The Great Wall of ChinaEnlarge Photo
In pursuit of its goal to become a world leader in electric-vehicle technology, the Chinese government is considering new rules that will effectively require ceding critical intellectual property on electric car technology to Chinese owned companies.
The proposed regulations from the Chinese Ministry of Industry and Information Technology would require non-Chinese automakers who want to build electric vehicles to do so through joint ventures with Chinese companies, in which they would only be allowed to own a minority share.
This means a Chinese company would effectively own licenses to that intellectual property, but the Western automakers would not have control over how it was used, or in what vehicles, or even whether it might be used in products that competed directly with their own.
The front page of today's Wall Street Journal covers the dispute, for which it interviewed four unnamed exeuctives at automakers that want to sell their EVs to Chinese consumers. While the automakers aren't named, they like include Nissan and General Motors, which are about to launch their 2011 Nissan Leaf and 2011 Chevrolet Volt for sale in the U.S.
2011 Nissan LeafEnlarge Photo
Already, a Nissan joint venture with Dongfeng that makes eight separate Nissan models has announced ambitious plans to spend $440 million to expand its green technologies. Dongfeng-Nissan announced that it would sell an electric vehicle in China in 2012, and its latest proposal takes it first into hybrids and then into EVs.
While Chinese automaker projections must all be taken with a grain of salt, Dongfeng-Nissan says it will sell 50,000 battery electric vehicles by 2015. Under the new rules, for Nissan to benefit from the economies of scale for those vehicles, it might have to turn over its core intellectual property on battery and EV development to the joint venture.
Similar rules might also apply to a joint venture contemplated among German parts supplier Bosch, South Korean lithium cell maker Samsung SDI, and China's SAIC Motor Corp. Would Samsung willingly offer up its secrets on the latest lithium-ion cell development and manufacturing strategies?
Perhaps it would. China's auto market surpassed the U.S. last year to become the largest in the world last year, and is projected to reach 17 million vehicles within five years, against current U.S. sales of roughly 10 million. And so few Chinese own automobiles right now that potential sales are measured in the hundreds of millions over decades.
BYD e6 conceptEnlarge Photo
Thus far, China's record on electric vehicles has been mixed at best. BYD Autos has sold only a few hundred of its F3DM, a plug-in hybrid version of China's best-selling car, the BYD F3, an outright clone of the previous Toyota Corolla. BYD Autos says in Automotive News it is "preparing for mass export" of its all-electric E6 crossover.
And while Coda Automotive is sourcing both the rolling "glider" and the lithium-ion cells for its all-electric 2011 Coda Sedan from partners Hafei Motors and Tianjin Lishen, it plans to do final assembly in California. Moreover, all its engineering and parts-production processes vetted by Porsche Engineering to ensure they were up to Western standards.
Nonetheless, China has big plans. The country already produces roughly half of the world's lithium-ion cells for consumer electronic products like mobile phones and laptops, and the government plans to focus on up to five companies in China that it feels it can build into global competitors in EV technology--leapfrogging existing automakers.
Between government and corporate funds, the electric-vehicle plan drafted by the Chinese government calls for up to $15 billion to be invested in infrastructure like charging stations. The Ministry's projections for electric cars and plug-in hybrids stand at a total of 5 million in the country by 2020.