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Electric Cars Are Tougher Than They Look, Eh, China?

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Traffic in China

Traffic in China

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Several years ago, the world's auto industry heard a constant refrain: "The Chinese are coming, the Chinese are coming!"

With low labor costs and a government imperative to create globally competitive car companies, Chinese makers were expected to follow in the footsteps of the Japanese and Koreans to take a share of the U.S. market.

In electrics, the fear was even starker: The Chinese already make half the batteries in the world, so it's merely a matter of time before they dominate electric cars.

That was then. This is now.

A Business Week article points out that in fact, none of this has happened.

In "China's dream of electric car leadership elusive," author Joe McDonald points out that China's goal of becoming a global power in electric cars has been stymied by the same factors affecting the market everywhere else.

First, battery powered cars still cost far more than comparable gasoline cars. While battery costs will fall 6 to 8 percent a year, and gasoline cars will get more expensive as they get more fuel-efficient, prices won't be comparable for a decade or more.

Mass-market Chinese car buyers are ultra-sensitive to prices, so electric cars are a hard sell.

And thus far, wealthy buyers in China have proven to be more interested in prestigious global brands than in advanced electric propulsion technology.

BYD e6 electric taxi in service in Shenzhen, China

BYD e6 electric taxi in service in Shenzhen, China

Enlarge Photo

Second, the quality of native Chinese autos is far from globally acceptable. While Honda, General Motors, and other global makers can build state-of-the-art plants, Chinese car companies without Western partners flounder in understanding how to design, test, and manufacture cars with competitive quality.

The BYD e6 electric crossover, which that company has hoped to sell in the U.S., has already been redesigned and updated--but the latest model, which we saw at the New York Auto Show last month, remains substandard.

Two examples: the clearcoat on the paint didn't wrap under the painted doorsills, but was only used on painted surfaces, and we're told the interior still emits chemical fumes that would make the car unacceptable in any U.S. showroom.

Third, everyone has to walk before running. As in the rest of the world, hybrids may serve as a transitional technology for Chinese makers to give them experience with electrified vehicle components.

BYD e6-B

BYD e6-B

There's another factor McDonald doesn't mention: Chinese makers don't need to export to survive. Unlike the British who invented vehicle exports to the U.S. in 1948, the Germans who did it right with the VW Beetle, the Japanese in the Sixties and Seventies, and the Koreans in the Eighties and Nineties, their home market is plenty large enough to support multiple makers.

China is already the largest car market in the world, at about 18 million vehicles a year, and analysts project it will rise to 30 million by the end of the decade--perhaps even 40 million. It's simply easier for Chinese makers to sell substandard products to inexperienced first-time domestic buyers than to go through the lengthy, expensive process of creating a car that will sell in the U.S.

That's not to say that Chinese makers won't be a factor globally--although among Chinese buyers, Western brands and those built jointly with Western makers are taking a larger share of the market every year, so their window may be narrowing.

But electric-car startups like Tesla Motors and established players like Nissan, General Motors, and others at least have some breathing room from the perceived China threat.

While they may look simple, electric cars turn out to be hard to design well. And in affluent markets like the U.S., they sell for different reasons than does basic transportation.

Let the games begin.

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Comments (4)
  1. For a second there, I was almost convinced that those "superior" American electric cars have been commercially successful. If the Volt was GM's only vehicle, we'd be talking "Bankruptcy of an American automaker, Phase II." Apparently the Chinese are a lot smarter than this writer would have us believe - they seem to make a lot of money, a large part of it from us. And as I recall, our bogus standard of living, which rests on a mountain of bad debt, would disappear if the Chinese decided to stop supporting our lavish lifestyle. And if the Chinese stopped making parts for Detroit, there would not be any US automaking. Didn't Bernanke mention a 1/3rd cut in the value of the dollar to make us competitive again? No more Starbucks for you
     
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  2. @Kent: What percentage of parts for North American-built cars come from China? I take it you have that number at hand. Do, please, provide it for the rest of us.
     
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  3. John

    My compliments, you are spot on this time.

    Sorry I had to bust your chops about that nonsense on "compliance cars", but you got it right this time.
     
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  4. @Jim: Thanks for the good words on this one. I left a two-part reply to your comment on the Compliance Cars piece.
     
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