Alysha Webb's ChinaEV Blog

Car sharing seems to work in the U.S. and Europe, and a growing number of consumers want to give it a try.  Why else would global car-rental giant Avis Budget Group Inc. have recently paid $500 million to acquired Zipcar Inc., a Cambridge, Mass.-based car sharing company that has trouble making a profit?  http://online.wsj.com/article/SB10001424127887324374004578217121433322386.html

But will the model work in China?  There are many barriers, both structural and, in my mind, cultural. 

The business, whereby a consumer becomes a member of a company and then can use one of that company’s vehicles short-term in any city where it has a presence, is growing.     Zipcar www.zipcar.com says the car-sharing market could reach US $10 billion North America, Europe, and Asia.  For automakers, it is also a good way to introduce consumers –and many of the users of Zipcar’s services are a targeted young demographic – to new technologies such as pure electric vehicles.   American Honda has Fit EVs (a pure EV) as well as the Insight hybrid in the Zipcar fleet.  http://ir.zipcar.com/releasedetail.cfm?ReleaseID=663235 General Motors has Volt extended range electric vehicles in the Zipcar stable. http://chicago.cbslocal.com/2012/03/22/zipcar-to-add-5-chevy-volts-to-its-fleet-3-electric-cars-for-i-go/

Now, General Motors is hoping car-sharing can turn Chinese consumers on to electric vehicles.  But its approach in China is a bit more circuitous since there is not a Chinese version of Zipcar.  In China, however, GM is battling not just consumer reluctance to use an EVs but also bureaucratic infighting that is preventing the build out of a charging infrastructure.  How much to charge for the electricity is also an issue.   If the car-sharing program gets off the ground, I would add to that list a Chinese consumer indifference to taking good care of something that is only borrowed, not owned. 

In October of 2011, General Motors announced it had signed a Memorandum of Understanding with the Sino-Singapore Tianjin Eco-City Investment and Development Co. to integrate its EN-V personal mobility pure electric vehicles into the Eco-City.  http://media.gm.com/media/cn/en/gm/news.detail.html/content/Pages/news/cn/en/2012/Jun/0627_Signs_MOU.html The Tianjin Eco-City, located 40 kilometers from the center of the northeast China city of Tianjin, aims to build a sustainable community of 350,000 residents in a 30-square-kilometer area.  

Though it has not been widely discussed, a car sharing program is part of GM’s plan to introduce pure EVs to the inhabitants of the Eco-City.  It’s part of a wider scheme to convince Chinese to buy GM’s just-launched Sail SPRINGO EV, http://media.gm.com/media/cn/en/gm/news.detail.html/content/Pages/news/cn/en/2012/Jun/0627_Signs_MOU.html  but the SPRINGO (GM always caps that in its press releases so I am doing the same.  Perhaps it wants us to shout the name when we read it….) isn’t the car GM is using in the Eco-City experiment.  Rather, it will use a fleet of EN-Vs, the pod-like pure electric vehicle first introduced at the Shanghai World Expo in 2011.  GM showed an artist’s rendition of the EN-V 2.0, a more advanced version, at the Beijing auto show in 2012. 

The automaker aims to have a small demo fleet of EN-Vs in operation in the Eco-City within a few years, according to people familiar with the project.  If it can overcome some bureaucratic barriers, that is. GM envisions charging station installation in apartment parking areas and commercial buildings for workplace charging.  But currently there is no method to get permission to install charging stations. That might sound like a small thing.  But it isn’t in China. 

China’s various government ministries have also not agreed on what charging plug standard to use, though China has announced its own China GB standard.   The China GB standard is similar to the European IEC standard with some important differences that make it less safe.  The State Grid, www.sgcc.com.cn one of China’s two state-owned electric utilities, and SinoPec, http://english.sinopec.com/ a state-owned oil company that also owns gas stations, are arguing over how to resolve that issue. 

Another unresolved issue is who will be allowed to sell the electricity used for charging, and at what price. The electricity price to residential customers is much cheaper than to industrial customers, but the State Grid wants to charge more than the industrial price to its customer for EV charging.

There are already nascent car-sharing programs in China using electric vehicles.  The government of the east China city of Hangzhou  offers car sharing through its EVnet company.  Car leasing company Shanghai Dazhong has said it will offer car sharing, though it hasn’t said it will include electric vehicles.  And Shanghai’s Jiading District, home to Shanghai International Auto City, is also putting together a car-sharing program using local automaker SAIC’s pure electric Roewe E50 , sources tell me.  A source at an international car rental company says his company is also talking to Tianjin and Jiading about car-sharing. 

What I wonder is how Chinese consumers will treat these borrowed cars.  Okay, I don’t wonder. I fear.  Perhaps the assumedly younger consumers who will want to become members in an electric car-sharing program will return the cars in pristine shape, both inside and out.  But I doubt it.  I envision smoke-filled vehicles with much trash in them and cigarette ash strewn throughout.  I hope I’m wrong.

Efficient Drivetrains Inc. www.efficientdrivetrains.com is charging ahead in China.  Now if China’s central government can only make those pesky local governments start ordering electric vehicles, things will really look good for the alternative fuel vehicle company.

EDI, as the company is usually known, is based in the northern California town of Dixon, near the university town of Davis.  Though it has been around for a while – it was founded in 2006 – EDI is still small and hungry just like a start-up.  Only recently, in the wake of finishing development of a new PHEV parallel/series drivetrain for delivery trucks, EDI has begun to grow.  Now, it is also about to seek more funding.  I spoke with CEO Joerg Ferchau to learn what’s new at EDI.  (Full disclosure:  I do some business development work for EDI and also write a short story each month for its company newsletter.  The newsletter is free – subscribe! http://www.efficientdrivetrains.com/newsletter.html And not just to read my stories.  It also has company updates and insights from Ferchau and EDI founder Andy Frank, considered the father of the PHEV.)

But I digress.  As I mentioned, EDI just finished work on a new PHEV drivetrain.  Usually, EV drivetrains are either parallel – switching back and forth between electric and gas propulsion—or series, using the electric drivetrain then switching to the gasoline drivetrain, but not back to the electric again.  (I hope I got that right.  I am not an engineer….)

Prof. Andy Frank, co-founder of EDI, attempts to explain the difference between series and parallel hybrid drivetrains to me at EDI world headquarters in Dixon, CA.

It usually costs less to develop a series hybrid than a parallel hybrid, said Ferchau, because the parallel control system is more complex.  But, a parallel system costs less to build.  Ferchau claims EDI’s new drivetrain is less expensive than many series hybrids because EDI already had a number of patented designs that it could leverage in this new design.  It has fewer components and smaller motors than a pure series, he said.   “Also we are willing to go minimum on engineering costs because product sales are what we are after,” said Ferchau.

EDI just finished a demo truck built on a GM platform using the new PHEV system. That truck is going to China.  While EDI has a handful of customers here in the U.S., including Siemens, China is where it sees real growth potential.  Now, China has been talking about becoming a big market for electric vehicles since 2009 and not much has happened.  But even less has happened here in the U.S., points out Ferchau.  “For EDI, China is high priority,” he says.

To be sure, China’s central government hasn’t given up on the technology.  In July, it issued the latest new energy vehicle policy.  http://www.gov.cn/zwgk/2012-07/09/content_2179032.htm   http://www.greencarcongress.com/2012/07/china-20120709.html  It placed more emphasis on PHEVs than in the past, and stated fairly strongly that China’s municipal governments should get started on electrifying their fleets. That is good news for EDI.  It is focusing on fleet vehicles – especially light and medium-duty trucks such as the small delivery vans that zip through urban alleys.   Besides trucks, EDI can design or work with partners to design drivetrains for SUVs, sedans, and even busses, says Ferchau.  “We can do PHEV, HEV, or EV but are most interested in PHEV opportunities,” he says.

EDI already has a Chinese customer, Ankai Bus www.ankai.com , a manufacturer in central China’s Anhui province.  The two have been working together since around 2008, says Ferchau.  They will launch a PHEV bus in the first quarter of next year, he says.  http://english.ankai.com/news/company-news/2012110601.html Ankai is already promoting the PHEV bus with EDI technology inside on its website.   And it seems the central government has already started more aggressively pushing for municipal fleet electrification.    Ankai reports on its website:  “In September 2012, the Ministry of Finance … issued a notice on promoting the hybrid bus demonstration cities to change from 25 cities to all over China.  And the promotion goal amount of the buses are (sic) 3,000 – 5,000 units.  The highest subsidy of a single bus can reach RMB 420,000 (US $67,300).”

Ferchau says EDI should be announcing several other projects in China in the next few months.

That’s one reason it is seeking new funding.  Up until now, EDI has gotten funding from a handful of sources:  Seed investors; a small low-interest loan from the city of Dixon; a venture capital group partly supported by the government of Wuxi, China; and revenue from customers.  But to meet its anticipated growth needs in the U.S. and China over the next year,  EDI will open up in the first quarter of 2013 for US $2-3 million in investment,  providing Preferred Series A shares in exchange, said Ferchau.

EDI is already ramping up its China presence.  In June, it registered a wholly-owned company in Wuxi, a small city east of Shanghai.  http://www.efficientdrivetrains.com/news.html#global  The company, New Energy Automotive Technology, or NEAT, is recruiting engineers now.  It is talking to two or three groups in China about forming joint ventures, says Ferchau.  “That is a big part of our strategies, forming JVs,” he said.

What about your intellectual property? I asked Ferchau.  How will you protect it?  Much of EDI’s intellectual property is contained in the software and controllers it provides, he said.  That kind of IP can be hard to copy.  Still, “you always have to be worried about intellectual property,” said Ferchau.  “I have lost three other products with other companies.”   But IP protection is an issue anywhere one does business, he says philosophically.  EDI hopes its joint venture partners and investors will show a vested interest in protecting the ventures intellectual property.

In any case, Ferchau is (not unexpectedly) optimistic about the future for companies such as EDI.  There are fewer companies competing for what he figures will be a surge in orders from companies and from the U.S. and Chinese governments and militaries, all of whom are committed to greater electrification of their fleets.   He predicts the market will really start heating up in 2015.

EDI has not grown too quickly, as did many companies that went under, says Ferchau. It still only has several dozen engineers.   “The last year and a half we have had our heads down to get the vehicle and drivetrain down,” says Ferchau.  But EDI has a demo vehicle now so it can more aggressively court new customers.  The new funding – or deals it now has in the pipeline – will allow EDI to scale up quickly if it needs to, he says.  I guess we will know if Ferchau is right in a year or so ….

I visited Efficient Drivetrains Inc. www.efficientdrivetrains.com  last week for the first time.  EDI, as it is usually known, produces a plug-in hybrid electric drivetrain and a continuously variable transmission.   I met EDI founder Andy Frank, the father of the plug-in hybrid electric vehicle, a few years ago at a conference in San Francisco.  I now know EDI CEO Joerg Ferchau and others at the small company, as well, and do some work for EDI.  But this was my first time to visit.   EDI is located in an office park in Dixon, CA, which is between Davis and San Francisco.  Its current space is small—just a few offices and a larger garage-like area.  But it recently rented more space in the business park, tripling its footprint there.  The growth is business-driven, fortunately, and some of the business is in China.  EDI opened an office in Wuxi, east of Shanghai, a few months ago.  The China deal that is the farthest along is an agreement to produce a PHEV bus optimized for both city and high-speed highway travel.  The Chinese company is bus producer Anhui Ankai Automobile Co.  http://www.chinabuses.com/english/manufacturer/ankai.htm based in central China’s Anhui province.  China is the initial target, but export is also possible Joerg told me.  Ankai has already exported buses to the U.K. and the U.S.

Andy and Joerg visit China frequently.  Both meet with a variety of company and government sorts and have great insights into the direction China’s EV policy is taking.  Joerg was out of the office, but I had a great talk with Andy about the China market.

It seems to me that some resources are going to be wasted by the rather scattered approach China is taking to EV development.  On the other hand, some good technologies may emerge as well.  And Beijing is determined to develop China’s EV industry, it is clear.

Beijing i.e. China’s central government, recently released its new energy and fuel efficient vehicle development plan.  http://www.greencarcongress.com/2012/07/china-20120709.html The plan calls for China to have 500,000 PHEVs and/or BEVs on the road by 2015.  Since Chinese consumers aren’t going to be buying EVs in anything close to those numbers in the next few years, the government is brainstorming for ways that goal can be reached.  One idea it is considering, said Frank, is short distance (duan tu) vehicles.  I immediately said:  “Oh, Shandong province will like that because it has so many low-speed EV producers.”  No, said Andy, these are not low-speed EVs. They are short distance EVs.  Of course the details of this potential strategy aren’t worked out.  But as Andy explained it, these would meet regular vehicle standards but their batteries would not have much range.  I guess they would be city vehicles.   Range is the biggest issue with the current crop of batteries.  Sure, one can find batteries that can go hundreds of kilometers on one charge.  But those batteries cost a lot.  Producing a BEV with a limited range would lower the cost and potentially make it more commercially viable.

I have said a number of times that municipal fleets are the way Beijing will meet its EV goals.  http://www.chinadaily.com.cn/cndy/2012-07/30/content_15628934.htm  That, in my estimation,  is why so many municipal governments are now investing in companies with electric drivetrain and battery technology.  An executive at a foreign automaker in China that works with the Chinese government on electrification concurred that fleets are the likely solution.   He listed garbage trucks, street sweeping, postal and package delivery, and taxi and bus fleets as good candidates for electrification.  Some of those types vehicles – postal and package delivery and street sweeping for example – are also good candidates for the short-distance EV strategy.

Once upon a time, like 2009, Beijing thought China could become the BEV capital of the world quickly.  Now it is more interested in PHEVs in the near term.  Beijing thinks BEV is the ultimate, “but the technology is not here,” Frank told me.   “They feel the problem now, and the problem is to displace gas.”  That’s for sure.  A recent report by consultancy McKinsey says oil imports in China are likely to double by 2020, when it could amount to 16% of total world oil demand.  Andy is a true-believer in PHEVs, so he naturally thinks that the PHEV is better than a pure electric vehicle in any case.  As fpr the short-distance EVs,  I’m not sure how the mix between BEVs and PHEVs might play out.  After all, if range isn’t a big issue then BEVs might be more appealing.  I’m sure Beijing doesn’t currently know  what the mix will be either.  It will make up that part of the policy up as it goes.   Are short-distance EVs the way to go?  I think it would be an enormous waste of resources.   The minute the government hints that it is interested in a short-distance EV tons of companies will jump into that sea.  I can imagine many, many of the low-speed vehicle makers in Shandong going down that road.   Many already are, judging from what I saw at EVS25 in Shenzhen in 2010.  The majority would make a product that would be poor quality and find little market.   But some good technology might emerge.  I guess that is a chance the central government wants to take.

Andy also helped me see that the pressure on local governments to electrify their fleets, while on the one hand a big waste of resources since economies of scale aren’t possible, is also a great way to test different technologies.  Think about it.  For a recent story for Automotive News, companies I talked to included PowerGenix www.powergenix.com , which has its own Nickel-Zinc battery chemistry and is working in part with a local government in central China’s Anhui province;  Protean Electric www.proteanelectric.com , which has in-wheel electrification and is working with the local government in the east China city of Liyang; and battery maker Boston-Power www.boston-power.com , which has Chinese investment and is also building a plant in Liyang. (Both B-P and Protean work with venture capitalist Sonny Wu, managing director of GSR Ventures.  www.gsrventures.com   Clearly Sonny has some guanxi in Liyang).

What China is doing, said Andy, is getting local governments  to test different technologies.  “After four or five years, they can see what works best,” he said.    Seems brilliant to me, though it will involve waste of local government resources.  A problem with that strategy is that gathering good data will be tough if the central government doesn’t step in.  Beijing had better get busy developing a data collection strategy.