, and eyeing China for future business. “We’re spending a lot of time there,” says Helsel.
The J1772 standard for Level 1 (120V) and Level 2 (240V) charging was developed in the U.S. and is accepted by many in Japan and Europe. J1772 was issued in by the Society of Automotive Engineers (SAE) in 2010. http://standards.sae.org/j1772_201001
As for Level 3, or DC fast charging, there is currently no standard though a Japanese standard known as CHAdeMO has achieved some acceptance (and is used in the Nissan Leaf electric car). http://www.chademo.com/
Given that there are very few electric cars on the market, and very few Level 3 charging stations yet being built, that hasn’t been a problem.
To get ahead of the issue, the Society of Automotive Engineers (SAE) is spearheading an industry group attempting to come up with a next generation J1772 standard that combines Level 2 and Level 3 plugs, says Jack Pokyzrwa, SAE’s director of ground vehicle standards.
China wants to be part of the group and has met with SAE several times, he says. Frequent communication is tricky given the language and time differences, says Pokyzrwa. But it is important that China be included. So SAE is going to create an official liaison position with the China Automotive Technical and Research Center, he says. CATARC sets automotive standards in China. http://www.catarc.org.cn/
“We see a trend of (China) trying to adopt a more Western-type process,” Pokyzrwa told me. “They are much more involved with us.”
That is not as “well duh” as it might sound. China is famously secretive about its decision-making process, and that extends to plug standards. Generally, there is a lot of consultation (such as the industry group meeting now on the next-gen J1772); a proposed standard is released; then a government can chose to adopt the standard in part of full, says Pokyzrwa.
In China, he says, it seems a standard is developed and adopted, then announced. “Our process is more transparent,” he says.
China released a Level 1 and 2 standard last year, but the standard does not seem to be widely used in the country. At the EVS25 forum and conference in Shenzhen last November, a dozen or more Chinese companies displayed recharging stations with unique plug standards.
The Chinese standard resembles the German standard, says Ted Bohn, a power electronics engineer, at the Advanced Powertrain Research Facility in the Argonne National Laboratory. www.anl.gov But the Chinese standard cuts out an interlocking circuit, he says. The circuit is an extra safety measure; without it, the car could not be sold in the United States, says Bohn.
The committee working on the next gen J1772 plug standard has some 130 international members. Within that, a task force of 20 or 30 meets twice a month. Pokyzrwa says his best projection (or perhaps his hope) is that a year from now there will be a new standard that combines AC and DC charging capabilities. Implementation wouldn’t start until as late as 2020, Pokyzrwa figures. China may be on board.
“China is coming to the table,” says Pokyzrwa. “They do have a different standard, but the next release can be harmonized.”
Alysha Webb
Alysha Webb's ChinaEV Blog 