China makes a Great Leap Forward into electric vehicles; will corporate starvation result?
I was in Shenzhen last week at the 25th World Battery, Hybrid, and Fuel Cell Electric Vehicle Symposium and Exhibition (That’s a mouthful. Hereafter EVS25), an international conference and electric vehicle show. www.evs25.org
There were some glitches—like the tiny room allocated the hugely-popular workshop on plug-in hybrid electric vehicles, and the non-functioning equipment at the same workshop. But the event was a packed with government and industry folks, all talking about electric vehicles and batteries. There were lots of people from the U.S. Department of Energy, www.doe.gov one indication of how important the whole EV sector is becoming.
There were also plenty of Chinese government officials. The details of their message were confusing, at least to me. But the message was clear: China aims make its auto industry the world leader in electrification technology and standards.
What I’m wondering is if this is another Great Leap Forward.
Both Ouyang Minggao, a Tsinghua University professor deeply involved in forming the government’s new energy vehicle strategy, and Xiao Chengwei, a battery expert at the Ministry of Science and Technology’s Key Lab for Power Sources, presented an overview of the government’s electrification strategy. It emphasizes developing electric vehicles first in two areas: fleet vehicles, especially buses, and mini-vehicles.
That will lead to the second generation of EVs, which will be passenger cars, they said. What?!? Why are all the automotive manufacturers in China launching all manner of electric passenger vehicles, then?
It seems that hybrid passenger cars are to be developed concurrently with full electric buses and mini vehicles, leading to a second generation full electric passenger car. And because China loves numerical shorthand names, (You are permitted to roll your eyes now, as I am doing.) the strategy is called the “three verticals” and the three horizontals.” The three verticals are battery electric vehicles, fuel cell vehicles, and hybrids. The three horizontals are battery technology, electric motors, and controls. At least that’s what Ouyang said at EVS25. The interpretation was slightly different in a speech he gave in October of this year at a forum in Shanghai sponsored by General Motors. Same basic idea, though. http://www.gmexpo2010.com/forum/en/node/405
China figures such an important task is waaay too important to be left up to market forces (especially considering there isn’t a market for these cars yet), or to be left in private hands. Ouyang said in the October speech:
“In order to elevate the strategy of developing electric cars from a corporate or industry strategy to the height of national strategy, ‘vehicle electrification’ strategy must fall under the general guidance of collective development, and keep pace with the transition and transfiguration of fuel-efficiency and new-energy cars. Governments will directly intervene to breed new industries, striving to keep pace with international goals that, by 2015, see China with some 1 million electric cars in use.”
That includes up to 300 million light electric cars, according to his presentation. Okay, I’m not sure what exactly a “light electric car” is. But, the rest are likely buses and/or mini EVs.
Actually, my head spins a bit trying to sort out China’s very ambitious plans for new energy vehicles. The exhibition was full of mini electric vehicles produced by companies who previously had no experience making vehicles. But, the government is encouraging minis, so companies jumped right in. “We see a good business opportunity,” several of the companies told me.
Shandong Bidewen Power Technology Co. Ltd. makes electric bikes and motorcycles. Now it makes mini cars too!
There were also plenty of hybrids and pure electric vehicles from the major automakers. Some of them, such as BYD, were also showing electric buses since the government is promoting electrification in the public transport sector. 
Is this another Great Leap Forward, as Mao’s attempt to push China’s modernization by promoting back yard steel mills and collectivizing agriculture, among other measures, was known? His reasoning was that China had lots of people, so people power should be the modernization force. Widespread starvation resulted from attempts to organize agricultural into communes during the GLF.
Some companies may starve to death as a result of this NEV Great Leap Forward. Too many are rushing into the EV segment (too many battery manufacturers, as well), in a market that can’t support them all. Does this mean the strategy will fail?
Although I am as always skeptical, I am also influenced by a conversation I had with my friend Mark Clifford, the executive director of the Asia Business Council in Hong Kong. www.asiabusinesscouncil.org So what if some businesses fail, he said. That’s how it works. And China always rushes into things this way, Mark pointed out. (Like a “swarm of bees” as a friend of mine in Kunming said back in 1992 when everyone was going into small scale private business.)
Okay, some of these companies will survive, and maybe even thrive. I am, however, skeptical that China will achieve the technological breakthroughs it desires on the tight time frame it has set. Of course, as I pointed out in earlier blogs, Chinese companies will get some help from foreign companies with good technology. Indeed, “cooperation” was a buzzword at the symposium.
Some will also fail, if the government lets them. It is having trouble rationalizing the regular auto sector; how will it fare with the EV sector?
The next few years will be a roller coaster ride that I’ll be on voyeuristically, at least.
GM aims for China e-bike riders with a cheap electric car, but will it be cheap enough?
I just returned from two and an half weeks in China. I found that, despite a government target of producing one million new energy vehicles by 2020 http://af.reuters.com/article/energyOilNews/idAFTOE69F00L20101016, companies who will be major players in China’s new energy vehicle sector are uncertain about how big the sector will actually be. Nonetheless, they are ramping up to supply EVs to China’s masses.
And I learned something! Well, quite a few things. One of the most interesting is that GM wants to produce a low-cost, basic transportation electric vehicle for China. GM’s thinking is this: China has hundreds of millions of electric bicycle riders, especially in smaller cities. Those people would love to have an electric car, which might cost a bit more but offer protection from the rain, and be safer than, an electric bike.
As an example, GM offers its EN-V, a two-wheeled Jetsons-like vehicle it is showing at the Shanghai Expo (and in the lobby of its office building in Pudong). http://media.gm.com/content/media/us/en/news/news_detail.globalnews.html/content/Pages/news/global/en/2010/0817_env_capabilities
GM showed its vision of the cheap EV future at the Shanghai Expo. The little pod includes software that keeps it from crashing into other little pods.
“This is like upgrading from a black and white TV to a color TV ,” says John Du, director of GM’s Science Lab.
I disagree with Du’s assessment. Deceptively simple-looking, the EN-V includes technology that talks to other vehicles to avoid collisions. A television upgrade might involve a 100 RMB additional investment. Upgrading from an electric bike to an electric car, no matter how basic, would involve considerably more. Especially if it was as technologically-rich as the EN-V.
“There is a definite movement in China to create a segment of low-end electric vehicles to replace the low-end auto segment,” says former GM China executive Frank Chou, now with consultancy PAC Group in Shanghai. http://www.pacgroup.com/
But price will be a major factor. A e-bike costs as little as 2,000 RMB. An entry level mini car such as Chery’s QQ or BYD’s F0 costs a bit more than 30,000 RMB.
To hit the sweet spot between those two choices, GM needs to price its electric vehicle at no more than 25,000 RMB, figures Chou. If it can’t get the price that low, “GM is just dreaming,” he says.
Du admits GM doesn’t yet know what the acceptable price range would be for an entry-level electric vehicle, or even who the target consumer is.
Says Du: “We are going to do research on this. But we are pretty sure the 200 million e-bike riders will view this as like a TV upgrade.”
There may also be competition in that segment. In May, Chinese automaker BYD Co. http://www.bydauto.com/ and German automaker Daimler AG formed a joint venture. http://www.daimler.com/dccom/0-5-7153-1-1298502-1-0-0-0-0-0-8-7145-0-0-0-0-0-0-0.html
A BYD executive says the venture aims to produce a low-cost electric vehicle. He questions if GM can get its battery price down enough to be competitive.
That’s what John Du hopes to find out. The China Science Lab, which Du calls “my baby,” is so far just a dirt field in the Shanghai district of Pudong. But it will do research in half a dozen areas, including person- vehicle interaction, battery materials basic research, and alternative powertrains. http://www.theautochannel.com/news/2009/09/25/478974.html
One project his China Science Lab will work on is lithium-ion battery composition. “We are hoping to make a better lithium-ion battery,” Chou says. Better, okay. But it will also need to be pretty darn cheap.
Nissan faces dilemma in bringing the Leaf electric vehicle to China
I’m in China on a consulting gig for the Specialty Equipment Market Association (monster trucks!) www.sema.org. But of course I’m also cramming in as much electric vehicle nosing around as I can. In that spirit, I attended the kickoff of Nissan’s Safety and Environmental Technology Tour in Beijing.
The tour’s intent (in my estimation) to allow Nissan to 1. Brag a bit and 2. Tout its dedication to reducing road deaths in China and improving the environment, two causes both commercially and politically correct. I was mainly interested in number two, because it includes the launch of Nissan’s Leaf electric vehicle in China.
I also wanted to find out more about a project between Nissan and the government of the central China city of Wuhan. Oh, and I wanted to drive the Leaf, which Nissan plans to launch here in 2011.
Despite all the Chinese government’s talk about how big the new energy vehicle sector will be in China, it seems Nissan is taking a bit of a plunge introducing the Leaf here because the actual demand for such cars is far from certain. That makes the chance that Nissan will produce the Leaf in China uncertain, as well.
I met with Tsunehiko Nakagawa, vice president of Nissan (China) Investment Co. Ltd.
We discussed some of the hurdles to growing the electric vehicle sector in China. And a reported plan that seems to require foreign automakers of electric vehicles to hand over their technology if they want to sell electric vehicles in the China market. (He was suprisingly sanguine about the plan, though it may have been a front.)
Nakagawa san said the biggest hurdle is (not unlike the U.S.) the lack of a recharging infrastructure. Committing to a nationwide build out aside, China needs to decide on a plug standard for recharge stations. And any decision on that is at least a year off, figures Nakagawa san.
“The concerned party is going to make a standard, but maybe it will take a year. The decision process is quite complex,” he told me with an emphasis on complex.
One issue is the number of “concerned parties.” Industry sources say Miao Wei, vice minister of China’s Ministry of Industry and Information Technology, favors local standards, no surprise as he was previously the chairman of Dongfeng Motor Corp. ( the former Third Auto Works). It is owned by the Wuhan government, though a subsidiary, Dongfeng Motor Co, is 50 percent owned by Nissan.
Another concerned party: Wan Gang, head of the Ministry of Science and Technology. Wan Gang, who has a PhD from a German university, previously worked at Audi in China, then was dean of the New Energy Automobile Engineering Center at Beijing’s Tongji University. http://www.most.gov.cn/eng/organization/leadership/
Wan favors a national standard, sources say. (Wan Gang has reportedly been grilling the scientists at Argonne National Lab in the U.S. about the standards there.)
But, said Nakagawa san, “Finally, the State Grid will decide.” The State Grid builds and operates China’s power distribution system.
China is leaning toward a standard that more closely resembles the European standard, he said, with elements of the U.S. standard, which was created by the Society of Automotive Engineers. But, Nakagawa added, China wants the standard to have Chinese characteristics, as well. So, a “complex” decision process indeed.
Promoting the Leaf was also part of the event. I drove one. Nice car. Much better acceleration than BYD’s e6 electric vehicle. A nice interior, too. And roomy. http://www.nissanusa.com/leaf-electric-car/
For the Leaf to succeed beyond the test city of Wuhan, however, the government will have to decide on a charging standard. That’s one necessary condition, in any case. Meanwhile, Nissan is moving ahead with a joint program with the Wuhan city government to make Wuhan an electric vehicle hub.
http://www.nissan-global.com/EN/NEWS/2010/_STORY/100325-01-e.html
The program will start in 2011 with 25 Nissan electric vehicles. Wuhan will build 250 slow EV chargers. Nissan will also provide two (imported) quick-charging stations. They will collaborate on an educational program.
Nakagawa san said the program aims to resolve two issues. The first, how many recharge stations are needed in one square kilometer so people can use an electric vehicle “without resistance?”
The other is more fundamental—education. “People have to know what is an electric vehicle,” said Nakagawa. Because BYD is the poster child for electric vehicles in China, and BYD is known for producing small, cheap cars, Chinese consumers think all electric vehicles are small and cheap, he said.
We also discussed a rumored Chinese government plan may require foreign automakers to turn over their electric vehicle technology to a Chinese partner if they want to sell in the domestic market. There’s a lot of uncertainty around the law.
Said Nakagawa: “We don’t know what the law means. We can’t collect the information about the actual process, or the approval criteria for what and how much we have to disclose.”
So, I asked him, does that influence when, or if, Nissan will produce the Leaf in China? Not really, said Nakagawa. Since Nissan has a 50/50 joint venture with Dongfeng Motor Co, technology transfer would occur if the Leaf was produced locally, he said.
The real deciding factor for local production of the Leaf is the size of the market in China for electric vehicles, said Nakagawa. And that is unknown.
“Especially with the battery plant, it is necessary to make a huge investment,” he said. “Therefore the decision (to produce the Leaf locally) is quite difficult.”
Nissan is in a bit of a Catch 22. It wants to know what the demand for the Leaf will be before it decides whether or not to produce the car in China. But, if the Leaf is not produced locally it won’t qualify for a the government’s new energy vehicle purchase subsidy, so the price will be high, suppressing demand. http://www.chinadaily.com.cn/bizchina/2010-03/09/content_9560631.htm
In any case, Nissan Motor Co. is expanding its production capacity in China. In September, CEO Carlos Ghosn said Nissan aims to nearly double its capacity in China by 2012 to 1.2 million units. http://www.cnbc.com/id/39264109/Nissan_to_Double_China_Capacity_to_Tap_Hot_Market
At the time, Ghosn said that the future of electric vehicles in China was “very bright.” Whether it is bright enough for Nissan to produce the Leaf locally remains to be seen, however.
BYD aims to be a green giant. But it needs to sell lot’s of cars to fund that dream.
BYD Co. Ltd’s car sales in China took a hit in August, falling19% compared to the same month in 2009, according yto J.D. Power and Associates.
A BYD spokesman made light of the matter, naturally, saying the entire market was weak in August (thoughpassenger vehicle sales rose 25% in August according to J.D. Power). http://www.reuters.com/article/idUSTOE68603T20100907
In any case, BYD chairman Wang Chuanfu has another trick up his sleeve besides auto sales–becoming a holistic green company. Can a company that started out making batteries become a green giant? Not without selling a lot of cars to fund the expansion. Here in Los Angeles, I have a front seat to see what happens.
On September 16, BYD and the Los Angeles Department of Water and Power signed an agreement to develop an energy storage unit for the city’s wind power farm. http://mayor.lacity.org/PressRoom/PressReleases/LACITYP_011469
It is the second non-automotive green tech event BYD has held here in recent months. A few weeks ago, I went to an event in Lancaster, CA hosted by BYD, among others. (see July 14 blog) http://www.kbhome.com/pdf/press/2589/KB-BYD_Green_Home_%20Final_100713.pdf
That event involved a house built by KB Home that included BYD’s solar panels, and other green tech. In Lancaster, I asked BYD senior vice president Stella Li if BYD is an auto maker that dabbles solar tech, a battery maker that also makes cars and solar panels, or what? She replied that BYD is “a unique automaker.” But I think Wang Chuanfu dreams of being much more.
I haven’t seen it reported on anywhere else, but Wang’s speech at the Sept 16 LADWP event was very strategic, and telling. He said:
“BYD’s dream is to help the West solve their pollution problems and achieve the goal of reduced oil dependence.
However, solar and wind power plants in themselves cannot help us replace fossil-fuel electric generation, it requires renewable-power with “firm capacity” — Firm Capacity and Energy that we can rely upon at peak demand. Energy Storage (our second focus) makes renewable energy generation relevant to the grid. Only with renewable-energy generation and energy storage in place will electric vehicles truly be ZERO-emissions. That is my true goal. A zero-carbon, zero-emissions eco-system “template” that we can create and run our homes and our vehicles, our businesses and our public transportation.”
Wait a minute, the U.S. needs a Chinese company to wean itself from foreign oil dependence? Wang makes a good point, though. Electric vehicles charged with electricity generated from fossil fuels ain’t that green. And I have to hand it to Wang—he’s creating, or at least pointing out, synergies between BYD’s different business lines.
Buildings play an important role in driving (get it?) Wang’s point home, as it turns out. BYD plans to build “green theme” dealerships in the U.S., says Michael Austin, vice president at BYD America (which will be headquartered right here in Los Angeles).
“Our delivery may be different,” says Austin. “It’s not a car dealership, it’s a green dealership.”
A green dealership would educate customers on how to reduce their electricity costs, etc., he says. Then it would sell them an electric car. And a home charger. And maybe a solar panel. As Austin says, “Real solutions that you can buy.”
There won’t be any BYD green dealerships in the U.S. until at least 2011, however. BYD is sticking to its plan of first using its hybrid and pure electric cars in municipal fleets here in Los Angeles, beginning later this year. Those fleets will be Petri dishes of a sort, helping BYD to pinpoint what changes need to be made to make its cars palatable to American drivers.
One move I recommend: Allowing the e6 electric vehicle battery to be tested here in the U.S.—perhaps at the Argonne National Lab– so American consumers can see independent test results of the technology.
Then, of course, BYD will need to make the car’s driving experience match U.S. consumers’ expectations. BYD is thinking of that, apparently. It will hire U.S. industrial design engineers with experience working on cars for the U.S. market to create U.S. versions of the Chinese models, says Austin. That won’t begin until the first quarter of 2011, he adds.
For all cars, whether electric or internal combustion, the car’s interior ranks first in importance in J.D. Power studies as far as satisfaction is concerned, says Tim Dunne, director of global automotive operations at J.D. Power and Associates.
“I can’t think it can ever be a bad move to try to tailor your product to the market,” Dunne says. “For all buyers, whether of alternative powertrain or internal combustion cars, interior designs are important. That’s where they spend all their time.”
Especially if you’re a commuter in Southern California.
It all sounds good. But Wang’s grand vision is a long way from being realized. He has already scaled back his grandiose sales targets for autos in the face of the August sales numbers. That may allow BYD to focus some of its energy on its other businesses. But car sales are the company’s cash cow. It will be tough for BYD to do it all.
The U.S. and China are cooperating on EV development. Can both sides come out winners?
An American friend of mine in China was always very frustrated when he entered into negotiations with a Chinese company. “They always have to come out on top,” he would complain. “There is no concept of win-win in China.”
Win-win—the Chinese word for it is “shuang1 ying2”, literally a pair of wins. For China, that usually implies that China comes out on top, however. Nonetheless, the U.S. government is committed to working with China on electric vehicle development. Indeed, several cooperative research relationships were formed in the past few weeks. The key will be to ensure that we get as much out of the arrangement as China does.
At the end of August, the U.S. China Electric Vehicle and Battery Technology Workshop meeting took place at Argonne National Laboratory in Chicago, IL. http://www.anl.gov/
The meeting, between scientists from Argonne, the U.S. Department of Energy, and China’s Ministry of Science and Technology, had three aims, said Jeff Chamberlain, leader of the energy storage initiative at Argonne National Laboratory. https://blogs.anl.gov/expertsguide/jeff-chamberlain/
They were:
- To compare notes and see if the U.S. and China are working on the same problems.
- To do the direct comparison of who is working on what, the results, and what the next step is.
- Map out where we might work together to help each other.
“The objective is to move the technology forward in a way that is better for humanity and the planet,” said Chamberlain.
That’s very noble. But this is the real world. So Chamberlain added: “The complicated aspect is to find a way in which we can collaborate in the science while recognizing that ultimately we will be competing.” In other words, make it a shuang ying arrangement—to a point. I don’t know if that’s possible.
I was feeling kind of optimistic. My friends in business in China tell me the younger generation of Chinese is more attuned to international business norms. But then I read a story in the New York Times by Keith Bradsher about how China is heavily subsidizing the clean energy industry. http://www.nytimes.com/2010/09/09/business/global/09trade.html
That violates its WTO agreement, and effectively shuts foreign companies out of the market. I realized that, at least in the government’s mind, shuang ying situations are not desirable.
But hey, let’s look for a bright side. Those subsidies may allow Chinese battery makers and others to advance technology in new ways. And hopefully the U.S. will have access to that through these cooperation agreements. But I’m not holding my breath.
A lot hangs, it seems to me, on how advanced China’s battery technology really is. And that is not known because China’s lithium ion batteries haven’t been made available to researchers in the U.S., who would run same kinds of tests on them that batteries in the U.S. are subjected to so we can really know what Chinese batteries can do.
Until that happens, we won’t know how to interpret the Chinese test results. So one big benefit of the Argonne/China cooperation could be finding a way to understand what battery performance test results from China actually mean.
“If we can work together in a way that helps us show the consumer that (electric) vehicles are safe, that advances the market,” said Chamberlain.
But that could take a while. The American and Chinese scientists and engineers will need to find a way to “collaborate at a higher mission to change the world while protecting the tax payers’ interests,” said Chamberlain.
The taxpayers he is referring to are you and me. Our interests lie in not having our intellectual property stolen. So, the two sides will have to develop trust, and that will require time and effort.
Some details about the Argonne meeting: It lasted three days. The three roundtables on day two accounted for the most of the meat (or the tofu in my case). The topics covered were technology; testing and performance evaluation; and vehicle performance. Chamberlain led the testing and performance evaluation session.
As it turns out—no big surprise here—China and the U.S. apply different standards when they test battery systems. One substantive result of the meeting was this agreement: Each side will test the same battery system according to its own procedures. Each will provide the other side with the full test results.
The Chinese were “a little frustrated” by the suggestion, says Chamberlain. But, “we agreed to start with this experiment and publish together.”
This approach will be very useful when Chinese EVs start being sold in the U.S. Which could happen by early next year, but I’m skeptical. (Surprise!) In any case, we should at least see some BYD pure EVs here in Los Angeles by early 2011 in municipal fleets.
So long as a team in the U.S. tested a similar system, the performance information can be fairly evaluated and compared to other vehicles, hopefully before the BYD e6 even arrives.
U.S.-China collaboration on clean vehicle develop is already official U.S. policy. During President Obama’s late November visit to China, the U.S. and China agreed to form the China-U.S. Clean Energy Research Center. http://www.energy.gov/news2009/8090.htm
Saving the planet is one goal of the Center. But cold hard cash – hopefully in the pockets of U.S. companies – is also a goal.
Said Steven Chu, U.S. energy secretary: “The U.S.-China Clean Energy Research Center will help accelerate the development and deployment of clean vehicle and clean coal technologies here at home. This new partnership will also create new export opportunities for American companies (emphasis added), ensure the United States remains at the forefront of technology innovation, and help to reduce global carbon pollution.”
The first CERC research grant for clean vehicle development has already been awarded. The University of Michigan will lead a consortium of universities that will receive $25 million in federal funding to develop clean vehicle technologies. China will match that funding, and Chinese universities will be in the consortium. The U.S. funding will only be used by the U.S. companies, said Katinka Podmaniczky in the DOE’s office of public affairs.
Chamberlain said China is “dead serious” about investing in clean vehicle technology. Hopefully, that will help make the U.S. China collaboration a shuang ying one. He also said he suspects the Chinese scientists are “just as paranoid as we are about sharing our secrets.” Wish I could be a fly on the wall in that lab.
I got the latest Sales Satisfaction Index study for China from J.D. Power and Associates a few days ago. It measures how happy a car buyer was with the purchase process. http://businesscenter.jdpower.com/news/pressrelease.aspx?ID=2010172
“For automakers and dealerships, it is of the utmost importance to design and implement effective (sales) processes, as well as to have properly trained sales staff to perform them, says the press release.
That got me thinking about the Chinese government’s plan for new energy vehicle production to reach 500,000 units annually within three years, and for NEV sales to be 5% of the total market. (NEVs include plug-in electric, electric, and hydrogen fuel cell vehicles. Hybrids are considered “energy conservation” vehicles.) http://www.sasac.gov.cn/n1180/n1566/n258237/n258854/7500833.html
Selling these cars is going to test dealerships–and auto manufacturers themselves–not just in China, but around the world. Car salesmen will need to develop a new skill not generally associated with their job—restraint. If NEVs are foisted on the wrong owners, it could create a big pothole on China’s road to world dominance in the NEV sector.
Toyota started educating its dealers about selling hybrids more than a year before the launch of the Prius, says Greg Marchand, president of Automotive Aftermarket Training. http://www.intelligentmechanic.com/
Marchand worked as a field technical specialist at Toyota when the Prius was launched. Now, he has a company that trains independent mechanic shops how to service electric vehicles.
The Toyota salespeople had to fully understand the technology so they could clearly explain it to customers because “if you get somebody to purchase that technology and they don’t understand it, they won’t like it,” says Marchand.
Now this was for hybrids, mind you. They work more or less like a traditional car, except they are a lot quieter at stop lights and get better mileage. Not so electric vehicles. The current technology has limited range capabilities, recharging takes hours, and the recharging infrastructure is nascent in China and the U.S.
Bottom line—a pure electric vehicle is not for everyone, at least not right now.
Bill Jones is general manager at Tonkin Wilsonville Nissan http://www.tonkinwilsonvillenissan.com/ in Oregon, where, as at all Nissan dealerships, his staff is preparing to sell the Nissan Leaf pure electric car. http://nissan-leaf.net/
Managers and sales people are getting on-site training and online certification, says Jones. But selling the Leaf will also require some judgment on the part of the sales staff, he points out.
Says Jones: “We need to be cognizant of the fact that the EV is not going to be for everyone. It may not be the right car if someone has to drive long distances. We have to be responsible enough to know by interviewing the client if the Leaf is the right car for them.”
Let’s face it, a pure electric car is not currently suitable to be the only car most people own. And in China, 70 percent of car purchases are by first time buyers. That won’t change much for a long time, though second-car purchases in China’s wealthier cities are on the rise.
Which brings me to the task of selling all those NEVs in China. I haven’t read anything that indicates much thought is being put into the salesperson education issue among the automakers in China.
Anecdotally, however, the issue seems to be at least on the foreign automakers’ minds. Sewells Group of Australia http://www.sewellsgroup.com/ offers dealer management and skills training. In China, Sewells counts most of the foreign automakers among its clients, says Kyle Dickie, managing partner in China. Sewells is not currently working with any local auto makers, he adds.
Kyle Dickie, managing director, China, Sewells Group points out that a dissatisfied customer doesn't just get mad at the dealership where the car was purchased, he or she gets made at the brand itself.
Dickie says conversations with the foreign automakers regarding training on how to sell NEVs are “ramping up exponentially.” However, dealerships in China are no closer to being prepared than those in any other country, he says.
It is not that a new sales process needs to be learned, says Dickie. The basic steps are the same, be it a car with a traditional drivetrain or an alternative fuel drivetrain.
“The biggest issue is how an electric vehicle fits into your lifestyle,” he says. Which is the same issue that Nissan dealer Jones talked about.
Because of the need to recharge, and the paucity of recharge stations, a pure electric vehicle “doesn’t augment your lifestyle, you have to adapt to it,” says Dickie. (Can you say “range anxiety”? Well, maybe not without paying GM a fee, if GM has its way… http://wheels.blogs.nytimes.com/2010/09/02/g-m-is-trying-to-corner-the-market-on-range-anxiety/?src=mv )
The first buyers will likely be early adopters who understand the recharging issues, says Dickie. But when the average Zhou (he said Joe, but I’ve sinocized it) comes into the dealership, the salesperson will need to make that judgment call.
That presents what Dickie calls the “ethical conundrum.” Do you sell an electric vehicle to someone you know it is not suitable for, or advise against the purchase?
Alas, I don’t have a lot of faith in the ethics of car salespeople in China or anywhere else. As Dickie points out, sales people will take the shortest path to success.
But if you think this is the just the dealer’s problem, think again. It’s the automaker’s problem, too.
If a customer is dissatisfied with the car, he or she likely won’t return to that dealership to buy another car. But they aren’t just mad at the dealership for selling them an unsuitable car. They are mad at the brand.
“The impact of the first purchase experience reflects on how the brand is viewed,” says Dickie. “The customer isn’t going to blame the dealer, they are going to blame the OE.”
Damned straight, J.D. Power would say. Okay, Dave Power probably wouldn’t say that, and McGraw Hill owns the company now anyway. But J.D. Power studies do show that dealerships with good SSI scores will have more repeat purchase customers. And customers will be more likely to return to that dealership to have their car serviced. And to recommend the brand to a friend.
So how do automakers ensure their dealers don’t sell electric vehicles to customers for whom the car is simply not suitable? (That’s a rhetorical question, though the answer might be education/training plus a different pay structure….)
There are additional potholes in that NEV domination road.
For example, the nature of dealership footprints in China. In Texas, where I grew up, car dealership lots were the size of football fields, with hundreds of cars in stock. In China, in contrast, even the dealerships in the suburbs have small lots. Dealerships in the center of major metropolitan areas such as Beijing and Shanghai often have no lot at all. Instead, they have multiple floors. So on-site inventory is very limited. And that inventory will include traditional and NEV models.
With only a handful of electric demo models, how can a dealership make sure all the vehicles are fully charged all the time for test drives, points out Dickie? Getting to test drive a car greatly boosts satisfaction with the sales process, according to J.D. Power, but running out of “fuel” while taking an EV on a test drive isn’t likely to add much in the satisfaction column.
Even with a larger inventory, China has a lot of walk-in customers, he says. “How do you manage the stock behind the store to make sure the models are always charged?”
Okay, I’ve just about whipped the NEV sales horse to death, so let’s start hitting the service pony. Where will China get all the service technicians to maintain and repair those NEVs?
Audi won’t launch its electric sports car until 2012, and the German car maker is already planning a technician training program. “Electric cars bring with them new service and maintenance requirements, so we have already started preparing our dealer and service networks,” Bernd Hoffman, head of sales for aftermarket and genuine parts for Audi told Automotive News Europe.
http://www.autonews.com/apps/pbcs.dll/article?AID=/20100901/ANE/309019998
Nissan in June opened a 23,000 square feet center in Livermore, CA to train EV technicians.
http://nissan-leaf.net/2010/06/23/leaf-training-center-for-technicians-opens/
Those are just a few examples of the lengths automakers are going to so their models can be serviced appropriately.
To be sure, there could be a lot of training activity going on in China, but somehow I doubt it. The State Council should perhaps mandate the establishment of some training centers. China will need them if it plans to become the global number one in NEVs.
On August 18, Li Rongrong, director of the State Council’s State Assets Supervision and Administration Commission, announced the establishment of an alliance of state-owned companies to promote the electric vehicle sector. http://www.sasac.gov.cn/n1180/n1566/n258237/n258854/7500833.html
The speech confirmed for me something Tom Gage, president of AC Propulsion Advanced Vehicle Technologies, www.acpropulsion.com said when I visited him in the company’s San Dimas office last week regarding China and new energy vehicles.
“My impression is that the government doesn’t understand the industry,” said Gage.
He points to China’s announcement a few years back of a timeline for meeting stricter emissions requirements. Vehicles in most of China’s large cities should be required to meet Euro IV standards by now. Few do. The government’s plan “wasn’t consistent with the development cycle,” says Gage.
It’s a reminder that China is, after all, still a planned economy. Though some of the economy is now more or less market-based, the government still likes to do things via mandate. And it is hard to mandate innovation. But, Beijing considers the automotive industry too important not to meddle in. And it sees NEVs as a way for China’s auto industry to leapfrog all those western countries stuck in old technology i.e. internal combustion engines.
But establishing a commission of state-owned companies to promote the sector will not produce the leapfrog effect that China seeks. China needs to encourage firms that have the best technology, regardless of ownership. And stop setting targets that firms will feel obligated to achieve, or at least seem to be achieving, regardless of true market conditions.
We’ll come back to Gage, and AC Propulsion’s experiences in China. First, a bit more about Li’s speech. China’s State Council is sort of like the U.S. Congress and executive branch rolled into one. Not much gets done in China without the State Council’s seal of approval. Does the State Council’s seal of approval mean something gets done, however? Not necessarily. But it is a great place for big plans.
So, I kind of laughed as I read the text of Li’s speech because it was full of the kind of big plans, and contradictions, one expects where the Chinese government is concerned.
The new commission is to be composed of 16 state-owned companies. They range from large automakers such as FAW Group Corp and Dongfeng Motor Corp (SAIC was strangely absent, but it could fall under the “deng,” or etc. at the end of the sentence.) to state-owned battery makers such as China Aerospace Science and Industry Corp, to major electric utilities such as the State Grid Corp. of China.
Those state-owned companies, joined in the new commission, are directed to make China’s electric vehicle industry globally competitive according to market principles, and solidify China’s dominant position in the industry, “under the leadership of the SASAC” (the leadership of the central government, that is).
China has “already mastered the key technologies of electric vehicle development,” said Li, and “begun the development of all kinds of electric vehicles,” and “realized the self-development and commercialization of key electric vehicle components.” Well, that’s a bit in question. But I digress.
Over the next three years, said Li, China would achieve an NEV production capacity of 500,000 units, and NEVs would account for 5% of total vehicle sales in three years. (China produced 8.4 million light vehicles in 2009, according to J.D. Power and Associates. Production was up 49% on-year in the first seven months of 2010.)
Hmmm. Sounds a bit like a central government pep talk, because Chinese companies—state owned or otherwise—aren’t there yet as far as technology is concerned. Let’s not even get into who is going to buy those 500,000 NEVs.
I’m less optimistic than my friend Tim Dunne at J.D. Power and Associates about China’s chances of achieving this milestone. In the August 2010 “China Automotive Monthly: Market Trends,” Dunne expresses some skepticism. He cites JD Power studies showing hurdles to NEV sales in China are pretty much the same as those in the U.S.: range anxiety, concern that the technology is not mature, and the price.
But Dunne concludes by saying, “based on China’s past performance in overcoming obstacles, we should not be surprised if China is able to pull off its ambitious plan to create its own NEV future.”
Dunne is smart. He has spent a lot of time in China. But I can’t agree with him. Besides the fact that it is just my nature to be skeptical where China is concerned, I’m influenced by my talks with people who have experience with China’s NEV industry. Such as AC Propulsion’s Gage.
AC Propulsion designs and produces electric vehicle drive trains, including the battery management system and the battery its self. It has been doing this for a while—its first electric drive train was unveiled in 1994.
It has achieved some success. Among its customers: BMW Group built 500 Mini E electric vehicles using AC Propulsion technology.
http://www.acpropulsion.com/pressreleases/11.20.2008%20BMW%20Press%20Release.pdf
Yulon Group in Taiwan is also building electric vehicles using AC Propulsion technology. http://www.acpropulsion.com/pressreleases/10.10.2008%20ACP%20Yulon%20press%20release.pdf
AC Propulsion manufactures its drive trains at a plant in Shanghai. They are then shipped to the U.S. for final assembly. But the company would like to be doing much more than just manufacturing in China.
“We want to sell our technology into China,” says Gage. “The homegrown technology is lacking. We want to promote the adoption of our own technology.”
(A bit of a common theme among independent U.S. alt-fuel powertrain companies. See my July 20, 2010 blog about EDI.)
AC Propulsion has developed prototype electric vehicles for several Chinese automakers, but none have gone past the prototype stage. In 2007, it built an EV for Chery Automobile Co. Chery is a state-owned automaker in the central China province of Anhui, in the growing city of Wuhu.
(I have been to Wuhu several times, most recently December, 2009. The hotel selection is improving…sort of. The breakfast buffet at the Crowne Plaza had skim milk, a real sign of progress. Little things can mean a lot in China.)
Says Gage: “Chery asked us to give (the prototype) to them for three months to evaluate.”
Chery asked AC Propulsion to leave the EV so it could "study" the vehicle. AC Propulsion declined.
AC Propulsion took the vehicle home. I drove it to lunch (At an Italian restaurant in downtown San Dimas, which is a pretty small town.).
AC Propulsion also built a prototype electric vehicle for Beijing Automobile Industry Corp. (BAIC), a state-owned company that partners with Hyundai and Daimler in China. BAIC didn’t originally produce passenger cars itself, but the central government pretty much told the local partners of foreign automakers that they should have their own brands, or else.
As with all of China’s domestic automakers, BAIC also wants its own new energy vehicle now (also strongly encouraged by the central government). Alas, once BAIC had the prototype, it didn’t have the money to go to production, says Gage.
“We converted their model into an electric vehicle,” he says. “But the changes need to be validated. They didn’t have the budget.”
Validation would include testing safety and crash worthiness, durability, manufacturability, and cost optimization, says Gage, as well as building several more prototypes.
One could suspect Gage of exaggeration regarding the state of China’s domestic EV technology. After all, he admittedly wants to sell his company’s technology to China. But others corroborate.
Duan Chengwu, Greater China lead analyst with IHS Automotive http://ihs.com/automotive/index.htm in Shanghai agrees with Gage that China’s domestic technology is lacking. “Lot’s of Chinese companies can develop prototypes,” says Duan. But “given the short history of the Chinese auto industry, Chinese companies are still learning to make product at a consistent level of high quality.”
And as I mentioned in an earlier blog, InterChina Consulting http://www.interchinaconsulting.com/en/aboutus/companyprofile/index.php
in its “Electric Car Sector in China” report lists battery management systems and battery film as among weaknesses in China’s domestic NEV supplier industry.
(Chery just announced it will manufacture battery film. http://www.autonewschina.com/en/article.asp?id=5702 The quality remains to be seen.)
AC Propulsion’s experience with BAIC highlights another problem Chinese automakers face in achieving the government’s lofty NEV production and sales goals—money. Okay, the government is going to pour billions of RMB into the industry. But that will be spread among at least a handful of companies. And as Gage points out, BMW spent millions to build just 500 electric Minis.
As well, the sales slowdown in China’s auto industry will give both state-owned automakers and private companies such as BYD less money to invest in developing new technology. http://online.wsj.com/article/SB10001424052748704504204575445263274052370.html?mod=WSJ_auto_IndustryCollection
And it is unclear if private companies will get any government money under the new plan anyway.
To be sure, something good might come out of the government-mandated alliance. Duan, of IHS Automotive, says it is a good collaborative model because it includes multiple industries that are important to the success of NEVs. “This is definitely towards the right direction,” he says.
Which brings me back to Li’s speech. Is it a step in the right direction? Hard to tell. It may indicate that the recipients of central government largesse will be state-owned companies. And they are not known for being nimble.
But, Li also said that the NEV sector may face “temporary” difficulties and problems. In that case, he said, the newly-established commission should “positively study and benefit from the successful market expansion experiences of other foreign and domestic commissions.” (Learn from Li Feng! Inside joke.)
The benefit will be, as it has been in the auto industry as a whole, the acquisition of foreign technology. That may be through joint ventures with foreign firms. And if Chinese companies can afford it, outright purchase from companies such as AC Propulsion.
But the most vibrant companies in China’s auto industry haven’t been the large state-owned companies. They have been the Sino-foreign joint ventures and the privately-owned companies. One of those privately-owned companies, BYD, is leading China’s BEV charge.
Here’s Gage’s evaluation of the new commission: “It can make sense in the near term, but at some point they have to step back and let market forces into the game.”
Let’s look at the auto industry as a whole to evaluate that statement. China mandated that foreign automakers could only produce cars for sale in the domestic market by entering into 50/50 joint ventures with domestic automakers. Decades later, that requirement remains in place. When will the government step back from that requirement?
Seems there is more fuel cell vehicle action among automakers than I realized, in the U.S. and even in China (I sort of bashed China for dropping fuel cell research like a hot potato in favor of BEVs in my July 20 blog).
According to Michael Wang, manager of the systems assessment section of the Center for Transportation Research at the Argonne National Laboratory in Chicago, China is still putting money into fuel cell research. Among the research activities, Tongji University, in Shanghai, is even holding an international fuel cell forum this year.
There is a lot of activity in fuel cell research in the United States too, which I didn’t know about. Okay, the info is out there. But it’s generally only talked about in circles where people understand all of California’s zero emission vehicle program (which I may have also been a bit hasty to commit to the dustbin of history), or super-geek alternative fuel vehicle circles (I may catch hell for that. But hey, it’s my blog.).
Indeed, the California Fuel Cell Partnership estimates there will be 54,300 fuel cell passenger vehicles (including public transport) on the road by 2018. Huh?
To understand why that might be true, I spent part of last Thursday at the University of Irvine with Tim Brown, technology manager in the sustainable transportation department in the Uni’s advance power and energy program. www.apep.uci.edu The National Fuel Cell Research Center www.nfcrc.uci.edu operates under the APEP’s umbrella.
The National Fuel Cell Research Center at UC Irvine is home to a fleet of fuel cell vehicles. The University has its own refueling station.
Brown, who is one of the chief super-geeks, sees consumers driving fuel cell vehicles in the U.S. the near future.
“In 2015 you should be able to walk into a dealership and buy a fuel cell vehicle,” says Brown
.
Mercedes, General Motors, Honda, and Toyota have the most serious fuel-cell development programs, he says. According to Brown, in California, Mercedes has 100 vehicles on the road, GM has 119, Honda says it will have 200 eventually, and Toyota currently has more than 100. All are members of the California Fuel Cell Partnership. www.cafcp.org
“They see this as a marketable car, and acceptable to consumers,” he says.
Brown is like a proud parent with his fleet of aging Toyota RAV4 FCVs.
Toyota has pledged to bring the cost of a fuel cell vehicle below $50,000 by 2015, plus make the segment profitable, says Brown. Other automakers also have produced at least one fuel cell vehicle. http://www.cafcp.org/progress/vehicles
(okay, this is overkill, but here’s even more info on automakers’ fuel cell plans. P 4 http://www.cafcp.org/sites/files/FINALProgressReport.pdf )
Brown, who has a PhD in Mech E from UCIrvine, is a gearhead, albeit a brainy one. He has an M.A. in automotive engineering from the University of Michigan at Dearborn, and worked at General Motors in the structural test lab in Warren, MI and the GM proving grounds in Milford, MI.
Now, managing a filling station is one of his jobs. Okay, it’s not exactly a filling station. Brown manages UCI’s hydrogen refueling station, “arguably the most heavily used public hydrogen station in the world” according to Brown’s CV. (Could be a little CV padding, though. By Brown’s admission, Germany and Japan have much larger hydrogen fleets, though also more refueling stations…).
Brown manages UC Irvine's hydrogen refueling station, which his CV calls “arguably the most heavily used public hydrogen station in the world.”
He also manages a fleet of 17 Toyota RAV-4 fuel cell vehicles. I drove one to lunch at Wahoo Fish Taco (not relevant to this blog). I didn’t check out its zero-to-sixty abilities (which wouldn’t have meant much to me anyway as I’m not really a gearhead). But to me the FCV drove just like any other car, except for the eerie lack of engine noise.
The problem with commercialization of fuel cell vehicles, says Brown, is not technology. The technology is mature, he says. The main problem is the cost of a fuel cell vehicle, which runs in the hundreds of thousands. All the automakers agree it can be reduced by 10 times by ramping up the scale of production, he says.
So why aren’t GM, Honda, Toyota, and Mercedes turning out growing numbers of FCVs? There aren’t enough refueling stations, among other hurdles. Why aren’t there enough refueling stations? There aren’t enough fuel cell vehicles on the road to warrant the investment. Sound like a Catch 22?
To be sure, not all agree that cost is the main reason there aren’t lots of fuel cell vehicles on the road today. Tom Gage, president of AC Propulsion Advanced Vehicle Technologies in San Dimas, CA, http://www.acpropulsion.com/ is one critic. He argues that the reason hydrogen fuel cell vehicle development hasn’t been more vigorously pursued is that hydrogen can only be produced by separating it from natural gas or water. That process is so energy-intensive it mitigates any potential benefits, he says. “They can’t solve the thermodynamic problem,” says Gage, also a mechanical engineer. Of course, AC Propulsion makes electric vehicle drive trains, so he is invested in a competing alt fuel technology.
I’ll let those two Mech E’s duke that one out.
Which brings me to my re-consideration of California’s zero emission vehicle program. I wrote about it for Automotive News, looking at how it has created a market for the credits among automakers. http://www.autonews.com/apps/pbcs.dll/article?AID=/20100802/OEM01/308029992
While reporting that story, I became convinced that the ZEV program–though driven by a noble idea, reducing green house gas emissions (that is the rationale now, at inception it was to clean up the air)–was a failure. It is mind-numbingly complex. Even the tutorial http://www.arb.ca.gov/msprog/zevprog/factsheets/zev_tutorial.pdf is nigh impossible to follow. The program is thus very difficult to implement.
However, the ZEV program may have achieved one of its goals. Brown credits the program with jump-starting fuel cell vehicle development in California. (Gage credits it with killing GM’s electric vehicle program, however. When GM no longer had a corner on the market, it wasn’t worth producing, he said.)
The California Air Resources Board’s Elise Keddie says: “The program was initially seen as a technology driving force.”
Keddie, who is manager of the Zero Emission Vehicle Implementation Section at CARB, told me, “We wanted the automakers to take longer strides, to look over the horizon.”
But without a good refueling structure, that horizon still seems a bit distant. Let’s look at Honda’s fuel cell program as an example. Ed Kjaer at SoCal Edison called Honda’s FCX Clarity “the best fuel cell packaging technology on the planet.” But only about 20 of the vehicles are on the road. “We are actively looking for more leases,” says Jessica Fini, the environment and safety specialist flack at American Honda Motor Co. But, only people who live close to a refueling station are even considered for the program, says Jon Spallino, who just received his FCX Clarity.
This is Spallino’s second go-around. He leased the original FCX, introduced in 2002, as well. (I live close to both the Santa Monica and the Torrance stations, and so will get a FCX Clarity to try out for a few days in October!)
Says Spallino: “If you get a Clarity. You have to think about where you get fuel. As someone who drove one for three years, I had to sometimes plan appointments around getting fuel.”
Driving a hydrogen fuel cell vehicle has gotten easier for Spallino because the new Clarity has a greater range, and a refueling station is being built in Torrance, CA, close to his home. But there are still only a handful of public refueling stations in California, even fewer in other states.
http://www.cafcp.org/sites/files/FINALProgressReport.pdf
For fuel cell fans, the good news is that we should be getting a few more hydrogen refueling stations in the next year or so. Eight new public stations, funded mostly through California’s Hydrogen Highway program, should be up and running by 2011.
California just allocated an additional $22 million to build refueling stations. The political wrangling over location has now begun, with different automakers making pitches.
The California Fuel Cell Partnership has its recommendation. UCIrvine is doing its own study, as well, of the best locations for the stations, says Brown. Now there is “renewed interest” from the California Fuel Cell Partnership in working with UCIrvine on determining locations, he says.
Says Brown: “The only way we can reach our environmental and security goals without the consumer paying a price in range anxiety and charging time is with fuel cell technology.”
Well, Tom Gage wouldn’t agree. I love a good scrum, even one over technology. Have at it!
A few weeks ago, an automotive executive asked me if I had heard that the Chinese government was pressuring foreign automakers to bring their alternative fuel vehicle—or new energy vehicle, as they are known in Chinese–technology to China or face unspecified consequences. New energy vehicles include electric drive train technologies only, so plug-in hybrid electric, battery-electric, and hydrogen fuel cell.
Turns out it is not that the government told foreign companies to bring NEV technology to China. Not exactly, anyway. Rather, a combination of government support for the sector and the eagerness of the automakers to be part of a potentially very large market has produced pretty much the same result as a government mandate would have.
In any case, China will need all the outside technology it can get if it hopes to even come close to achieving its ambitious new energy vehicle sector development goals.
Details of the plan recently appeared in the local press. Briefly, as reported by the Shanghai Securities News on August 4, China aims to be number one in the world in new energy vehicle production and sales by 2020. To achieve that, the government will invest more than 100 billion RMB, (that’s US $14.8 at current exchange rates) in the NEV sector over the next ten years. Half will go to companies producing NEVs. Purchases of NEVs will be subsidized, and the government will give companies in the sector tax breaks.
The policy calls for China to have three to five “key” NEV manufacturing companies as well as two to three “internationally competitive” supplier companies in the area of batteries, motors, or other key components. They should own the intellectual property rights to that technology i.e. they won’t be manufacturing another company’s products.
The policy as reported doesn’t specify if the companies must be fully domestic, or if joint ventures (companies partly owned by a foreign entity) or wholly-owned foreign suppliers qualify. (In China, foreign automakers can own no more than 50% of a company manufacturing vehicles for the domestic market. Suppliers can be 100% foreign-owned.)
But hey, the point of the new energy vehicle policy is to promote the domestic industry. My guess? No way will foreign-invested companies qualify.
In any case, many foreign companies already have plans to bring, or have already brought, their NEV technology to China. Those plans probably won’t change regardless of the policy. Why? Firstly, no one knew, and it is still not clear, who will qualify for the subsidies. Second, even if foreign companies can’t climb on the Chinese government’s gravy train, they hope to benefit from overall growth in the sector.
Some examples: Renault-Nissan in April 2009 signed an agreement with the Ministry of Information Industry Technology (MIIT) to set up a partnership to promote pure electric car development, according to a report by InterChina Consulting of Beijing. Nissan Motor Co. plans to begin selling its Leaf Electric vehicle in China in 201, albeit initially as an import.
Last year, I interviewed Tsunehiko Nakagawa, vice president of research and development for Nissan (China) Investment Co. Ltd. (One of a number of interviews I did for the J.D. Power and Associates report “China Automotive 1015: The Cost of Opportunity,” which I co-authored). Nakagawa said EVs could account for 5% of the China market by 2015—if the government subsidized development and purchase. Which we now know will occur.
“Electric vehicles will become very important to business in China,” he said. “Even if only 5% buy one, it will still be a huge market.”
Well, let’s do the numbers. J.D. Power forecasts that China’s light vehicle market, including light commercial vehicles such as minibuses and mini trucks, will grow to 19.1 million units by 2015. So 5% of that would equal nearly one million units annually.
General Motors is developing a prototype Chevy New Sail electric vehicle for China, and in 2011 will introduce the Chevy Volt and a hybrid Buick LaCrosse and to the market. GM built the GM China Advanced Technical Center in Shanghai to “accelerate the realization of GM’s electrification strategy,” GM China Group President Kevin Wale told the “Electrification—Plugging into the Future” forum in Shanghai in June. GM hosted the forum. “We will intensify the research and testing in China of advanced propulsion systems, which include electrification technologies such as batteries, electric motors and power controls,” Wale said.
So, are these moves the result of pressure from the Chinese government? Not exactly, says Michael Wang, manager of the systems assessment section of the Center for Transportation Research at the Argonne National Lab http://www.anl.gov/ in Chicago, IL. Wang advises the China on alternative vehicle technology. http://www.flickr.com/photos/argonne/4207282994/
Rather, he says, foreign automakers were told in order to participate in any government subsidies for the industry, they would need to bring their new vehicle technology to China, and to produce locally.
Says Wang: “For internal combustion engine technology, China is behind the U.S. and Europe. For electric vehicle technology, the government thinks China has a good chance to get on the same level or even ahead of some other countries. This is a strategic decision to get the Chinese auto industry on the global level.”
To be sure, foreign technology is needed to fill some gaps in domestic companies’ EV production capabilities. InterChina Consulting, in its April 30, 2010 “Electric Car Sector in China” report, notes that Chinese companies lacks crucial EV technologies such as a mature battery management system and powertrain control systems.
Other foreign companies are also coming to the rescue. For example, in May, Daimler AG announced it would form a 600 million RMB (US $85.6 million at current exchange rates) 50/50 joint venture with China’s BYD to develop an electric car for the China market. http://www.daimler.com/dccom/0-5-7153-1-1298502-1-0-0-0-0-0-12080-0-0-0-0-0-0-0-0.html
Reading over my notes, I noted another intriguing comment from Nakagawa. “In the near future, there might be some restriction on foreign ownership of battery manufacturers in China,” he said.
China’s battery manufacturers could use some help with their electric vehicle battery technology, and a policy restricting foreign ownership in the auto manufacturing sector helped China’s domestic automakers (such as SAIC) gain global technology.
(“China faces difficulties in reducing battery charging time, increasing battery driving distances and lifespans, and maintaining consistent product quality in high-volume production,” says the InterChina report. China’s battery manufacturers also much import most of their battery film, it says.)
Battery producer A123 Systems of Massachusetts to the rescue! (Among others. Don’t want to seem like I’m picking on A123) In December of 2009, A123 formed a joint venture with SAIC Motor Co. Ltd. (whose parent company, Shanghai Automotive Industry Corp, partners with GM in China and India) to develop, manufacture, and sell vehicle traction battery systems for use in pure electric and hybrid vehicles. SAIC owns 51% of the joint venture. http://ir.a123systems.com/releasedetail.cfm?ReleaseID=430981
And while Chinese companies such as BYD Co. and Tianjin Lishen Battery Joint Stock Co. are global behemoths in terms of manufacturing lithium-ion batteries for consumer electronics, the margins in the consumer electronic battery business are very thin, and the market has approached saturation, says Wang. Meanwhile, “automotive is a huge opportunity,” he says.
Now, I’m going to sit back and watch how this new NEV policy plays out. As a reference point, I look back about six years ago, when as part of a new auto industry policy Beijing required that automotive manufacturers in China develop their own brands, with their own their intellectual property.
The result was a frenzy of own-brand development by domestic automakers. And that policy didn’t even come loaded with cash. Of course, Chinese automakers are already in a frenzy of talking about NEV development. Maybe now that the government has shown them the money, some real development will begin.
I’m impressed by the enthusiasm and sincerity of the people I talk to that are diving into the brave new world of electric vehicles. It sometimes nearly thaws my cold, skeptical heart where China-related things are concerned.
Steven Fly, chairman and CEO of Green Automotive Co. Inc. www.usaelectricauto.com in the Dallas suburb Addison, TX is such a person. His company aims to begin importing by the end of this year pure electric SUVs produced by Zotye Holding Group, www.zotye.com a small Chinese automaker.
I figured my talk with him would be like most of the conversations I had when I was the China bureau chief for Automotive News regarding this or that Chinese automaker and the prospects for selling its cars in the U.S. My advice then was always “be extremely cautious and do thorough due diligence.” I would hang up and think “sucker.”
Perhaps it is that Fly is a fellow Texan. Perhaps it was just late in the day. But after our phone conversation I thought, hmm, maybe. Just maybe, though. We’ll get to that later.
Fly calls himself as a “car guy.” He started working in dealerships right out of college, and worked in just about every position except service manager, he says. About two years ago he got interested in importing cars from China. Electric vehicles seemed the way to go, to avoid having to pass the EPA emissions tests, says Fly. He got burned by his first attempt. But, he was sold on the concept. And, “when somebody tells me it won’t work, that just fuels me,” says the tall Texan.
Green Automotive has already signed up some dealers, including Bob Rohrman Auto Group of Lafayette, IN. Fly says he has about 30 points so far, though not all are firm commitments. “If we opened up tomorrow, we would have a firm 10 dealerships,” he says. Some of the dealers have put down a deposit, from $25,000 to $50,000. Others are waiting for the cars to arrive.
Initially, Fly figures sales may only total 1,000 EVs a month for all the dealers. It’s a cautious figure, but “we’re taking baby steps ‘cause we don’t want to be like Mahindra and have a bunch of pissed off dealers,” says Fly. Passing U.S.- mandated safety and emissions tests is taking longer than Mahindra & Mahindra Ltd anticipated, and the Indian automaker is being sued by its U.S. distributor because of delays in bringing its diesel pickups to the U.S.
Since the Zotye SUV is fully electric—and thus emission-free—the vehicle won’t have a problem with emissions testing. It still has to pass crash tests, however. Ten of the small SUVs will arrive in the U.S. in late August for crash testing, says Fly. “The biggest thing is to make sure we’re Federal Motor Vehicle Safety Standard compliant,” he says.
It looks good from the outside.
The electric SUVs will sell for around $35,000 before tax incentives, says Fly. To lower the cost, Green Automotive will later seek government funding. The first buyers will likely be people who “really want to go green, not just the pretenders,” he says.
The SUV’s range is advertised as up to 250 miles, but “that’s doing like 28 miles an hour,” says Fly. Fly says he has driven his Zotye electric SUV 150 miles doing 60 miles per hour, in the Texas heat. The airco runs off a separate 12-volt battery, he says.
Fly has visited Zotye in China, and one of Green Automotive’s eight employees is in China now working with the Chinese automaker to make sure the vehicle’s fit and finish meet U.S. consumer standards.
And this is where the skeptical section begins. Privately-owned Zotye, in the east China province of Zhejiang (which is famous for its private businessmen, by the way), has only been producing vehicles since 2003, according to its website. The SUV, which comes in both electric and gasoline-powered versions, is based on the Daihatsu Terios platform. Zotye also produces a very small car based on a Fiat platform. It also produces engines and components. The Chinese automakers sold around 45,000 units in 2009.
This isn’t the first time news of a Zotye SUV coming to the U.S. has appeared. In 2008, stories circulated that the Zotye electric SUV would be arriving. Nothing happened, possibly because Zotye didn’t have an electric SUV yet.
In 2009, Zotye raised 720 million RMB (US $105 million at the exchange rate then) through a share sale to private investors. The money was to go to developing an electric vehicle. Zotye’s president said the automaker planned mass production of electric vehicles by the end of 2009.
In 2010, Zotye is finally producing an electric SUV—known as the 2008EV. The numbers seem very limited. About 30 of the EVs are now on offer as rental cars in the lovely city of Hangzhou.
A Green Automotive exec got to drive one around what appears to be West Lake, in the center of Hangzhou. Here’s a rather disjointed video of that drive: http://www.youtube.com/watch?v=yC7yVKB6J2Y
And a wander about of the vehicle (if you watch it you will see why I do not call it a walk about):
http://www.youtube.com/watch?v=1_NYtHhpglQ&feature=related
At least one electric SUV has been sold to an actual consumer in China, says Fly (and he is driving one in Dallas). But, Zotye has said that selling the electric vehicle in China is not realistic because of the high price of the electric vehicle, double that of the gas-powered SUV, says Kevin Huang, an automotive analyst based in Guangzhou.
Huang sees a motive behind Zotye’s push to sell electric vehicles in the U.S., even though it isn’t selling them in China. The automaker is preparing for an initial public offering in Hong Kong. Launching a vehicle in the U.S. may help Zotye attract overseas investors, says Huang. That would give the company money to develop new models, whether electric or conventional, he says.
For now, Zotye should concentrate on improving the electric SUV’s fit and finish.
The gasoline-powered SUVs are not high-quality, says Bill Fisher, COO of AmAsia International www.amasia.biz. AmAsia is a consultancy in Florida that aims to help Chinese and U.S. companies understand markets. Its ultimate goal is to import Chinese vehicles.
Fisher has visited many Chinese auto manufacturers, though not Zotye. He checked out Zotye’s vehicles at out at this year’s Auto China in Beijing, however. “Their fit and finish is not up to U.S. standards, says Fisher.
Fly admits the early versions of the electric vehicle were not impressive. But Zotye has made a lot of improvements, he says. “I had my doubts,” says Fly. “But the (new and improved) fit and finish is extraordinary.
“The product is much better than we thought it would be, but it is going to be even better,” he adds.
The Zotye project is probably giving Fly gray hairs (China gave me gray hairs, or at least that’s how I claim they got there). “I haven’t slept at night for the last year and a half,” he says.
He probably won’t get any sleep for some time to come.
But I look forward to following Green Automotive’s progress. I don’t think we’ll see Zotye electric SUVs in the U.S. by the end of this year. But maybe in 2011. I don’t want to have to assign my fellow Texan to the “sucker” category.
Alysha Webb
Alysha Webb's ChinaEV Blog 
