Alysha Webb's ChinaEV Blog

I lived in Kunming in January of 1992 when China’s then-paramount leader Deng Xiaoping made his famous “Tour of the South,” meant to reassure Chinese that his reform and opening policies would continue. That the common people in China were convinced was immediately apparent in Kunming, the provincial capital of Yunnan in southern China on the border with Vietnam.

Overnight on a downtown street, dozens if not hundreds of card tables sprouted. Illuminated by bare incandescent light bulbs strung overhead in long lines, those tables sported all manner of small items for sale by individual “business people” who had decided to “xia hai,” or jump into the sea of doing business for themselves, albeit on a small scale.  I mentioned it to a Chinese friend who said, “Chinese people are like a swarm of bees. When the government policy suggests something, they all do it.”

I saw evidence of that same swarming effect at Auto China 2018, which this year took place in Beijing (the show alternates between Beijing and Shanghai). One area the Made in China 2025 policy encourages is development of electric vehicles.  Boy have Chinese firms swarmed into this area. The show included 174 new-energy vehicles, which includes battery-electric, plug-in hybrid electric, and hydrogen fuel cell vehicles.

For all intents and purposes, however, it means BEVs and PHEVs. Of those at the show, more than 70 percent were made by Chinese firms. Note that I do not say automakers because all manner of Chinese companies, from automakers to internet companies to home appliance makers are investing in the sector.

One could see all this investment in EVs as a great thing.  How admirable that so many companies in China have the resources – including intellectual property, technology, design capability, human resources, etc. etc. – to answer the government’s call? On the other hand, one could also consider this a huge mis-allocation of resources. I lean more towards the huge mis-allocation side.

And it is only getting worse. The top Asia Pacific executive at a global supplier told me that they currently have applications from 41 wanna-be EV makers who want to use his firm’s technology. Having to wade through all these applications is a huge waste of his staff’s resources, the exec complained.

We’ve seen this before – in the traditional auto industry. China has more than 100 traditional automakers, most of them producing very small volumes of not very good ICE vehicles. Now, it has dozens — probably hundreds if commercial electric vehicle producers are added in — of companies trying to produce EVs.  I am the one who always says, “Shoot with buckshot and you are more likely to hit something.” But in this case, it really is a mass waste of resources in many instances.

True, China’s EV market is fast-growing. In 2017, it grew by 53 percent compared to the previous year to some 770,000 units, including 479,000 passenger vehicles, according to the China Association of Automobile Manufacturers. That was a tiny percentage of the total passenger vehicle market of 28.9 million units.

EVs have a bright future in China, no doubt.  But a lot of the investment being poured into EV production is still going to be wasted. There is very little to differentiate many of these models from each other. Consider the photos  at the top of this blog, which I snapped on the floor of the show. They represent a very small slice of the large electric connected SUVs on display.

What will differentiate these EVs, and in the end determine which manufacturers will succeed, is technology, most specifically connected car technology. I mean connectivity in the broad sense, so vehicle to vehicle, vehicle to smart phone, etc.  A pair of reporters from French media (but both were ethnically Chinese, so I automatically slipped into Chinese during the interview, only realizing later they probably wanted me to speak English) stopped me on the floor on the second media day and asked me to name one word to describe the show. I had to mull it over for a while before choosing connectivity.

I won’t go into the special connective features of the various models because I don’t know them all. But I will say that the various executives I interviewed at the show thought China would lead the world in connectivity technology. Their reasoning: The government is mandating it – connectivity aka smart car technology is also part of Made in China 2025. Chinese consumers are demanding it. And the shear size of the market means that there is more investment and testing going into connectivity ergo faster development. Big data writ really big.

I also won’t – indeed, since I am not in China on a daily basis I don’t feel able to – pick winners and losers in the China connected EV race.  I do however think China will “win” the EV race simply by virtue of the size of its market. But it won’t necessarily have EVs that are any better than other countries, just more of them. And, some of those will carry foreign badges.

I am becoming more convinced that my friend Bill Russo may be onto something with his Automobility focus, at least where connected cars are concerned.  There is a lot to be said for sheer scale paired with actual innovation.

Now, let’s hope the government doesn’t decide there is a bit too much freedom of information in the sector and clamp down on it. That likely won’t happen, however. Indeed, the eagerness for Chinese to be connected to all things in all ways aids the government in its quest to know more about and to control what its people are saying and thinking. But I won’t go there….

 

 

I read recently that Evatran Group Inc., a wireless charging company based in Richmond, VA, (and which I blogged about in 2015 and 2016) would no longer pursue being acquired by Zhejiang VIE Science & Technology Co, a Chinese firm that was already an Evatran investor. According to a story in the Richmond Times-Dispatch, the acquisition is “currently off the table primarily due to the Chinese government regulatory approval environment.”

That vague statement by Evatran board chairman Bob Mooney can be read several ways. It may refer to Beijing’s more restrictive attitude towards Chinese firms investing abroad.   It may also refer to the current U.S. administration’s much more restrictive approach to Chinese investment approval.  In any case, Chinese investment in the U.S. dropped by 36 percent in 2017 compared to the previous year, according to The Rhodium Group.

Either way, it could be an ominous sign for automotive startups here in the U.S. as Chinese money has been an important building block for many of them. This week, I talked with one such firm, Autonomous Fusion Inc. If that name isn’t familiar, I am not surprised. Until just a few days ago, Autonomous Fusion was known as Wheego Technologies, Inc.

 

It is the second name change for the company. In October of 2015, Atlanta-based Autonomous Fusion changed its name from Wheego Electric Cars to Wheego Technologies. At that time, CEO Mike McQuary told me “We are a technology company whose primary focus is on electric vehicles and autonomous driving systems.”

Now it is all-in for autonomous driving software.

To quote McQuary, now CEO of Autonomous Fusion:

“About three years ago we realized that if we were going to continue making EVs we were going to have to raise an enormous amount of capital, around half a billion dollars.  I struggled to find a business model that would work.  We had established a group to look at automotive future tech, a skunkworks group. I talked to some folks at Georgia Tech (and) they had figured out Autonomous Driving was going to be one of the corner stones of the industry.  Artificial Intelligence and Machine Learning were the way it would succeed.”

His team at Wheego was already working in that space, so it pivoted to a software as service company whose first product is a “full stack” autonomous driving software solution based on Artificial Intelligence and Machine Learning, says McQuary.

“That is what ADAS (Advanced Driver Assistance Systems) is going to be,” he says, “Particularly Level 3 and Level 4, because of the dynamic nature of the driving environment. Using machine learning as a platform for an ADAS product, you will need constant updates.”

That doesn’t mean EVs are a thing of the past for McQuary. “The software is not specific to EV’s, “he says. “It works great in ICE cars; but the automakers who are making EV’s know that their consumers will want the most advanced technology in their vehicles and so are being more aggressive in pursuing L3 ADAS.”

Autonomous Fusion is in preliminary talks with several automakers to use its software, says McQuary, and now we get to the China part of this story. Most of those automakers are Chinese.   There is a lot of interest in China, he says.

Due to government, industry, and investment community support, “China will be a lot more aggressive it their employment of ADAS and EVs,” says McQuary.  Indeed, a new policy from China’s central government calls for 50 percent of all vehicles to have full or partial autonomous function by 2020.  That same year, China aims to have five million new energy vehicles — which includes battery electric, plug-in hybrid electric, and fuel cell vehicles — on the road.

That goal is backed by a dual-credit scheme combining standards similar to California’s ZEV policy and increasingly strict vehicle emissions standards. Automakers will have to earn enough credits by producing NEVs or pay fines.

That has created an opening in the China market for foreign firms such as Autonomous Fusion. Chinese technology in the ADAS area is still developing. And, Chinese automakers are now more willing to pay for good technology than in the past, when low cost was the highest priority, says McQuary.

But the ADAS software space is getting pretty crowded, I mention. How will Autonomous Fusion stand out? Guanxi was pretty much his answer.

“It helps that we have in our DNA over ten years where we have built relationships over here,” he says. “Our relationships are deep-standing, not just on the auto side, but also in China’s evolution in technology” from copying to developing its own.

And here is where the matter of Chinese investment comes in. Wheego relied on Chinese investment to keep going. In 2013, Wheego needed funding and wasn’t having any luck finding investors in the U.S.

McQuary was visiting suppliers in China, and made an appointment to meet with GSR Ventures, a Beijing-based venture capital firm. GSR was happy to invest in Wheego so long as it turned its focus to producing EVs in China for the China market – mainly local governments, McQuary told me in 2016.

But that small EV sector is a pretty crowded market in China, so now we are back to where McQuary decided to “pivot” to the software as service business model.

Autonomous Fusion is at a familiar spot. Automakers – mostly Chinese – are interested in its software.  It is ready to go into production of a Level 3 autonomous vehicle, says McQuary. Until it finds more funding, however, it can probably only take on one new customer, he adds.

“We are sort of walking a fine line between commitments and the ability to take on full commercial customers,” says McQuary.

China once again seems like the best bet for funding. Besides Chinese VC firms, many local governments are investing in ADAS and EV startups, he says.

Like his vehicle-agnostic software, McQuary is funding-source agnostic.

“I am out in venture markets,” he says. “I am looking in China and the U.S. for money. We have gotten interest.”

 

 

This is a story I wrote for Wards Auto. Reposting here.  The media writes about China’s NEV policy is such a shallow way. For example, I didn’t even get into it here but the whole eight percent requirement for automakers doesn’t really mean eight percent of all the cars they produce.  There are “multipliers” applied to the PEVs and fuel efficient models produced that mean one BEV, for example, will count for more then one unit. Like California’s ZEV rules, however, trying to understand China’s policy would make my head explode.  Also, as I note in this story exactly what the policy will be is as yet undecided.

Here is my story:

SHANGHAI — China wants electric vehicles to account for a significant portion of the vehicles sold in this country in the future, and it wants automakers to produce a growing number of those vehicles.  That much is clear.

What isn’t so clear is exactly what the market wants, and what the policies related to EV production will be. That forces automakers to adopt somewhat unfocused future product plans.

Take Ford Motor Co.  It plans to eventually offer electrified versions of every model produced at Changan Ford, its joint venture with Chongqing Changan Automobile Co.

Seventy percent of its models will be electrified by 2025, Trevor Worthington, vice president of product development at Ford Asia Pacific says at the Shanghai auto show.

The “vast majority” will meet the Chinese government’s definition of an electric vehicle, he says.   “In order to compete in the world’s largest market, you have to be there with the right product at the right time,”

The problem can be knowing just what the right product will be.  For example, “I don’t know that anyone understands the Chinese customer (battery) range demands,” Worthington says.

Just before the April show, Ford announced it would begin producing a plug-in hybrid vehicle, the Mondeo Energi, at Changan Ford in 2018. It will also bring to market within five years an all-new fully-electric SUV with a range of more than 450 miles, Ford announced.

Carrot to stick

Then there is the issue of shifting government policies.

Sales of battery electric vehicles in China rose 9.7 percent in the first four months of 2017 to 72,895 vehicles. Plug-in hybrid electric sales fell 27.4 percent to 17,507 vehicles, according to the Chinese Association of Automobile Manufacturers.

Hefty government subsidies underpinned much of that demand. Chinese drivers haven’t shown any real passion for electric vehicles unless accompanied by cash.

But in January, the government announced it will phase out those subsidies. They are expected to be eliminated by 2021.  At the same time, Beijing still says it wants electrified vehicles to account for 20 percent of passenger vehicle production and sales in 2025.

In place of the purchase subsidies, China’s central government is planning a carbon credits program similar to California’s Zero-Emission Vehicle program.

China is switching from using a carrot to using a stick to promote electric vehicle sales, says Jason Forcier, CEO of battery maker A123 Systems,

“It is going to shift the burden (for creating demand) to the manufacturers,” he tells Wards Auto during the Shanghai auto show.

Auto makers will likely be forced to produce electric vehicles at a loss to meet the government requirements, he says.

In theory, the carbon credits the automakers receive will offset the losses, says Robin Zhu, senior analyst in Hong Kong at investment research firm Sanford C. Bernstein.

“But you essentially go from a system where there are government subsidies to a system where OEMs cross-subsidize each other via the credits system,” he says.

All automakers face the same cost issues, says Worthington. “You have to be ready to go.”

In any case, the policy is likely to change, pretty much everyone agrees. That often occurs here.

Government mandates “are in flux,” says Worthington. “You don’t always know what is going to happen.”

Says Forcier: “It wouldn’t be shocking to me if we get to the end of this year and this policy gets updated. It happens in China a lot, and it happens rapidly.”

Indeed, exactly what form China’s ZEV mandate will take is as yet unknown. Two government offices, the National Development and Reform Commission and the Ministry of Industry and Information Technology, have each published their own version.

Bernstein, in a November 2016 report, calls it “a riddle, wrapped in a mystery, inside an enigma.”

The industry consensus now, says Zhu, is that the EV credits target will be delayed by either a significant phase-in period or lower 2018/2019 quotas.

“It is a source of frustration” for automakers,” he says.

 

 

 

 

 

 

 

 

Correction: Karma, the former Fisker, is A123’s only high-voltage customer in North America.  Forcier wrote me to say that outside of North America:  “We have high voltage programs with many OEMs including SGM, SAIC, Chery, GAC, Haima and several bus companies.”

It’s about time I wrote another ChinaEV blog and given my penchant for revisiting companies I have written about before, I thought battery maker A123 Systems Inc. would be a good topic.  I met with A123 CEO Jason Forcier last month during Auto China in Shanghai.  The battery maker has been through some big changes since we last spoke, including a bankruptcy filing. But A123 looks to be on a good path now.

As you likely know, A123 was in January of 2013 acquired by Wanxiang, one of the largest (if not the largest) auto components maker in China.  That gave it financial security, but that is not the most valuable benefit of being owned by Wanxiang, as it turns out. Read on to learn more.

The battery maker reorganized in February of 2013, says Forcier. “The company has been on a tear since then,” he says. Its 2018 revenue will be close to $500 million, he told me, compared to less than $100 million in 2012.  As you might expect given the opportunities in China, A123 is investing heavily in its China footprint, to the tune of $200-250 million a year. That is primarily to support the China market but China is also the base of A123’s battery cell production and it aims to export cells to Europe from China.

Though we hear mostly about the BEV or PHEV markets in China, which require fairly large batteries, China is the largest 48V battery market in the world, says Forcier, and half of A123’s 48V battery business globally is in China.  48V batteries are used in mild hybrids – vehicles with start-stop systems – and improve fuel efficiency quite a bit.  China is mandating fuel economy of 5.0 liters per 100 K by 2020.  “That will be really hard to meet without a battery on board,” says Forcier.

The market for electrified vehicles with larger batteries is primarily policy-driven in China. That has meant government purchase subsidies, but those are now expected to be phased out by 2021. Replacing subsidies will be a program resembling California’s Zero-Emission Vehicle policy, which compels automakers to produce and sell a certain number of BEVs/PHEVs.  Even with that change, however, China will still remain a huge 48V market because meeting the fuel economy standards will require a mix of engine types.   Of course, A123 still serves the larger battery market as well but its main (only) customer is Karma Automotive, which is also owned by Wanxiang.

Forcier has some interesting observations on Chinese automakers’ battery technology. They are investing in it, he says, but they are not on the same level as global OEs such as GM or VW. And,  “BMW knows way more about batteries than Chinese OEs,” he says. It surprised me a bit that things haven’t changed that much since I started blogging about China and EVs. Sure, the local manufacturers have made great strides in electrification compared to five or six years ago. But, they are still focused on cost, says Forcier. Most aren’t making the R&D investments that the foreign automakers are in battery systems. Instead, they are sourcing entire battery systems out to suppliers, says Forcier. Same old story.

To be sure, he says, some Chinese automakers, such as SAIC, are engineering the systems themselves, and own the technology. But they are still playing catch up. “Over time, the idea is they leapfrog the rest of the industry,” says Forcier. “I am not sure I see that happening.”

Speaking of SAIC, I asked Forcier what became of A123’s joint venture with SAIC called Advanced Traction Battery Systems.  “It is doing very well,” he says. “Still producing and growing.”  For background of that JV see my blog of March 28, 2012. ATBS is now a captive battery supplier to SAIC.

The benefits of Chinese ownership

The SAIC JV was going to be A123’s approach to the China market, says Forcier.  But, “our thinking changed.”  I’m sure it did since A123 was acquired by Wanxiang.  And that’s a good thing. The Chinese government in 2016 released a list of approved battery suppliers i.e. those that will receive subsidies.  One criteria, it seems was that the company have significant manufacturing capacity in China. No foreign firms made the cut.  A123, by virtue of being owned by a Chinese company and manufacturing in China, does qualify. “We have the best of both worlds,” says Forcier. “We are certified in China, have global technology, automotive knowhow, and a quality mindset.”

That has really paid off with General Motors, which is one of A123’s best customers, says Forcier. It also doesn’t hurt that A123 has a tech center in Michigan, where GM has a battery plant and its global headquarters.   A123 also works with many other global OEs who do business in China.  “We booked a lot of business in the last 18 months,” he says.

With a lot of business, Chinese certification, and a Chinese owner who is not lacking for cash, Forcier seems pretty satisfied with A123’s situation. The Chinese certification is really A123’s ace in the hole, it seems. “We get calls from our competitors all the time because they are locked out” of the China market, he says.

 

General Motors China has long had a knack for elbowing in to segments domestic automakers are doing well in and taking market share from the domestics. Its electrification road map, announced in late August, is the next chapter in that strategy.

Local automaker BYD is China’s top seller of electrified vehicles. Its Qin and Tang plug-in hybrid electric vehicles are selling like gang busters.  That hasn’t escaped GM’s notice.

“The Qin and Tang are very viable in Shanghai,” Martin Murray, deputy director, electrification engineering at GM China tells ChinaEV.  “That has given SAIC and GM the motivation to compete.”

BYD sold 19,134 Tang SUV plug-in hybrid electric vehicles in the first six months of 2016, and 11,129 Qin D segment units. They were the top two electrified vehicle models in China, according to electriccarsreport.com. Total PHEV sales in China  for the first six months were 126,950. (BYD also recently began to produce pure electric versions of the Qin, hence the photo  below, which I took at the  BJ show in April.)

The Qin and Tang buyers are “real people” (as opposed to ghost companies and government employees, I suppose), says Murray.  But he sees a weakness.  “We think those cars can be better,” he says.

GM China is out to prove that.

“We are looking at GM technology which has the safety and performance people like, and GM’s affordable models, and putting the two together in China,” he says. “The object is to make these high volumes. We are going protect these (GM) brands; these are going to be super high-quality products.”

Murray didn’t say it, but implicit in his comments is the idea that foreign automakers -or at least GM — can still produce a better car than local automakers in China.  Chinese automaker’s quality and safety has improved a lot, so it is not a sure thing that GM China can produce a much more high-quality, much safer electrified vehicle than BYD.

But even an equally good, equally safe product would draw its share of buyers because the GM name in China does carry the connotation of a good, safe vehicle.  And Chinese consumers often still trust foreign automakers more than local ones. So BYD better watch out.

Battery production localization – woohoo!

I think the most interesting, and indeed most crucial, part of GM China’s electrification road map is the plan to fully localize its battery pack production. It will build a new battery plant in Shanghai to accomplish this.  That will help it compete with BYD on price and to produce a vehicle that consumers will still want to afford even after the government subsidies for electric vehicles run dry.

Murray says much of the current demand is driven by government subsidies, but GM figures that the subsidies will end at some point. But the need for GM to sell electric vehicles in China will not because of China’s aggressive fleet fuel economy standards.  Given that, “the key point is to have affordable (electrified) cars,” says Murray.

The battery is the most expensive component in an electrified vehicle. Local production should help keep the cost down.

Murray has significant experience producing batteries, including leading battery pack engineering at GM’s battery operations in the U.S.  He tells ChinaEV that GM will duplicate the entire battery production process at Brownstone Charter Township in Michigan at the planned Shanghai plant.

That means, among other things, that the plant will produce a full range of EV batteries, from power packs for hybrids to high-density energy packs for extended-range EVs such as the Volt. “We will make all the products in China that we now make in Brownstone,” says Murray.

Interestingly, he didn’t mention pure electric vehicles. And a pure electric vehicle isn’t included in the products GM mentioned in the electrification roadmap press release. The first electrified products that will be localized are the Chevrolet Malibu XL hybrid and Buick LaCrosse hybrid, and the Cadillac CT6 PHEV.

Why no pure electric vehicle, I ask Murray?

GM’s GFE electric propulsion system is scalable, he says, without really answering my question. He mentions the Springo BEV, a derivative of the Spark small car that GM China produced in limited volume. “We have plans,” says Murray a bit mysteriously.

Local production usually means local sourcing.  What will GM China source locally and has GM identified the suppliers, I ask? There are 60-90 parts for each battery pack, says Murray. GM went through the list and identified parts that “made sense” to source locally, he says, mentioning sheet metal, harnesses, hoses, and the like.

Those are components that all vehicles use. What about EV-specific components such as battery cells, I ask? GM purchases cells from partners, he says, and “we are going to make packs here in China with cells from our friends.”

Some friends are more equal than others, it seems. LG is GM’s partner at its battery plant in Michigan. “But not necessarily in China,” says Murray.

GM’s long-time partner in China, SAIC, has a joint venture with A123, Shanghai Advanced Traction Battery Systems Co that produces battery cells in China. Will GM be sourcing form ATBS, I ask?  “We do stay in close touch with SAIC, says Murray. “They have a lot of interesting ideas.”  Sounds a bit like a no to me.

The planned battery plant in Shanghai is, in any case, a joint venture with SAIC (or perhaps with Shanghai GM, the press release is a bit unclear and I forgot to clarify). GM has licensed “all the necessary” intellectual property to SAIC GM, says Murray. The battery plant project is being driven by the Pan Asia Technical Automotive Center, a 50/50 GM/SAIC research and engineering center in Shanghai.

“Our goal at PATAC is to leverage ideas in China, (and) leverage good ideas from local suppliers,” says Murray.

Finally, I asked Murray if GM China would be producing China-specific electrified vehicles.  His reply leads me to believe GM is taking the Chinese approach to planning, i.e. “crossing the river by feeling for the stones.” Which is a good idea as that is the way China’s central government is making its NEV policy, so best to be flexible.

GM will have some products that are specific to China, but have common solutions under the hood, he says. More details will come out over the next four to five years, he says.

“We are going to set the industry trend for driving experience,” says Murray. “We are here for the long run.”

I recently had a conversation with Rebecca Hough, CEO of Evatran, the maker of the Plugless Power wireless charging system for electric vehicles.  Seems her company is making inroads in China, sort of.  I still await the Chinese government’s commitment to building a wireless EV charging infrastructure, however.

About a year ago, I also spoke with Hough (and blogged about it). At that time, Evatran had just announced an investment from Zhejiang VIE Science and Technology Co, a Chinese supplier.

 

The relationship between VIE and Evatran continues to grow; the next tranche of investment from VIE just occurred. I thought it was a good time to check back with Hough about the JV and her overall take on China’s electric vehicle market.

The most recent investment of $2.3 million occurred in July, and it was the final tranche of the $5.5 million initial investment by VIE in the U.S. Evatran entity. The two earlier tranches, or $1.6 million each, occurred in mid- and late-2015.

Additionally, Evatran and VIE will invest $5 million in the China-based, Hong Kong-registered joint venture. Evatran’s portion will consist of a limited amount of capital plus assignment of intellectual property, as well as technical and engineering support, Hough tells me.  Evatran will have a 25 percent ownership stake in the JV.

The target customers for the wireless charging system – known as Plugless Power, in the U.S. – are Chinese automakers, many of whom are already VIE customers, says Hough, Hough indicated the target product was passenger cars, and based on VIE’s website, it seems to supply all the major domestic OEs as well as SGMW.

Rather than sell Plugless Power as an aftermarket product, Evatran and VIE hope to become suppliers to the auto makers themselves.  That requires automakers to have plans to produce electric vehicles with wireless charging technology installed. So I guess part of the plan it to use the VIE connection to convince automakers to begin producing electric vehicles that can be charged wirelessly.

As with most things China, there is an issue. China doesn’t yet have a national wireless charging standard.   SAE in the U.S. is currently evaluating  the J2954 wireless charging standard for light duty plug in/electric vehicles.  It is expected to be standardized “after the 2016 timeframe.” But China doesn’t want to use that standard.  As Hough pointed out, “China often has its own standard, but close.”  Meaning rather than just adopt the same standard as the U.S., China wants its own. Sigh.

Hough figures the lack of a standard in China isn’t a problem.  She says that China will likely be similar to the U.S. in that after automakers begin to produce electric vehicles that use wireless charging, a standard will follow.

“In China, we have an opportunity to use what we learned in the U.S.,” says Hough. “We go to the OEMS, says ‘we can put this in the field without having a standard, then develop a standard.”

It could be three to five years before a standard is developed and rolled out in China, she says.

Is the China market ready for wireless charging? Yes, says Hough. And I do hear from my industry contacts there is a lot of interest in wireless aka inductive charging. But as I said at the top, I await a sign from Beijing.

To be sure, sales of new energy vehicles – which includes PHEVs, BEVs, and HFCVs though we can disregard HFCVs for now – is growing.  In the first six months of 2016, some 126,000 battery electric vehicles were sold in China, and some 44,000 plug-in hybrid electric vehicles.  BEV sales rose 126 percent on-year; PHEV sales rose 62 percent, according to the China Association of Automobile Manufacturers.

It is uncertain if Chinese consumers actually feel any enthusiasm for electric vehicles of any kind, of course.  They do like the hefty government subsidy that comes with the purchase, however.  One thing is clear – Beijing isn’t backing down on its plan to make China a big market for electrified vehicles.

That is why Evatran is working with VIE, says Hough. Evatran figures it can’t be a global player if it doesn’t have a presence in China, she says.

As it has developed relationships with manufacturers over the last year, “the real eye-opener is looking at the work done by the companies themselves (on EV development). You get pretty bullish about what the company can do and the market not just in China but globally.”

For the next six months Evatran will work with VIE on getting the JV up and running. The VIE can handle manufacturing the actual charging pad. Evatran’s expertise will be vital to adapting its standard Plugless Power charging system to the Chinese vehicles.

The JV aims to start manufacturing by the end of 2017.  It should have a customer lined up by then, says Hough. “We have a front runner,” she says.

The Evatran/VIE venture is focused on passenger vehicles. Meanwhile, other Chinese entities are going after the bus market. Chinese telecom equipment company ZTE last year said it was developing wireless charging for buses, and focused on public infrastructure.  So it must smell government support. I haven’t seen or heard much about it lately, though.

Wireless charging is a great idea for China.  Most people don’t have a drive way, much less garage. But the government hasn’t even made good on its plan to install a lot of regular charging posts yet.  So I’m skeptical that it will rush to install wireless charging pads.  Perhaps the automakers themselves will do this.  Someone will have to.

 

 

China is still struggling with how to implement a Zero Emission Vehicle-like credit program. Concurrently, it is working on a new fuel economy CAFÉ-type regulation, and aims to implement an industrial carbon credits program. As usual, China won’t simply borrow California’s ZEV program, or copy someone else’s carbon credit program. The ministries in Beijing want to come up with their own, one with Chinese characteristics. And that could be a problem.
Back in November of 2014 I blogged about how China was interested in putting together a program similar to California’s Zero Emission Vehicle program, or ZEV. The program requires automakers to sell a certain number of zero emission vehicles in the state, a number determined by the total volume of vehicles that automaker sells in California, where I live.
I wrote about China’s ZEV plans again in November of 2015. At that time, An Feng, co-founder of the non-profit Innovation Center for Energy and Transportation (iCET) told me ICET wants to establish four pilot cities in China to try out the ZEV program, An told me back then — Beijing, Shenzhen, Chongqing, and Shanghai. The caveat, he said, would be enforcement. “California has worked because it has a very high penalty,” said An “In China, who has the authority to introduce the penalty and manage it?”
That is still a good question. A number of ministries in China have their toe in the transportation/energy policy pond. That has slowed implementation of any ZEV-type programs. As well, ZEV programs, with their multiple levels of credits for various types of low- or zero-emission vehicles – are complicated enough (just try reading the details of California’s ZEV credits regulation without having your eyes glaze over), but China wants to make such a program even more complex. It wants to combine an automotive carbon credits program i.e. a ZEV-type program with an industrial carbon credits program. A two-track carbon credits program under one umbrella, as it were.
Meanwhile, a new corporate average fuel consumption program (China’s version of CAFÉ) is being created. And this is where it gets tricky. The Ministry of Industry and Technology (MIIT) is working on the CAFC standards. The National Development and Reform Commission (NDRC) is working on implementing the carbon credits program.
“There is a consensus now that some form of mandate will be adopted,” said one of my sources. And there is an agreement between MIIT and NDRC that the policy should be a national one to avoid local protectionism, he says. But, MIIT wants the CAFC regulations and ZEV/carbon credits program to be part of the same policy. This is very problematic, says the source.

“A ZEV mandate is futuristic. If the future is a cliff, you can pay someone to jump off the cliff for you,” he says. “CAFÉ is like high school graduation; you either make a passing grade or you fail. With ZEV you can buy your way out, CAFÉ is not tradeable.”
What is the danger if China combines the two? Well, the CAFC details haven’t been worked out as to how many credits each kind of alternative fuel vehicle will be worth. And, each automaker will almost certainly have to produce a certain number of EVs to meet CARC, but Beijing is considering also requiring them to produce some EVs to meet the carbon credits requirement.
The source posits a hypothetical situation that shows how problematic combining the two policy goals may be: A local automaker that produces mainly SUVs has several possible strategies. It could innovate with its ICE vehicles, using lightweight materials and the like, to improve the vehicles’ fuel economy. Or it could produce a lot of hybrids. Or the automaker could go all-in on EVs, founding its own EV manufacturing company which produces “some garbage EVs” which the automaker then sells to its own leasing company, thus meeting the quota. None achieve the government’s goal of making China a production center for high-quality EVs.
Another possible outcome: The EV quota is set very high. The automaker can’t meet the quota for the stringent standards. That forces the automaker to either produce trash EVs or cheat and bribe its way into compliance. “How do you know in a mixed system what is the proper level of EV requirements for the quota?” he says.
The debate continues regarding a combining CAFC and ZEV/carbon credits under one policy. I guess the good news is that MIIT and NDRC have agreed that any policy needs to be nationwide to avoid local protectionism. The bad news is it could be a bad policy.

So let me say right up front that I wrote a pretty mean blog in December of 2013 about Kai Johan Jiang, the Chinese-Swedish founder of National Electric Vehicle Sweden AB, or NEVS.  Not about him personally. But about his purchase of Saab. I mean, Saab isn’t that sexy a brand and NEVS was making some pretty bold claims back then.  NEVS is still making some bold claims. But I’m ready to eat crow if I turn out to be wrong.  So I’m taking a second look at NEVS.

This second look was prompted after a friend of mine visited NEVS in Tianjin and had some positive things to say about the Chinese-Swedish company.  The most positive thing he reported, admittedly, is that NEVS seems to have excellent connections with China’s central government and also a steady stream of funding via private investment and also incentives from the Tianjin Binhai Hi-Tech Industrial Development Area (THT), which is building a new factory for NEVS and has given them the land for free, he said.

My friend was also very impressed with Kai Johan Jiang, who made a fortune from biomass. Jiang founded a company in China that uses Swedish technology to produce electricity using biomass.   The company, called (apparently, I am still trying to envision the org chart for Jiang’s companies) National Bioenergy Group, has no trouble selling every kilowatt hour it is generating to China’s State Grid, said my friend. “It appears (Jiang) has extremely good connections with the State Grid,” said my friend.

But, said my friend, Jiang sold that business three years ago and used the proceeds to buy Saab. On his LinkedIn page, Jiang is listed as Chairman of State Holdings.  State Holdings is based in Beijing. And his company, National Modern Energy Holdings (NME), is described as the main owner of NEVS on the NEVS website.  NME also owns State Holdings. Got that?

Jiang’s good relations with State Grid paid off in March of this year. NEVS signed a contract to provide “mobility solutions” and supply electric vehicles to the State Grid. That is a sweet contract.  In fact, NEVS has been on an acquisition trail ever since it was founded in April of 2012.   It acquired the main assets of Saab in August of that year.  You can see the rest of its acquisitions on its timeline.  Clearly NEVS has funding.

Headquartered in Sweden, NEVS has production facilities in Sweden, invested in a production facility in Fujian, and is building one in Tianjin.  It plans to use the Saab 9-3 platform to produce several pure electric vehicles, and is developing a platform of its own for another lineup of EVs.

Let me digress a bit. I must say that NEVS has been a pleasure to deal with. For one, its website is lovely. Nice looking, and more importantly full of useful information.  And its public relations people are actually helpful! Though I didn’t get the interview I requested, they did answer my questions in a timely manner.  So that also makes me think well of NEVS.

So, back to its production plans.  It will launch the 9-3 EV sedan, using the Saab platform, in China in 2017.  NEVS plans to start to produce painted bodies in Sweden then ship them to China for final assembly.  It will also manufacture a limited number of 9-3 EV sedans in Sweden for sale there.

Meanwhile, NEVS is developing its own Phoenix architecture, a scalable and modular platform that “makes it possible to manufacture cars from the B to the E segment,” said NEVS director of communications and public affairs Mikael Oestlund (there is an umlaut on the O but I can’t reproduce it. So one puts an e, right?) In an email.

In 2019 or 2020 NEVS plans to launch a lineup of EVs based on the Phoenix architecture. It will include: Distinctive Family SUV, D segment; Active All-rounder D segment fastback; Urban Adventurer D fastback x (I am reproducing what NEVS sent me. Not sure what x stands for); Sporty Urban SUV, C segment SUV. He sent some sketches, which are not of actual models, he said, rather they are examples of the types of vehicles NEVS plans to develop.

Quite ambitious. And they will be entering an already crowded SUV segment in China.   I asked the spokesman why NEVS thought it would be successful in China. He replied: “We think we can deliver a high quality EV product, based on the innovative Swedish Saab car heritage. We have already interesting framework agreements for fleet sales in China.”

By framework agreement I assume he is referring to the $12 billion agreement with Panda New Energy Vehicle to deliver an initial 150,000 EVs, and later an additional 100,000 EV “products and services.” Those deliveries will begin in 2017, said Oestlund, beginning with the 9-3 EV sedan, and also transport and logistics vans. The vans will be produced at the plant in Fujian.

The deal with Panda was announced in December of 2015.  I am skeptical. Panda is a new energy vehicle leasing company “cooperating with many chauffeured car service platforms in China.”  I think it must have ties to large SOEs or local governments that are going to be required to include new energy vehicles in their fleets going forward. So a captive market of sorts. Nonetheless, I am skeptical.

I asked Oestlund if NEVS was confident the agreement would be executed.  “We have a framework agreement that we are planning for to be able to deliver upon,” he wrote in his reply. Good luck.

In any case, because NEVS is a very professional company that, as mentioned, seems to have excellent connections in China, it may have a chance.  I will reserve judgement and follow its progress with interest.