Saturday, September 18, 2010

China Hopes to Bully Foreign Companies, Trade Market Access for Electric Vehicle Technology


The chips are finally hitting the fan. China has put the word out there that it may play a big power card in the near future: give us all the secrets to your tech, or we won't let you build and sell in our ever-growing Chinese market.

According to the Wall Street Journal, executives have been given a proposal that would provide China with a majority share in any joint venture involving foreign companies introducing "key new-energy components...such as advanced lithium-ion batteries and high-power electric motors". This would allow China to gain control of the technology that minority shareholders (i.e. anyone else) bring to the table.

In response to this, one anonymous executive said, "[This is] tantamount to China strong-arming foreign auto makers to give up battery, electric-motor, and control technology in exchange for market access. We don't like it." Another executive has claimed this sort of scheme simply "raises the hurdle" in building electric cars in China.

This technology-for-market access trade, in turn, would push China one step further toward its goal of being a world leader in electric vehicles; looks like they'll pass on improving their current vehicles and move straight onto electrics (because by now the Chinese have realized that their own cars are WAY off the mark). Another step in attaining its goal is to consolidate and concentrate its automotive manufacturer base.

Ultimately, China hopes to have three to five manufacturers building globally-competitive electric cars. According to non-Chinese execs, the investment could require up to $15 Billion (100 billion yuan) and no one seems to be sure where the money's coming from; that is, no one is sure how much cash foreign companies will need to invest and how much China's government will put up.

That money, however acquired, would go into manufacturing facilities, suppliers, and infrastructure for China's future electric/hybrid vehicles (estimated to be five million by 2020).

At the World Economic Forum, Chinese Premier Wen Jiabao said, "China is committed to creating an open and fair environment for foreign-invested enterprises...Foreign-invested enterprises in China on the whole enjoy a good environment and have reaped good returns."

Oh, and get this: the Industry Ministry has asked for opinions from state-owned automakers and its fellow ministries to see if anything needs to be postponed and reworked.

That's like asking your reflection if that next shot is a good idea (hint: it always agrees with you). What's worse is that this plan could go into effect NEXT MONTH. Looks like China is getting a little too big for its britches...

By Phil Alex

Source: WSJ