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Automakers Will Launch Electric Vehicles in China Even Though No One Wants Them

Pressured to Build EVs and Develop Local Brands, Foreign Car Companies Kill Two Birds by Using New Names

By Published on . 2

In the past few months, numerous global automakers have disclosed plans to let their Chinese joint ventures produce electric vehicles. General Motors, Daimler AG, Suzuki Motor Corp., Volkwagen AG and Nissan Motor Co. all have said that they will build EVs in China.

Why are these companies jumping in? It's not to satisfy consumer demand for EVs. In fact, EV sales in China are virtually nonexistent.

The automakers are doing so because Beijing wants them to.

If foreign automakers want to expand operations in China, they must do two things. They must share their EV technology with their Chinese partners -- which happen to be state-owned companies -- and they must help those partners create new local car brands.

When these requirements were unveiled last year, foreign automakers initially resisted. That's why it took companies like VW longer than expected to win Beijing's approval to build new assembly plants in China.

This year, the foreign automakers finally came up with a smart idea. They could make EVs in China, and these EVs would be launched under new brands created for their China joint ventures.

This allows them to kill two birds with one stone: They will produce EVs in China, and they will create new Chinese brands to sell them.

How will they do this? Details are scarce, but the automakers have dropped some hints. At the Beijing auto show last year, Volkswagen unveiled the E-Lavida, an electric version of the Golf-based sedan that VW produces in China. This month, VW followed up with the news that its new Tantus brand -- to be shared with its joint-venture partner SAIC Motor Corp. -- will market an EV. The company offered no further details.

Meanwhile, GM recently announced that it also will produce an EV jointly with SAIC. The company offered no additional details, although it said the new vehicle wouldn't be the Volt. However, the mystery vehicle might be an EV version of the Chevrolet New Sail sedan, a prototype that GM displayed last year.

In August, Nissan CEO Carlos Ghosn announced plans to produce an EV jointly with partner Dongfeng Motor Corp. under the new brand Venucia. Mr. Ghosn offered no further details, although he noted that the new vehicle wouldn't be the Leaf.

Other global automakers are expected to take a similar approach. Most likely, their first Chinese-produced EVs will be based on existing gasoline models already produced by their joint ventures. And these vehicles will spawn fancy new brands like Venucia.

Very soon we'll hear that other global brands, including EV-wary Hyundai Motor Co., will announce plans to build EVs in China.

Is there a Chinese market for these green vehicles? The answer is not yet, due to the prohibitively high prices of EVs and the lack of a charging station network.

But this is not important. The foreign automakers will introduce EVs anyway, because they want China's approval to expand production capacity. And they are finally starting to get it.

After waiting for a year, VW received permission from China's central economic planning agency to build a new plant in south China's Guangdong province. And a few days after it signed its agreement to develop an EV with partner SAIC, GM announced plans to build a new assembly plant in the northeast Chinese city of Shenyang. To be sure, GM CEO Dan Akerson insisted that China's government did not pressure it to share the Volt's technology.

Some analysts have speculated that the foreign companies won't bring their best EV technology to China. Instead, they'll do the minimum necessary to meet Bejing's requirements.

Wouldn't China's state-owned automakers pressure their foreign partners for the latest EV technology? The international joint ventures have been lucrative for the state-owned companies, notes one veteran auto analyst who asked not to be named. As long as those ventures grow, the Chinese partners have no incentive to rock the boat.

Private Chinese automakers -- companies like BYD, Geely and Great Wall -- are a different matter. They are lean and hungry, and they want the best technology right now, if not sooner.

Indeed, BYD has managed to negotiate an EV joint venture with Daimler. But the others have been frozen out, and Beijing isn't especially concerned about them. The private carmakers will have to fend for themselves.

Automotive News China.

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