Maybe people will pay more attention to Wuling’s role in General Motors China sales now
This week I feel like writing about a non-EV related issue. Partly because I don’t have any good ideas for an EV-related blog. But also, I read some news that hit on something I’ve been keeping my eye on for a long time.
Kevin Wale, president of GM’s China group, www.gmchina.com said a few days ago that GM’s sales in China would likely grow by only about 10% this year compared to 2010. http://www.autonews.com/apps/pbcs.dll/article?AID=/20110711/GLOBAL03/307119827/1131
Granted, 10% is not to be sneezed at. But in China, that would have been considered a poor showing even last year. It’s the bottom of the growth range Wale forecast earlier this year. His bearish tone brings to the fore how dependent GM’s China sales numbers are on its minivan joint venture, Shanghai GM Wuling. www.sgmw.com.cn Many in the media seemed to have ignored that for a long time.
To GM’s credit, it didn’t try to hide the problem. Indeed, to my surprise, it talked about Wuling’s falling sales—down 5.4% in the first half of 2011– in the second paragraph of its press release of July 5, after the “Unprecedented First Half Sales” subhead. http://media.gm.com/content/media/cn/en/news.detail.brand_GM.html/content/Pages/news/cn/en/2011/Jul/0705
I guess that is because, though Wuling accounted for 50.4% of GM’s China sales, it sold a goodly number of Buicks and Chevys in the first
six months, as well. Buick sales, for example, grew by 28.2% on-year in the first half of 2011 to 324,919 vehicles, according to GM.
Nonetheless, the recent news will hopefully encourage those who read GM’s glowing sales figures out of China to disaggregate them a bit in the future.
Sales don’t tell much about the profit picture for GM in China. GM owns 44% of Wuling; it owns 49% of Shanghai GM, its flagship joint venture. So it gets only part of the proceeds. And, Wuling’s best selling model, the Sunshine mini van, costs around US$5,000. http://www.sgmw.com.cn/templates/chanpin_wlcy/index.aspx?nodeid=55
Why did Wuling’s sales fall? The main customers for its mini vans are small private businesses. They are getting hit hard by China’s raging inflation. Prices were up 6.4% in June. Also, loans have gotten more expensive—China’s central bank has raised interest rates five times since October trying to tame inflation.
And, some government policies that were boosting sales in the small towns and rural areas where Wuling’s customers live ended, such as a “cash
for clunkers” type trade in program. And, the government banned the use of mini vans for tour or school buses, according to J.D. Power and Associates. Indeed, J.D. Power www.jdpa.com forecasts sales in the light commercial vehicle segment, which includes Wuling’s main products, will fall by 2% for all of 2011 compared to 2010. So GM’s sales numbers will likely continue to take a hit on the Wuling side.
Nonetheless, General Motors made a brilliant move when itbought 34% of state-owned Wuling in 2002. (I feel a personal connection to Wuling as I was the first foreign journalist to visit the automaker. Back in 2001, when I worked for BusinessWeek in Shanghai, I interviewed Wuling general manager Shen Yang in Liuzhou, where Wuling is headquartered. The General Motors purchase of Wuling’s shares was still pending and hasn’t been officially announced. )
Wuling’s sales roared as incomes rose after China’s WTO entry. The economy grew by double-digits. GM managed to buy more of Wuling in November of 2010, and now owns 44%. According to my sources, GM wrangled that deal by giving Wuling access to some older platforms so Wuling could launch its own line of passenger cars, called Baojun or “Treasure Steed.” The first Baojun model—a small sedan– rolled off the line in November, 2010.
But Wuling–and GM–is still dependent on minivan sales to make the numbers. And farmers and small businessmen worried about inflation aren’t buying. So GM China isn’t invincible.
China needs to clarify EV incentives if it wants the market to grow. Oh, and it needs better technology…
This is, admittedly, a rehash of a blog I wrote for auto163.com, a Chinese-language website I blog for. http://alyshawebb.blog.163.com/ It is part of Netease. Actually, the blog appears in Chinese and English. If you click on the title, both versions appear.
Hey, it’s hard to come up with new ideas sometimes. And its a good blog.
China has audaciously proclaimed that it will be the largest market for electric vehicles by 2020. I’m very skeptical that will happen. But it certainly won’t get there without clarifying what kind of government support the market for electric vehicles will get over the long term. And it hasn’t done that yet.
To be sure, the central government has supported the consumer market for new energy vehicles with purchase subsidies of up to 60,000 RMB for some electric vehicles. But that hasn’t boosted sales much, judging by the numbers.
Price is one issue. The few electric vehicles for sale in China are still fairly expensive compared to a comparable gasoline-powered car, even with a rebate. Yet a study by market research firm Synovate found that, in direct comparison with their current car, only 4% of China’s owners would accept a price increase to buy a battery electric vehicle. 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
Another problem is the lack of actual electric vehicles available for consumers to buy. Recommendations from friends is an important factor in Chinese consumers’ car-buying decisions, yet few know anyone who drives an battery-electric vehicle, or even a hybrid. So no one is recommending them. And, there are few models to test drive, so comparison shopping is pretty much impossible.
That brings us back to the need for a clear subsidy policy. Without one, the number of electric vehicles available will remain tiny.
Many of China’s automakers have proclaimed that they are producing hybrid, electric, or other new energy vehicles. But most have only produced a prototype. Without clear market acceptance, a growing infrastructure to support EVs, and most importantly a clear indication of what kind of incentives the government will provide–and for how long–automakers in China are reluctant to do more than dip their toes in the EV sea,
much less jump in.
There are some positive signs from the government. A draft law on vehicle taxes posted on the State Council website in mid-June includes eliminating taxes for battery electric, fuel cell, and most significantly plug-in hybrid electric cars. Taxes on regular hybrid vehicles would be cut by 50%. The draft law is circulating for comment right now; it will likely become law on January 1, 2012.
But, a purchase tax reduction is attacking the problem at the “bottom end,” an executive at a U.S. company hoping to sell its PHEV technology in China pointed out to me. The government needs to foster innovation at the initial stage, he says. That is sorely needed, because Chinese companies don’t have world-class PHEV technology. They may never catch up with foreign companies in that area, but a lack of clear government support certainly doesn’t help.
In fact, Chinese firms don’t have several key technologies needed to produce electric vehicles. And without a clear indication of government support, they won’t invest in those technologies, and China will fall farther behind.
China wants to be a big player in the battery electric vehicle sector. But is the government willing to support BEV purchases until battery technology matures? Without some reassurances, the big investments needed to advance batteries won’t happen.
China’s government is aware that China is behind in three crucial EV technologies— battery management systems, engine management systems, and electric vehicle control systems. Why else would it have floated a draft law that may require any foreign company producing those three components in China to form a 50/50 joint venture?
The wording is unclear—it may mean that only 50/50 JVs will receive preferential treatment. That’s typical–the Chinese government often floats vaguely-worded draft laws for comment. Nonetheless, it is a clear indication the government recognizes China will have a hard time becoming an EV powerhouse on its own. That should spur the government to issue clearer policies.
A recent study by consultancy BCG that China and Europe, not the U.S., will be the largest market for electric vehicles in 2020. Government subsidies will be key to the development of China and Europe’s EV markets, said BCG. Well, unless China’s government is more clear on its support, perhaps the two largest markets will be the U.S. and Europe.
China’s government is already getting a bit more realistic in its goals for the new energy vehicle sector. That is China’s name for alternative fuel vehicles. Not too many months ago, the government was aiming to make China the number one producer of, and market for, battery electric vehicles by 2020. Since the technology was still nascent in all countries, China figured it could take the lead in the field.
Well, just a few months later reality has struck home. China has realized that, while it may be a big market for alternative fuel vehicles, some of those vehicles may not be all that advanced, and the technology will not all be home-grown.
That’s not to say China is not still interested in being the battery electric vehicle capital of the world. But low-speed or “city” EVs may be a big part of that plan. Fleet vehicles—can you say bus?—will also figure largely. And foreign technology or even foreign nameplates may be big players in
the sector, too.
Meanwhile, the lowly (I mean that facetiously) hybrid, a technology that Toyota www.toyota.com has most successfully commercialized, has become much more acceptable as a stepping stone towards battery electric cars. Plug-in hybrid electric vehicles are also getting some respect now.
Of course, if the government doesn’t clarify the extent of its support for the sector, the domestic content of new energy vehicles may be even smaller. See my recent blog at www.plugincars.com for more on that topic, however.
One clear sign of a more friendly attitude towards hybrids and PHEVs: A draft law on vehicle taxes posted on the State Council website in mid-June includes eliminating taxes for battery electric, fuel cell, and most significantly plug-in hybrid electric cars. Taxes on regular hybrid vehicles
would be cut by 50%. The draft law is circulating for comment right now; it will likely become law on January 1, 2012. http://www.caam.org.cn/zhengceyanjiu/20110615/1605057362.html
Let’s revisit early plans for the new energy vehicle sector.
A plan for revitalizing the auto industry released in March, 2009, called for China to have installed capacity to produce 500,000 NEVs–including EVs, PHEVs, and HEVs—by 2012. http://preview.subscribers.wardsauto.com/chinaauto/auto_industry_readjustment_090330/
Then, in August of 2010, details of a plan appeared in the local press that called for China to have 1 million electric vehicles on the road by 2015.
By 2020, China was to produce and sell one million battery-electric and plug in hybrid electric cars annually. Some five million such vehicles would be plying China’s roads by then. Annual production and sales of mild and full hybrid vehicles was to hit 3 million by 2020.
Now, I am not saying China has changed in those plans. But the way these targets will be reached seems to be morphing into something more
achievable than, say, five million full-fledged battery-electric sedans and/or SUVs plying China’s roads. Now, the government seems to be figuring on a chunk of those being low-speed vehicles, or city EVs. Fleet vehicles will also loom large.
That is probably doable given that China—especially Shandong province—is filled with low-speed vehicles manufacturers. Of course, I think
encouraging these low-speed EV makers too much is a mistake. Then they start eyeing the full-sized EV market, and wasting resources trying to enter it. I’ve blogged about that. But making really good low-speed EVs is a worthy goal.
Also promising is that major auto makers such as General Motors www.gm.com , and others, have told me the city EVs are a segment they think will be huge. They are working on products for the segment.
GM showed the EN-V electric car at the Shanghai Expo (here in its lobby in Shanghai.). It sees the market for small city EVs such as this--though perhaps with a more conventional shape--as a big future market.
Why the subtle shift in the government’s vision for the new energy vehicle sector? Well, it turns out that China’s electric vehicle technology was not as advanced as the government imagined, and that it is considerably more difficult than imagined to produce an electric vehicle capable of everything an internal combustion engine car is capable of.
Some of the signs of that realization were not too subtle, actually. A few months ago, the National Development and Reform Commission and
the Ministry of Commerce, floated a revision to the Guiding Catalog for Foreign Invested Industries policy that showed the government recognized the weak position China was in regarding some EV technologies.
The revision refers to joint ventures producing key components of electric vehicles such as battery management systems, engine management systems, and electric vehicle control units. Only JVs that are at least 50% owned by the local (Chinese) partner will be “encouraged” in the new wording. Of course, it likely means that only those JVs will receive preferential tax treatment, though it may mean only those will be allowed. That hasn’t been made clear. And implementing either version would meet with stiff resistance from foreign firms. Nonetheless, it shows thgovernment recognizes China’s EV sector needs foreign technology to succeed.
Finally, a confession. Perhaps some factions in China’s government have always figured that China would not become the top producer of battery electric sedans, or any other type of alternative fuel passenger car, in the near or even medium term. Perhaps low-speed EVs and fleet vehicles were always a significant part of the mix. To be sure, Chinese media did write about the difficulties of achieving the lofty NEV goals. http://www.chinadaily.com.cn/business/2009-10/26/content_8846285.htm
But the press—both foreign and Chinese—chose to interpret the early announcements about investments in the NEV sector as full speed ahead
with passenger cars. And Chinese automakers rushed to announce plans to produce NEVs. One in particular, whose name won’t mention but you know the initials, comes to mind.
In any case, things seem to be sorting themselves out now. Will China be a big market for NEVs of one kind or another in the next decade? Yes. Will it be the technological leader in the sector? Probably not.
Back in April, an EV produced by Zotye Auto www.zotye.com , a privately-owned Chinese auto maker, burst into flames while in use as a taxi in the east China city of Hangzhou. http://www.bloomberg.com/news/2011-04-12/china-s-hangzhou-suspends-electric-taxi-operations-after-fire-news-says.html I’ve had some bad taxi experiences in Hangzhou, but never one quite that bad.
The Hangzhou government investigated the cause of the conflagration. Its conclusion, reported in the local press, http://www.china4auto.com/news/showd.aspx?id=252192 suggests it is a lot harder to produce an electric vehicle than China’s automakers—or at least Zotye—imagined. And that Chinese companies producing EVs need to do a lot of testing before they put them on the road for general use.
The problems at Zotye also underscore how far Chinese automakers need to come to match the superlative safety rankings of today’s new electric cars from major global automakers.
In the U.S., electric cars, such as the Nissan Leaf www.nissan-leaf.com and Chevy Volt, http://www.chevrolet.com/volt/have been receiving very high safety scores. http://www.autoobserver.com/2011/04/leaf-and-volt-earn-highest-iihs-safety-ratings.html
The investigation determined that the battery cell design was not the problem. But, there were quality problems in the battery pack production process, and it did not satisfy the demands of the operating conditions in an automobile, it said. According to the local press story, after the battery module had been in use for a while, battery leakage and insulation damage occurred, causing a short-circuit. The report I read didn’t give more details, but it was still pretty damning.
Producing an EV is tough, especially for young companies without much experience producing any kind of cars, much less electric ones. Even if the battery cell is good, combining multiple cells to create a module is hard. Then there’s managing all that heat. And getting the battery module to talk to and work with the rest of the car’s systems ain’t easy. Battery management systems were one weaknesses in China’s EV segment that were identified in an excellent report put out in June 2010 by InterChina Consulting in Beijing. www.interchinaconsulting.com
A separate InterChina report on China’s traction battery industry concluded that the Chinese government’s policy of promoting the EV
sector had resulted in excessive investment in the battery sector, especially by small privately and collectively-owned companies. Many relied on “cheap and inferior equipment” and “a lot of manual labor” to keep prices low, said InterChina. China’s battery sector therefore “lacks
competent techniques and processing line equipment to guarantee product consistency between batches of volume production,” it concluded.
InterChina didn’t single out any companies. But the flaming taxi problem is a case in point. (Now I think I understand the traffic signs around Hangzhou of a car with flames bursting out of the top….).
Green Automotive Co., www.usaelectricauto.com a Newport Beach-based company, (it moved its headquarters from Texas last month), still aims to import Zotye EVs. The taxi that caught fire is not the same model as the EV it wants to sell in the U.S. That is a small SUV. But does the U.S. model contain the same battery modules?
The EV Green Auto proposes to sell in the U.S. is not the same model as the taxi that caught on fire. But is the battery pack the same?
Spokesman David Welch couldn’t answer that question. But battery technology in general was evolving quickly, he said, adding, “One car caught on fire. It happens. That is called testing.” He predicted there would be Zotye EVs on the road in the U.S. by the first quarter of 2012. The first model in the U.S. will be called the Zeus, said Welch. (Fortunately they didn’t chose to name it after Hephaestus, the Greek god of fire, or Vulcan, his Roman counterpart.)
Several of the Zotye EVs are being tested for FMVSS compliance at Roush Industries, www.roush.com an independent testing firm in Michigan. The next round of tests will occur on June 22, said Welch. For sure, Roush will test the Zotye EVs to see if you will survive being rammed by a larger SUV. Hopefully it will also test the battery pack to ensure it won’t bursts into flames.
I visited Wanxiang Electric Vehicle Co. http://www.wanxiang.com/Wanxiang%20EV_general.pdf in Hangzhou a few weeks ago and met with the executive director, Li Pingyi. Seems BYD isn’t the only Chinese company aiming to supply a whole range of things electric. But, I came away from our meeting thinking that Wanxiang has a more measured, and likely more successful, approach to the whole electrification trend.
First, a bit of background. Wanxiang www.wanxiang.co is China’s (and probably the world’s) largest producer of universal joints. The founder, Lu Guanqiu, got his start repairing bicycles, then agricultural machinery. In 1969, he opened the Ningwei People’s Commune Agricultural Machinery Repair Factory. That became Wanxiang Group. (I visited Wanxiang back in 2005 and interviewed Lu Guanqiu. http://www.autonews.com/apps/pbcs.dll/article?AID=/20051219/SUB/51219009; http://www.autonews.com/apps/pbcs.dll/article?AID=/20051219/SUB/51216061)
Wanxiang Group’s main source of revenue is still selling auto parts such as universal joints, bearings, and CV joints. But in 10 years it
aims for EV components to be its most important source of revenue.
Wanxiang is not gaga over the potential market for electric passenger cars in China, however. Li, the executive director of Wanxiang EV, consistently sounded a note of caution about the size of the market.
Li is cautious about the potential for sales of electric vehicles to consumers in China.
Consumer acceptance, and thus demand was uncertain, he said. And, the technology was not mature, he added. It would take up to 10 years for electric passenger cars to be accepted, he figured. So, Wanxiang has no plans to jump into the electric passenger car market right now. It will evaluate the market in 2015 and think about it then, Li said. “We have no experience developing and manufacturing passenger cars,” he said.
Wanxiang is investing heavily in electrification, however. “We are now putting our efforts into battery development,” said Li. “We should make sure we have the leading position in the battery field before we go into cars.”
Yes, you heard correctly. Wanxiang is actually getting really good at the most important part of the whole EV equation—the battery—before it jumps into a market it has no experience with. It is also expanding its production of motor and motor controls for electric vehicles, but the battery is the most important component, Li said.
Those batteries, motors, and motor controls are aimed at the electric vehicle market in China that Wanxiang is enthusiastic about—buses and
service fleet vehicles.
It’s hard not to miss that point—an electric bus chassis loaded with Wanxiang batteries is prominently displayed in the lobby of
Wanxiang EV’s main building in Hangzhou.
Wanxiang sees opportunity in the electric bus market.
Li said Wanxiang is cooperating with a number of bus companies in China. Among them: Zhengzhou Yutong Bus Co. http://www.yutong.com/english/aboutyutong/introduction/index.shtml, China’s largest bus manufacturer; SAIC www.saicgroup.com ; and Guangzhou Automobile Industry Group www.gaig.com.cn . A big portion of the buses it will produce with these companies are pure electric buses, said Li. A few will be hybrids.
Wanxiang is also working with Zhengzhou Nissan Automobile Co., a commercial vehicle joint venture between Japan’s Nissan Motor Corp. and Dongfeng Motor Co., http://www.zznissan.com.cn/english/about/Company_Profile.htm to produce a fleet of electric service vehicles for the State Grid, one of China’s two electric utilities, he added.
Of course, Wanxiang is pretty new at this electrification stuff, having only gotten into it around 1999. Wanxiang EV was founded in 2002
to focus on producing key EV components. So it wanted to find a partner with more experience. That’s where New York-based battery maker Ener1 www.ener1.com comes in. (See my Feb 19 blog for more on the partnership, and Ener1’s side of this story).
I asked Li, who has been in his current post for a couple of years, why Wanxiang partnered with Ener1. “We have only been researching EVs since 1999, he said. “Ener1 used to be part of Delphi. It has been doing this for much longer. It has good technology.” Wanxiang has some good technology, too, he said. Plus, it has a good customer base. So one plus one equals more than two.
The two aren’t just looking at the mobility side of the battery business; they are also looking to be major players in the energy
storage industry, Li said. “The cooperation with Ener1 really raises our profile in the industry,” he concluded.
Electric vehicle components isn’t the only “green tech” area Wanxiang Group is involved in. Like BYD, Wanxiang aims to supply a range of
products, including solar panels and LED lighting, as well wind farm development. Wanxiang America produces solar panels in the U.S. state of Illinois and is working with New Generation Power http://www.newgenerationpower.org/ on a large solar energy project in the
same state. http://www.greenenergyapproach.com/green-energy/illinois-governor-quinn-signs-solar-ramp-up-law-and-announces-one-of-the-largest-solar-development-projects-in-the-u-s/
It has wind power projects in China.
Like many large Chinese corporations (indeed, like many corporations worldwide), Wanxiang also has financial, real estate, hotel and restaurant management, and aquacultural (eels and snakes!) businesses, to name just a few. Indeed, after the interview we went to lunch in an excellent Chinese restaurant (no eel or snake, however) in a nearby hotel owned by Wanxiang. Saves money on hotel bills when people visit the HQ, I suppose.
Wanxiang Group is very international, including subsidiaries in the U.S., Brazil, and the U.K. That doesn’t mean it will be any more successful than other Chinese or non-Chinese company at producing complex electrical vehicle components such as batteries, motors, and motor controls. But at least it is taking a refreshingly business-like and sober approach to the EV sector. Unlike some of its compatriots.
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.
Alysha Webb
Alysha Webb's ChinaEV Blog 