Wanxiang’s purchase of battery maker A123 http://www.plugincars.com/wanxiang-gets-final-approval-buy-a123-systems-126289.html may turn out to be the best thing that ever happened to Fisker Automotive. www.fiskerautomotive.com Huh? Yeah, now Fisker not only has a battery supplier, but I bet Wanxiang will give Fisker some kind of bridge loan to keep it afloat while it seeks a “strategic partner” i.e. some company with cash to invest in the struggling plug-in hybrid electric company. But Fisker still needs cash, fast. And it is sniffing around China to find some.
Development of its next model, the Atlantic, is stalled awaiting funding. Production of its current model, the Karma, was also stalled as Fisker waited to hear the fate of its battery maker, A123. (and it didn’t have any money…) Now it knows A123 will survive. “We will start to re-negotiate the contract for batteries with Wanxiang in the very near future now that the sale is complete,” Fisker spokesman Roger Ormisher told me.
Wanxiang American www.wanxiang.com is willing to help Fisker with more than just batteries, it seems. Wanxiang America president Pin Ni told me. “We will be interested in any way we can help Fisker since they are a customer of A123 and A123 is currently a shareholder of Fisker,” he said. There is precedent for making a loan to Fisker. Wanxiang came to the rescue of A123 back in November 2012 with a $50 million loan. http://www.bloomberg.com/news/2012-11-05/a123-systems-gets-50-million-loan-from-wanxiang.html Guess it was worth it since Wanxiang owns A123 now. Well, maybe it wasn’t worth it, but that is another blog….
But, sources tell me Fisker has also been talking to Dongfeng Motor Group www.dfmc.com and Beijing Automotive Industry Group Corp (BAIC) regarding some kind of investment. State-owned Dongfeng, the former 3rd Auto Works, is China’s second largest automotive group based on sales volume, according to LMC Automotive. www.lmcautomotive.com In case you were wondering, SAIC is the largest. Of course, I am not sure if this includes all commercial vehicles. It may only include light vehicles. In any case, Dongfeng is big.
I am not sure what part of Dongfeng Fisker has been talking to. Dongfeng is a kind of confusing company. Dongfeng Motor Corp sold half its vehicle operations to Nissan back in 2003 and the resulting Dongfeng Motor Co. is 50% owned by Nissan. http://www.dfl.com.cn/dfl/info/introduce_en.aspx But, Dongfeng the parent company also has joint ventures (these are separate companies formed to produce cars as opposed to the Nissan venture, in which Nissan actually bought part of the existing Dongfeng….) with PSA, Honda, Kia, and now it has formed a truck JV with Geely, uh I mean Volvo.
Anyway, Fisker talked to Dongfeng about getting some help, likely through a strategic partnership. That went nowhere according to a source in China. No wonder. Dongfeng has its hands full, it seems. And access to EV technology from a variety of sources. Indeed, Dongfeng has an EV subsidiary and has said it will be selling two EVs by 2015. One will be under its self-developed brand, Fengshen, another will be under the Venucia brand, which it produces with Nissan. Got it? Good cause I am not sure I do. In any case, Dongfeng has some EV technology. And its hands full with all those foreign partners.
Fisker has also approached Beijing Automotive Industry Group Corp. or BAIC about cooperation, sources tell me. BAIC is China’s fifth largest automotive group, according to LMC. I don’t know how that is progressing. Last November BAIC said it would invest 1.7 billion RMB to build three plants to produce new energy vehicles by 2015. That term, new energy vehicle, is rather vague, of course. It could mean BEVs or PHEVs or even hybrids or CNG vehicles these days. The definition has gotten a bit looser over the years.
But BAIC will likely have access to very good EV technology. It already had a 50/50 joint venture with Daimler. And the two companies just announced that Daimler will take a 12% stake in BAIC Motor, the passenger car unit of BAIC Group. http://www.daimler.com/dccom/0-5-7153-1-1571316-1-0-0-0-0-0-9293-0-0-0-0-0-0-0-0.html Now this is likely confusing to those of you who don’t follow China’s auto scene obsessively. But it is similar to what Nissan did with Dongfeng, on a smaller percentage basis. Generally when a foreign automaker wants to produce cars in China it has formed a separate company –a joint venture – which is 50% owned by each party. So, it is a separate corporate entity. Nissan, and now Daimler, actually bought into the existing Chinese company. Too much information, I know. In any case, besides being busy sorting out how this new company that is 12% owned by Daimler will work, BAIC likely has access to EV technology now.
Fisker spokesman Ormisher would not confirm that Fisker had talked to Dongfeng and BAIC. “We can confirm we have had a great deal of interest from companies across 3 continents,” he said in an email.
Another thing to consider is whether Fisker is a desirable partner. The cars are nice looking, but the Karma was totally bashed by Consumer Reports in September of 2012. Among the faults cited by Consumer Reports, aside from the fact the battery failed on the first drive: “Poor dash controls, limited visibility, a cramped interior, awkward access into and out of the seats, an engine that is noisy when running, long battery recharge times, and a small backseat and trunk. The Karma’s heavy, SUV-like weight affects agility and performance, and the Karma lacks the oomph you would expect.” Ouch. http://news.consumerreports.org/cars/2012/09/fisker-karma-earns-a-failing-grade-from-consumer-reports.html
Having said that, I do think there is a market for the Karma in China. There is a certain segment of very rich Chinese who would want to own the same car as Leonardo DiCaprio, one of Fisker’s small stable of famous owners.
My advice to Fisker? (Not that they have asked for it, but if Fisker get funding from this source my arm will hurt from patting myself on the back.) Hit up China Grand Auto http://www.chinagrandauto.com/ for money. The dealership group has already agreed to be Fisker’s distributor in China. http://www.chinagrandauto.com/ It is the second largest dealership group in China in terms of 2012 revenue. It has plenty of cash, and is even weighing going public in China, which would boost its cash hoard. Seems like an obvious choice. Unless China Grand doesn’t have confidence in Fisker’s vehicles.
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.
I was in Shanghai Dec 6-17 and as usual met with many friends and gossiped a lot. One topic of discussion was GM’s plans for SGMW, its joint venture with SAIC and Wuling Auto. www.sgmw.com.cn The JV produces minivans under the Wuling badge and passenger cars under the Baojun badge. It exports to more than 40 countries, and many of the exports are badged Chevrolet.
I have always been interested in Wuling, but my interest increased a few months ago when Ray Bierzynski, GM China’s executive director of electrification strategy, was transferred to Liuzhou to become an EVP at SGMW. http://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/cn/en/2012/Oct/1012_Bierzynski.html What was GM up to? At the time I speculated that GM wanted to boost SGMW’s importance as an export base. I still believe that. I think GM sees SGMW as its growth engine going forward in China, as well. China’s inland cities are where the growth opportunities are now for automakers. SGMW produces a model that is perfect for aspiring middle-class families in China’s interior – the Hong Guang minivan. Nah, say not that it is a minivan. When SGMW launched it in September of 2010, it was labeled “China’s first compact business vehicle.” Said Kevin Wale, then president of GM China Group (since retired): “The Hong Guang addresses the growing need for a small, economical vehicle for business use and family travel.” https://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2010/Sept/0914_wuling.html Translation: It is the poor man’s GL8! Okay, not poor man’s. The less wealthy man’s GL8. The GL8 is GM’s wildly successful MPV. The GL8 First Land model – the lower end – starts at 228,000 RMB (US $36,580). GM China sold 58,566 GL8s in China in Jan-Oct according to LMC Automotive.
The Hong Guang has seven models priced between 44,800 RMB and 60,800 RMB. Quite a price difference from the GL8, but income levels are lower in China’s inland areas. And not bad for a rear-wheel drive seven-seater with power windows and locks, airco, radio with an MP3 port, and a CD player, among other amenities. And here’s a news flash–remember you read it here first. SGMW will produce a front-wheel drive version of the Hong Guang. Currently it is only offered in RWD. And, they may start badging it Baojun rather than Wuling. Makes sense. The Wuling name stands for workhorse small commercial vans. SGMW is marketing the Hong Guang as a sophisticated business car that can double as a family van on weekends.
SGMW sold 258,678 Hong Guangs in January through October of 2012, according to LMC Automotive. No comparison figure was available. Wuling’s aging Sunshine minivan is still SGMW’s best-selling model at 442,593 units sold in January through October of 2012. But that was down 27% on-year. The king is dead, long live the new king!
SGMW isn’t giving up on the Sunshine. It will continue to sell well — albeit at a declining rate — for many years. So SGMW is building a new plant in the inland China city of Chongqing. Sources tell me Sunshine production will be transferred there. http://www.reuters.com/article/2012/11/28/us-gm-china-idUSBRE8AR0LV20121128 The plant, which will begin producing minivans in 2015, will have a 400,000 unit capacity and also produce 400,000 engines annually. A side note: Chongqing is home to Changan, another large minivan producer. A source tells me that the Chongqing government asked SGMW, “Why are you doing this?” when the new plant was announced. SGMW said it considered Chongqing and Chengdu as locations, but decided Chongqing was superior. I’ll bet it is. It has a ready supplier base, courtesy of Changan and joint venture partner Ford as well as good logistics, courtesy of Ford and Changan. Hey, nobody said business was friendly.
Meanwhile, back in Liuzhou, where SGMW is located, capacity has been cleared to produce lots of Hong Guang compact business vehicles. Indeed, space being used to produce the Baojun passenger cars is available now, Also in November, SGMW opened a new 400,000-unit plant in Liuzhou to produce passenger cars. http://media.gm.com/content/media/cn/en/gm/news.detail.html/content/Pages/news/cn/en/2012/Nov/1118_Wuling.html
As for the Hong Guang, SGMW is already exporting the vehicle to multiple countries, including India, where it is assembled from a kit and badged a Chevrolet. . But trouble is brewing in India between GM and SAIC. In October SAIC divested itself of shares in the GM-SAIC joint venture in India, reducing its stake to 7% from 50%. The China Daily said SAIC did so after the JV failed to make a profit but sources tell me SAIC wants to market its own brand cars in India. http://www.chinadaily.com.cn/cndy/2012-10/29/content_15852533.htm
Which brings me back to speculation about why Bierzynski was moved to SGMW. He has years of experience working with SAIC – he was head of PATAC, GM and SAIC’s 50-50 research and engineering venture, after all. Seems his diplomatic skills may be needed to preserve the partnership as SGMW boosts it exports. He may need a strong liver, though. Those talks may involve some long nights over bai jiu.
General Motors www.gm.com plans to export lots of vehicles from China, and some of them will be badged Chevrolet. But the joint venture that produces those vehicles won’t be Shanghai GM, GM’s flagship venture in Shanghai with SAIC. The vehicles will be produced by SAIC-GM-Wuling Automobile Co, GM’s venture with Wuling Motors and SAIC www.saicgroup.com . A lot of exciting stuff is happening at SGMW these days, and the JV is worth keeping a close eye on.
Few casual observers of the Chinese auto market realize how crucial SGMW www.wulingmotors.com has been to GM’s sales growth in China. Of the 2.33 million vehicles GM sold in China in the first ten months of this year, 51% were produced at SGMW. http://media.gm.com/media/cn/en/gm/news.detail.html/content/Pages/news/cn/en/2012/Nov/1105_Oct_Sales.html A lot of those vehicles didn’t have a GM-brand badge on them, though the venture is producing Chevrolet models. They were badged Wuling and Baojun.
I have long kept my eye on SGMW. But I realized just how much importance GM was placing on this venture in October when GM announced that Ray Bierzynski, one of its most able and China-savvy executives, had been appointed executive vice president of the venture. http://media.gm.com/media/cn/en/gm/news.detail.html/content/Pages/news/cn/en/2012/Oct/1012_Bierzynski.html I’ve known Ray since the mid-2000’s when he assumed the leading role at PATAC, www.patac.com.cn the GM-SAIC design and engineering joint venture in Shanghai. More recently he served as executive director of electrification strategy for GM China. Why would a man with Ray’s background be sent to Wuling, I mulled? Now I think it is because SGMW is set to become a big export base for GM in China and GM wanted to send a very capable guy to oversee that expansion.
Among other recent SGMW news: In August, GM announced the Lechi mini car built on the Daewoo Matiz platform (can you say Chevrolet Spark?) was being rebadged Baojun. http://media.gm.com/media/cn/en/gm/news.detail.html/content/Pages/news/cn/en/2012/Aug/0815_Lechi.html Baojun is SGMW’s own brand; it targets buyers in China’s second- and third-tier cities. The Lechi minicar is also “GM’s new global strategic product,” according to SGMW website. (It was previously being produced at SGMW but badged a Chevy).
In mid-November, SGMW opened a new 400,000 unit passenger car production base “initially” producing Baojun brand cars. http://media.gm.com/media/cn/en/gm/news.detail.html/content/Pages/news/cn/en/2012/Nov/1118_Wuling.html It is also building an engine plant with annual capacity of 400,000 due to begin operating in September 2013. Adds the press release announcing the new plant: “SGMW also plans to enhance its R&D capability …. Integrating engineering design and testing resources, and establishing a systematic capability for product development and technical research. The aim is to fully support the overall development strategy of SGMW by helping it achieve 2 million annual vehicle sales goal (and) grow its export business.”
SGMW is counting on exports – badged Wuling and Chevy and Baojun — to help reach that 2 million unit sales goal. GM China spokesperson Dayna Hart wrote in a November 20 email to me that in 2012 SGMW has exported 12,773 units year-to-date. The list of countries SGMW exports to – and its exports in general– is growing. SGMW models badged Chevrolet are exported to 15 markets through GM’s Chevrolet distribution channels. “Our export models fill a gap in the existing Chevrolet portfolio in other market,” she wrote in the email. Yeah, a gap for inexpensive minivans and trucks! Those Chevy-badged exports are Wuling products.
As for Wuling-badged models, they are exported to some 40 countries overall, says the SGMW website.
The exported models are segment leaders in Chile, Ecuador, and Colombia, said Hart, and are in the top six in their segment in other markets such as Egypt. As you may have figured out, the SGMW-produced cars are mainly exported to developing countries. But the U.S., Japan, Germany, and the U.K. are also among the 19 country sites on the SGMW site. So at least a few of the exports are also going to developed countries, it seems. SGMW has even exported at least several hundred minitrucks or vans to the U.S.
Most of those exports were minivans and minitrucks. But you can bet GM aims to export growing numbers of mini cars and even compact sedans such as the Baojun 630, a model based on the same platform as the Buick Excelle platform. I mean exports to all destinations, not just the U.S…..
A bit about Liuzhou Wuling and the SGMW joint venture. Launched in November of 2002, SGMW was formed with investment from GM, SAIC, and Liuzhou Wuling Motors Co. Ltd. Wuling was as China’s largest maker (and seller) of minivans – known in China as mianbao che, or “bread box cars.” At the time it was formed GM had only a 34% stake in the joint venture. SAIC had 50.1% and Wuling 15.9%. In late 2010, however, GM boosted its share to 44%, leaving Wuling with 5.9%. SGMW produces China’s best-selling minivan, the Wuling Sunshine. In 2011, it sold 731,749 Sunshine minivans down3%. In the first ten months of 2012, SGMW sold 442,593 Sunshine units, down 27%. Minivan sales were boosted artificially in 2011 by a government rebate program.
Liuzhou Wuling was China’s largest minivan manufacturer before the joint venture formation, but it transferred most of that business to the joint venture. The state-owned Chinese company seems to have merged in 2007 with Dragon Hill Holdings Ltd. and transformed into Liuzhou Wuling Automobile Industry Co. Ltd. www.wulingauto.com.cn The new entity produces electric vans, trucks, and pickups (some of which are exported to the U.S. and sold through EcoCentre dealerships. www.ecocentre.us See my earlier blog on that topic). It also produces components including brakes, axles, pressing and jointing parts, instrument panels, seats, and door winder assemblies. SGMW is among its customers. And, it produces gasoline engines.
Given that Ray Bierzynski just came off an assignment as director of electrification strategy for GM China, I’ll be interested to see if SGMW now starts producing electric vehicles, too. But I’ll be more interested to keep following SGMW’s development overall. I predict big things for the venture in the not-too-distant future.
I visited Liuzhou Wuling in the south China province of Guangxi in 2001 before it had officially become GM’s partner. At the time I interviewed Wuling president Shen Yang and toured the Wuling production line. Shen at that time wore fairly tacky Chinese suits, had bad teeth, and wore transparent Chinese socks. The plant was already transforming. Though the building exterior was old and the machinery inside somewhat out-of-date, the manufacturing process was already changing over to GM’s system. Red lines delineated where visitors could walk, signs noted how many injury-free days the plant had recorded. I’m sure there were many other changes I couldn’t see.
I ran into Shen Yang, who is now president of the JV, at the Shanghai Auto Show five or six years ago. He was wearing a very nice suit; I’m guessing his socks weren’t see-through and his teeth were perfect. In Liuzhou, Wuling has built a new plant and is adding another. I’ll have to visit again to see the changes for myself.
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….)
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 ….
Liuzhou Wuling Motors Co. http://www.wulingauto.com.cn/en/index.aspx is breaking into the U.S. market with low-speed electric vehicles! And they are being sold through regular car dealerships, by established car dealers. I visited the first EcoCentre dealership, located in Irvine, CA, in October. I came away thinking it is a formula that might succeed. But it will still be a tough slog to make it work.
The Wuling name is familiar to many of you because of the SAIC-General Motors-Wuling joint venture www.sgmw.com.cn that produces minivans and a mini car under the SGMW badge and now cars under the Baojun name. Liuzhou Wuling also exists as a separate company; that is who Bill Fisher, the man who is spearheading the Wuling EV venture, deals with.
A bit of background on both Wuling and Fisher. I was the first foreign journalist to visit Wuling in 2001, when the SAIC/GM/Wuling venture was just being formed. I interviewed Shen Yang, then president of Liuzhou Wuling. I believe he is head of the group now. Even then, the GM influence was apparent on the plant floor. The production line was in an old building with a railway track outside so rail cars full of coal could bring power to the plant. But inside the plant was clean and organized, with red lines showing where non-production personnel and visitors should walk and a sign keeping track of days without a worker injury. Those old buildings and production lines have been replaced by new, fully modernized buildings and equipment now, says Fisher.
As for Bill Fisher, I met him in Shanghai about eight years ago. Fisher is CEO of AmAsia International, the Florida-based importer of the electric vehicles. I admit to some skepticism when I first met him about Fisher’s dream of importing Chinese vehicles. And he has had some dead-end ventures. But Bill stuck with it, which makes me respect him. In China, he works with Frank Chou, a retired GM executive and generally great guy.
Fisher’s idea this time is to import low-speed electric fleet vehicles produced at Wuling and sell those vehicles badged as the “Eco” brand through a chain of EcoCentre dealerships. The Eco brand products currently are the EcoVan, the EcoTruck, and the EcoE mini-car, three pure electric vehicles produced in China by Liuzhou Wuling. They range in price from $9,995 for the EcoE to $17,995 for the EcoVan. Target customers are municipalities, universities, medical schools and the like, all of which have large fleets of low-speed vehicles.
If you are from China or have spent time there, the EcoVan and the EcoTruck would look familiar. The EcoVan is based on the Wuling Sunshine van, only it has a 96-Volt battery instead of a gasoline-fueled drivetrain. The EcoTruck is based on Wuling’s D150 truck, says Fisher. The EcoE is a mini car that Fisher says he worked with Wuling to develop. Fisher says he has the western hemisphere distribution rights for these Wuling vehicles.
In turn, Fisher has appointed Ramon Alvarez as his representative in the U.S. Alvarez has trademarked the Eco brand name and is finding dealers to open EcoCentre dealerships http://www.ecocentre.us/EcoCentre/index.php to sell the Eco brand. Alvarez has been in the car business in California for 30 years. He owns Lincoln http://www.alvarezlm.com/ and Jaguar dealerships in Riverside, he is president of the state’s New Motor Vehicle Board, and he helped found an alliance of minority dealers. So he had some cred in the dealership world.
The vehicles I saw in Irvine, California were not the first Wuling vehicles Fisher has brought to the U.S. He started importing the vehicles some five years ago, and worked with several other distributors before starting the EcoCentre concept. Why didn’t he start out selling Wuling vehicles through established dealerships, I asked Fisher? “At the beginning, I don’t think our vehicles were prepared,” he said. “The drivetrains weren’t sophisticated enough to merit being sold in a dealership.” But Fisher worked with Wuling to make improvements such as replacing the 72 volt battery with a 96 volt battery, he says. Then he started lining up auto dealers here in the U.S. to open EcoCentres.
Alvarez sees gold in the inexpensive Wuling vehicles. “If you sell 30 of my cars a month you are going to make $100,000” a year, he said. That optimistic estimate relies on dealers tapping into their local communities, finding universities, municipalities, and others to buy the inexpensive EVs. “Not everybody can buy a Volt but a lot of people can buy a $9,995 car,” said Alvarez.
Denice Fladeboe Mock, president of the Fladeboe Automotive Group in Irvine, Calif., is the dealer principle at the first EcoCentre store, in Irvine. “I have always been involved in green things,” said Mock. “Ramon approached me and I liked his concept.” Mock is also selling another China-made product in her store –she is also a Coda www.codaautomotive.com dealer and the body of the Coda sedan is produced at Hafei Motors in China.
Mock has no worries about selling the Wuling electric vehicles. “Ramon has really done his research,” said Mock. She figures her location is a “perfect storm” for reaching fleet customers. The University of California Irvine is nearby, as are a medical center and numerous corporate campuses. But Mock doesn’t see sales immediately skyrocketing. She will do a lot of grassroots marketing, said Mock. “I don’t think the EV market will grow really fast. My job is to educate the public.”
Alvarez will open EcoCentre dealerships in some half dozen Southern California cities in the next year. A Glendale dealer just finished his training and will open in early December, says Alvarez. A Riverside dealer just signed on, and Alvarez says he is in discussion with dealers in several other cities. This is just the beginning of his master plan. “We plan to have conservatively 175 to 200 (dealerships) in a five year plan,” said Alvarez. And he isn’t stopping with small low-speed vehicles. Alvarez asked me if I knew of any Chinese companies making good quality medium-speed electric vehicles that he could sell in his stores.
I have some faith in Wuling’s quality. It has worked with GM for years, after alll. But I think Alvarez will have a harder time finding a high-quality medium-speed product in China. In any case, first he needs to concentrate finding dealers to sell the three models he has. I’ll check back with him — and the dealers — in a few months and report on the progress!
The Chinese government’s recently-announced plan to promote the growth of the EV sector http://www.greencarcongress.com/2012/07/china-20120709.html in China has created a risky environment for foreign companies with EV technology. It has also created a lot of opportunity for such companies. The saga of U.S. PHEV-drivetrain manufacturer ALTe www.altellc.com illustrates both the risk and the opportunity. It should be a cautionary tale for foreign companies that are looking to China to sell or license their technology.
A few days ago I talked with John Thomas, ALTe co-founder, president, and CEO about its recently announced agreement to form a $200 million joint venture in China. http://www.altellc.com/?p=1054 Turns out ALTe had already been stiffed by several Chinese investors by the time it signed the announced agreement. Thomas is hoping the third time will be the charm for his company. He related the fascinating saga of how ALTe ended up partnering with a Dubai investor and unnamed Chinese investors to convert medium-duty buses and trucks in PHEVs and hybrids.
On February 13, ALTe signed a letter of intent with a Chinese billionaire it met during Chinese vice president Xi Jinping’s February visit to the U.S., Thomas told me. http://www.reuters.com/article/2012/02/17/us-china-xi-economy-idUSTRE81G1JY20120217 But those funds failed to materialize by April 13, the agreed-to date, despite a trip to China to confront the investor. Another Chinese billionaire on Xi’s trip had also expressed an interest in working with ALTe, but he also failed to come through, said Thomas.
Fortunately, ALTe had already been approached by another investor, S. Moody Alavi, managing director of MESA Century New Energy Technology Inc. Alavi, who has bases in Dubai and Atlanta, was shifting his investment strategy from mostly commodities such as copper to include companies such as ALTe, said Thomas. So Alavi had a track record and he frequently worked with one of ALTe’s main investor, Simon Ahn of Atlanta, GA. When the second Chinese investment deal fell through, ALTe jumped on the Alavi offer. The parties didn’t bother with a letter of intent and the deal was sealed quickly, said Thomas.
The parties in the $200 million joint venture are ALTe, Alavi, and unnamed “private” Chinese investors. I put private in quotation marks because I’m pretty sure those Chinese investors are actually investment vehicles for the municipal or provincial government where each of the joint venture’s four plants will be built. One site has been announced, Shunyi, a Beijing suburb which also houses the Daimler-BAIC joint venture, among other companies. That site will be greenfield, said Thomas. Two other sites will use existing plants, he said. The fourth site has not been finalized.
A big part of ALTe’s contribution to the JV is engineering, “essentially a technology license,” said Thomas. Of the $200 million, $70 million will go to the U.S. to finish the production engineering. ALTe, based in Auburn Hills, Michigan, will nearly triple its staff to around 150 people, Thomas said. The JV will do some R&D in China, as well, he said. The aim is to make a powertrain that can pass U.S. certification so vehicles using it can be exported if and when the JV wants to do that, he said.
A bit of background on ALTe: ALTe retrofits vehicles that run on gas or diesel with plug-in electric drivetrains. I attended an ALTe press event in the Los Angeles suburbs in May 2012. See earlier ChinaEV blog on that event. (Thomas was not at that event and several of the executives who were there have since left ALTe.) Around the same time, I talked with Simon Ahn, http://www.ahnlawfirm.com/ the attorney in the Atlanta area who had invested nearly $20 million into ALTe. He said was impressed with the experienced management, and the “seven million lines of code” that make ALTe’s drivetrain work. “I saw ALTe technology as something really valuable,” Ahn told me. ALTe needed more funding, and Thomas told me ALTe was talking to Chinese investors. Meanwhile, it was getting funding from Chinese and Korean businessmen looking to obtain a U.S. visa, said Thomas. That requires an investment of at least $500,000 in a U.S. company, and job creation.
At that time (i.e. late May), ALTe’s target customers were fleet vehicles at U.S. companies such as PG&E http://www.pge.com/myhome/environment/pge/fleets/ and FritoLay. http://www.fritolay.com/about-us/press-release-20120810.html A Ford Econoline Doritos delivery van with an ALTe drivetrain was at the event, as was a retrofitted Ford F150 pickup. ALTe execs said the company was in discussions with Ford Motor Co. about becoming a Qualified Vehicle Modifer. But that process wasn’t very far along at all, I learned by asking around. Pacific Gas &Electric was (and is) testing some vehicles with an ALTe drivetrain in its fleet. In any case, the U.S. projects are on hold now, Thomas told me. “We are shifting our U.S. plans for range-extended PHEV here back one year to emphasize the China orders first,” he said. “The entity with funding gets priority.”
Well, I’d say the Alavi group is a pretty good bet but it remains to be seen if the Chinese investors will come through with funding. It also remains to be seen if China’s central government will wholeheartedly implement the EV sector plan. ALTe better hope it does – the U.S. company is betting its future on the belief that China’s government will make good on its plan to produce 500,000 BEVs and PHEVs by 2015. Thomas said he has met with some high-ranking Chinese officials and others and they are through with throwing money at poorly-executed plans. They are determined to get it right this time, he said. “They have given hundreds of millions of dollars to (state-owned enterprises) and they have failed,” said Thomas. “The powerbrokers and money providers have said we are done, we are going with outside stuff.” But will they actually start producing EVs in volume?
As for how ALTe will compete against the many other foreign companies vying for business in China, Thomas said ALTe is the only one making a complete powertrain system. Other foreign companies that have Chinese investors, such as Boston Power www.boston-power.com and Protean Electric www.proteanelectric.com , could potentially be ALTe suppliers. “We are passing an awful lot of our revenue to component suppliers,” he said.
The agreement says production must begin no later than 12 months from funding. The Chinese investors are pressuring ALTe to start as soon as possible, said Thomas. He is trying to explain to them why it takes time to get it right. “We are trying to balance speed with risk,” he said. Hope the Chinese funding sticks around long enough for the JV to turn out a world-class vehicle. I’m not sure it will.