China is committed to having an electric vehicle industry. But just what kind of EVs it wants, and when, is still being decided. Meanwhile, investors looking to cash in on China’s EV industry seem to be looking for a good way to benefit from a yet-to-be-finalized government policy.
Take vehicle producer Kandi Technologies (KNDI). www.kandivehicle.com Its stock price has surged recently. http://www.nasdaq.com/symbol/kndi/stock-report The stock, traded on the Nasdaq exchange, closed up 11.41% as I write this on July 26. What prompted this surge? News of Kandi’s delivery of 100 pure electric vehicles to the Hangzhou EV sharing system. http://www.nasdaq.com/press-release/kandi-technologies-announces-the-delivery-of-first-100-kandi-geely-co-developed-pure-evs-for-the-official-launch-of-hangzhous-public-ev-sharing-system-20130726-00318 That’s a pretty small number. But, Kandi said it will deliver up to 10,000 EVs within a year. This from a company that sold fewer than 4,000 low-speed electric vehicles in 2012.
So is the stock surge that justified? No way. We have no proof yet that Kandi is able to turn out a quality BEV. It is better to wait and see with Kandi, methinks, unless you have a big appetite for risk.
I sent a rash of questions to Kandi’s New York-based IR folks to try to get a better feel for the company and its products. Besides asking if the 100 BEVs were low-speed (“we don’t have such information available to the public yet” I was told), I asked these questions:
- China’s central government has not issued new guidelines for subsidies for electric vehicle purchase. How important are subsidies to Kandi’s growth?
- How large do subsidies for pure-electric vehicles need to be to significantly boost demand?
- Does Kandi think leasing or selling electric vehicles is the best business model?
- Will individual buyers or fleets ultimately be the largest market in China for pure electric vehicles?
- Does Kandi have plans to enter the fleet market and if so with what type of vehicle?
- ZZY EV, the company that is buying some BEVs from Kandi to use in Hangzhou, expects to deploy 5,000 to 10,000 rental EVs within one year. So is it closer to 5,000 or 10,000?
- Will all these vehicles be provided by Kandi?
- Go-karts still represent the majority of Kandi’s production. Yet Kandi has been aggressively adding EV production capacity at a several locations. What makes Kandi think it can produce high-quality pure electric vehicles in volume?
- When might we see Kandi EVs for sale in the U.S.?
The IR folks answered none of my questions. The reply: “Many of your questions are not yet publicly disclosed. We are now in the preparation for upcoming 10Q. Our legal counsel doesn’t encourage us to participate in any interview at this moment.”
I am not sure that the 100 BEVs Kandi delivered to Hangzhou are the same as the Super-mini cars like the one below. But they probably are.
I await with great interest the next filing from KNDI. Do I think all my questions will be answered? Hardly. Next time I am in Shanghai I must try to arrange a visit to Kandi in neighboring Zhejiang. Meanwhile, Kandi’s existing filings offer some a somewhat disturbing picture, or at least it disturbs me. Maybe I have spent too much time in China and seen too many big words from companies followed by small actions. Nonetheless, I take the caveats in Kandi’s filings with the U.S. Securities and Exchange Commission very seriously.
A little background: Kandi is a vehicle manufacturer based in the east China province of Zhejiang. Its primary business is still the production of go-karts, with a healthy serving of All-Terrain Vehicles thrown in. The two accounted for 81% of Kandi’s revenue in 2012.
Its electric vehicle business does seem to be picking up, however. Although sales to Hangzhou have just begun, according to the numbers in Kandi’s SEC filing for 2012, revenues from its pure electric Super-mini cars nearly tripled to $19 million in 2012 compared to 2011. I’m pretty sure the Super-mini cars are low-speed urban BEVs.
I am not sure who bought the 3,915 EV units Kandi reports selling in 2012 (compared to 1,077 units in 2011). But, says the 2012 10K, “this increase (in EV sales and revenue) is primarily a result of certain beneficial local government policies that encourage the development of EVs.” Indeed, the price of the Super-mini cars decreased in 2012 because Kandi “adopted a new battery exchange business model” and started selling BEVs without the battery, says the 10K. How much, then, of the EV revenue was government subsidies? Hard to know.
Kandi does warn that that China’s EV market is heavily dependent on government policy: “The Company’s EV products currently are mainly sold to Chinese domestic market, and the EV industry is supported by the Chinese central and local governments. Therefore, our EV products performance is significantly affected by the policies adopted by Chinese central and local governments. Any significant adverse changes in the Chinese governments’ supporting policies may negatively affect our results.” http://blogs.worldwatch.org/revolt/chinas-electric-vehicle-development-failing-to-meet-ambitious-targets/
So the growth of the EV market is uncertain. Still, Kandi has added production capacity quickly. In April, it announced the establishment of two plants with 100,000 unit capacity each to products EV key components and parts. Does that mean EVs? Not clear. At the same time, Kandi also announced a 100,000-unit EV production line opening.
Additional red, or at least pink, flags in the SEC filings: Kandi funds a substantial portion of its operations through short-term bank loans, a pretty expensive way to grow. And risky given the current crackdown on risky lending by China’s central government.
According to Kandi’s SEC filing for Q1 2013 operations:
“As of March 31, 2013, the Company has credit lines from commercial banks for $54,126,337, of which $32,794,193 was used at March 31, 2013.”
It continues: “Historically, the Company has financed itself through short-term commercial bank loans obtained from PRC banks. The terms of these loans are typically for one year; upon our payment of all outstanding principal and interest in a respective loan, the PRC banks have typically rolled over such loans for an additional one-year term, subject to interest rate adjustments to reflect prevailing market rates. The Company believes these lending arrangements have not changed and that short-term bank loans will continue to be available on customary terms and conditions.”
Then there are the off-balance sheet obligations: Kandi serves as guarantor for some $20 million in bank loans to other companies. It has also pledged some $6.2 million in land rights, plants, and equipment as collateral for other loans. Those companies also guarantee Kandi’s loans. Sort of like a pyramid scheme.
Said the SEC filing: “It is a common business practice among companies in the region of China where Kandi is located to exchange guarantees for bank debt with no consideration given. It is considered a “favor for favor” business practice and is commonly required by the lending banks as in these cases. These companies provided guarantees for the Company’s bank loans as well. The banks involved in these guarantee transactions typically allow a maximum loan amount based on a 30% to 70% discount on the net book value of the pledged collateral.”
Kandi isn’t going it entirely alone in the EV world. A few months ago it announced a joint venture with Maple Guorun, a subsidiary of China’s Geely Automobile Holdings Ltd. to produce electric vehicles. The JV just received government permission to produce an electric sedan, which qualifies it to receive purchase subsidies. http://green.autoblog.com/2013/03/30/geely-kandi-ev-partnership-electric-vehicles-china/
That didn’t move its stock as much as the 100-EV delivery, however. Investors may have realized they were exhibiting irrational exuberance. It is a few days later (Monday) as I finish this blog. Kandi’s stock is down 0.38%. Perhaps the market is also becoming skeptical, but not very….
China’s Beijing Automotive Industry Corp – BAIC – is owned by the Beijing Municipal government. Given the central government’s plan to produce millions of electric vehicles, an automaker owned by its hometown should be at the forefront of electric vehicle production right?
Yeah, it should be, but it isn’t. That is likely partly due to technical restraints, but also because BAIC executives are likely also unenthusiastic about producing a product they see little demand for. Even state-owned enterprises like to make money. And since BAIC wants to list its passenger car subsidiary in Hong Kong, it would like to have a product portfolio that appeals to investors. http://www.bloomberg.com/news/2013-03-06/beijing-auto-to-list-car-unit-in-china-after-hong-kong.html
Even if it isn’t actually producing many EV, however, BAIC has been throwing money at the EV sector over the past few years including construction of a huge R&D center and a battery plant and an EV production plant, according to my industry friends in China. They aren’t sure if BAIC is actually producing much in those plants, however. And now BAIC apparently wants to waste even more money by purchasing Fisker Automotive. www.fiskerautomotive.com Not exactly a way to build investor confidence, I’d say. http://www.autoweek.com/article/20130717/CARNEWS/130719842
BAIC said in November of 2012 that it would invest 1.7 billion RMB through 2015 in research and production of new-energy vehicles. http://www.chinadaily.com.cn/china/2012-11/08/content_15891837.htm That would be used to construct three plants with total production capacity of 150,000 units. The plants would produce hybrids, PHEVs, BEVs, and fuel-cell vehicles. That’s pretty ambitious, but as no details were given it leaves plenty of wiggle room as to what type of EV the plants will actually produce. BAIC can wait to see what technology is most supported by the central government. Meanwhile, BAIC already has a plant in the Beijing suburbs to produce key components.
According to the local media, BAIC in 2012 produced 1,200 new energy vehicles. In 2013 it aims to produce 3,000 to 5,000. http://www.chinaknowledge.com/Newswires/NewsDetail.aspx?Cat=RND Those aren’t hugely ambitious production targets, but it also aims to have sales revenue of 1 billion RMB, which seems pretty much impossible given nobody wants to buy new energy vehicles. The central government should buy them, setting an example for the country. But it has not been especially vigorous in electrifying its fleets, indicating that it doesn’t have much confidence in the technology either.
What would BAIC obtain if it bought Fisker Automotive? Fisker laid off most of its engineers and other staff, so BAIC wouldn’t get that. It is most interested in the Atlantic, the sedan that Fisker wants to produce next, say reports. Henrik Fisker or the company itself must own the patents for some of the vehicle’s design. That could be useful to BAIC. I hear that Fisker doesn’t own much of the IP for its electric drivetrain, however. That is what made it less appealing to other Chinese suitors including Geely and Dongfeng. And the Fisker brand name isn’t exactly stellar given that the company failed.
BAIC could, however, rehire some of Fisker’s engineers. Or use its own engineers to re-start the production process. And it could turn out some nice looking – if not top-notch in quality – plug-in hybrid electric vehicles. Perhaps BAIC figures that it could enter China’s luxury segment with a PHEV using Fisker’s designs. The luxury segment is showing stronger growth than the auto market as a whole, and should continue to do so. But the BAIC brand doesn’t carry much cachet. And Chinese who could afford to buy a BAIC Fisker would know Fisker’s history, which includes quality problems. Is that worth the millions BAIC would have to pay for Fisker? I’d say not.
Then there is the question of whether BAIC would be allowed to buy Fisker. The PHEV maker received $192 million in federal funding. http://articles.latimes.com/2013/apr/22/autos/la-fi-hy-fisker-misses-federal-loan-payment-20130422 Would BAIC have to pay this back if it bought Fisker? In any case, if Wanxiang’s purchase of A123 is any indication, some congressmen would raise a real outcry at any move to allow BAIC buy Fisker. It might eventually succeed in buying Fisker, but BAIC should consult with Wanxiang America’s president Pin Ni before making any moves…. Actually Ni might welcome a BAIC purchase of Fisker. Fisker was the main customer for A123’s batteries. He could give BAIC free advice re: navigating congressional shoals. http://www.a123systems.com/about-us-asset-purchase-agreement-and-chapter-11-filing.htm
BAIC deputy general manager Zhang Xin recently said he aims to have an EV that can compete against the Tesla Model S by 2015. http://english.peopledaily.com.cn/90778/8330202.html Some in the U.S. press seems to be under the impression that Zhang mean compete against Tesla in the U.S. Of course he didn’t mean that. He means he wants to build a car that can compete with the Model S, but sell it in China. A Tesla spokesperson said “we plan to enter the (China) market in Beijing when we are ready.” When Tesla does enter the China market it seems unlikely that BAIC can compete against it. Technology aside, there is the question of brand name, marketing, and customer experience. At least Zhang has a high benchmark. Will buying Fisker advance that goal? I don’t think so.
Is China backing off its push to have millions of electric vehicles on China’s roads in the next ten years? Not exactly. But recent statements by government officials do signal a change in strategy.
China is moving towards a plan which doesn’t see purchase incentives as the best way to encourage the EV market in China. Instead, it will aim for more support for research and development of fuel saving technologies. There are caveats, however.
That may come as a surprise to some readers who don’t obsessively follow China’s EV adventures. After all, wasn’t China going to have 5 million EVs on the road by 2020? http://www.nytimes.com/2009/04/02/business/global/02electric.html?_r=0
Well, just because the China’s central government declares something will happen doesn’t mean it will. There are barriers such as oh, science and technology, to overcome. And since this isn’t 1958 and this isn’t the Great Leap Forward, China’s leaders sensibly altered their plan. Crossing the river by feeling for the stones and all.
More recent policies have more strongly supported (in words, anyway) plug-in hybrids and even regular hybrids. No leapfrogging there, but the technology is mature and consumers will more readily accept it. And it will result in more fuel economy more quickly. Meanwhile, China can work on pure electric vehicle technology.
If you are a Chinese automaker, or a foreign automaker producing cars in China for that matter, this method of policy making can be annoying to say the least. Product cycles are not a stone in the river. So China’s automakers have paid lip service to producing electric vehicles while doing little. That is still pretty much the case, according to my sources in China. They aren’t rushing to produce EVs.
China’s domestic automakers ought to stop waiting around for the government to make a decision and start developing their own regular hybrid technology, scolded Dong Yang, secretary general of the China Association of Automobile Manufacturers, in mid-May. (Which calls to mind, my mind anyway, a saying: “Either s*** or get off the pot.) They are getting left behind, he said.
“As far as energy savings are concerned, for the next ten years hybrid technology is the most important area in new energy vehicles. The domestic brands shouldn’t just keep staring at the direction of government support policies, they ought to grasp research and development of hybrid technologies,” Dong was quoted as saying. http://news.xinhuanet.com/auto/2013-05/15/c_124713039.htm
OMG! Wasn’t the government negative on regular hybrids just a few years back since that technology has already been developed by foreign companies?!? Well, yes. But the goal is not just to make China a technical leader in the EV world; it is also to reduce its dependence on foreign oil. China’s government now realizes that those two goals will not be achieved simultaneously. China’s leaders – including former premier Wen Jiabao – even said that China should get the alternative fuel vehicle from foreign companies if necessary.
In late May, Wan Gang, head of China’s Ministry of Science and Technology, said almost exactly the same thing as CAAM’s Dong, that R&D was more important than subsidies. The China Daily quoted Wang as saying: “The government is unwavering in its commitment to the industry, but EV makers should never count on subsidies to survive.” Wan, who was speaking at an international forum on electric vehicle pilot cities in Shanghai, said it is “imperative” for companies to boost their research and innovation capabilities. http://europe.chinadaily.com.cn/business/2013-05/31/content_16550740.htm
And, in a statement equivalent to the U.S. Federal Reserve saying it would stop pumping money into the economy (well, not quite the equivalent, but in the China EV world still pretty significant), Wan said purchase subsidies would likely be phased out by 2020. Like the Fed — which later clarified its policy by adding that stimulus would end only if the economy continued to strengthen – Wan said EV incentives would be phased out if operating expenses could be lowered and the market could be expanded. Still, his words were a clear indication of where the government wants the EV market to go. http://www.chinadaily.com.cn/bizchina/motoring/2013-03/18/content_16317590.htm
Meanwhile, word is out that the central government will soon announce a new electric vehicle subsidy policy. (Wan declined to comment on this.) The old policy, which offered subsidies of 60,000 RMB for pure electric vehicles and 50,000 RMB for certain hybrid vehicles, is expected to be expanded to include more substantial subsidies for plug-in hybrid electric vehicles and even regular old hybrids. The new policy will incentivize vehicles based on how much energy usage is reduced rather than the technology used, Miao Wei, head of the Ministry of Industry and Information Technology (MIIT) was quoted as saying. Of course, he also said the policy would be out in June. I write this on July 1 and no policy yet…. http://www.theicct.org/blogs/staff/china-shifting-performance-based-incentives-vehicle-efficiency
Still, it is step in the right direction. Choosing technology winners hasn’t worked for the Federal government here in the U.S.; nor has it worked for the central government in China.
Here in the U.S., some local governments have been trying to expand EV ownership by installing charging stations and the like. China’s local governments have also been trying to encourage EV ownership, but with more heavy-handed policies. The jury is still out on how effective those policies will be.
Shenzhen comes to mind first. As it is home to BYD, the government has a vested interest in growing EV sales. BYD pays taxes in Shenzhen and employs people, after all. So the Shenzhen government has been buying (I guess) BYD EVs. The Shenzhen police are driving about in 500 BYD battery-electric vehicles. They join 300 BYD e-taxis; Shenzhen aims to increase that number to 3,000. E-buses are planned to hit 7,000. Those are big plans; right now there are only 3,850 new energy vehicles in the city’s fleets, or 12.6% of the total. http://www.businesswire.com/news/home/20120224005686/en/World%E2%80%99s-Largest-All-Electric-eBus-eTaxi-Fleets-Expanding
Among the other measures Shenzhen has taken: Banning high-polluting vehicles from the road between 7:30am and 7:30pm on designated days; additional subsidies on top of the central government subsidies; and preferential access to special lanes.
Shanghai, where the government-owned SAIC produces electric vehicles, will waive license plate fees owners of a pure electric vehicle. Coincidentally, Shanghai Auto began selling the Roewe E50 EV around the time the policy was announced. Waiving the license fee is a significant perk. Shanghai has long limited the number of license plates available; a limited number are auctioned off monthly in Shanghai and can cost more than a small car. The municipal government also offers electric vehicle purchase subsidies of up to 40,000 RMB. http://english.eastday.com/e/121229/u1a7095509.html
Other local governments are also implementing regulations aimed at reducing congestion – and sometimes encouraging EV purchases by exempting EVs from those regulations. In Guangzhou, the right to register a car is now handed out by lottery; only 10,000 a month are allowed to register. http://www.chinadaily.com.cn/business/2012CEWC/2012-12/11/content_16007414.htm Beijing and Guiyang have similar restrictions. And electric vehicle owners can bypass the lottery system in some cities. Beijing has said electric vehicles will soon be able to get license plates without a lottery and be eligible for a 60,000 RMB rebate, for example. http://www.chinaev.org/DisplayView/Normal/News/Detail.aspx?id=16516
I doubt these policies will make much difference, however. A story in China’s Sohu Auto (which I found reproduced on the site ChinaEV.org) summed up the problem well. It focused on Beijing’s plans to implement various policies to boost EV uptake.
The three big failings of efforts to “marketize” EVs are: EVs aren’t dependable; EVs have limited range; EVs price is high, it said. “The chance that electric vehicles will be able to replace traditional vehicles in the short term is remote,” the story concludes.
If they replace a few of the traditional vehicles, however, China may claim victory. And why not?
There are only a few plug-in electric vehicles on the market, but more are on the way. Meanwhile, there are already dozen of chargers out there, also known as Electric Vehicle Supply Equipment (EVSE). Sure, the EV manufacturer recommends a certain brand. But there are so many to choose from, and others that claim to be compatible with your brand of PEV. How to know if an EVSE really is compatible with your PEV? There’s a box for that. It doesn’t work in China, though, because China doesn’t have an EVSE or plug standard yet….
Gridtest Systems Inc. www.gridtest.com of Westlake Village, CA makes an “EV in a box” test system that is says can determine if an EV and an EVSE will work smoothly together. It has versions that are designed to work in the lab and in the field. The yellow box, also known as the EVE-100, which runs about $3,900, serves a dual purpose, testing both compatibility and safety, says Gridtest CEO Neal Roche. “We run about 20 tests on the interface and make sure it is compliant to standard and that it de-energizes when it is supposed to,” he says.
The company, which was founded two and a half years ago, has sold around 400 units to its 50-odd customers. Google, which has aggressively promoted workplace charging, is his biggest customer, says Roche. Others include electrical contractors, utilities, the insurance industry, and test labs, he says.
“Part of our business is helping people get the vehicle and charger correct by design,” says Roche. “The other is make sure it is reliable.” Consumers don’t always use the recommended brand of EVSE, he says. And automakers have also run into problem, for example Nissan Leaf users ran into problems with the General Electric Level 2 chargers in 2012, he says. http://www.hybridcars.com/ge-wattstation-vindicated-nissan-accepts-blame-leaf-charging-problems-49171/ It was a software glitch with the Leaf.
Roche says would like to expand the Gridtest customer base, which would help drive production costs down. But the market has thus far been slow. One problem in North America is that federal funding for charging station installation has ended, he says. Another problem: A workable business model for public charging hasn’t been found yet, says Roche.
What about China? Isn’t it supposed to be installing lots of chargers to handle the hundreds of thousands of PEVs it has planned? Well, chargers are being installed, though not in the hundreds of thousands. The problem is, China as yet has no national EV standards for chargers or plugs.
So though Gridtest has talked to a couple of Chinese auto companies, and sold a few Gridtest test boxes to some charging station companies, the Gridtest boxes test to J1772 and IEC65851 standards, which are prevalent in the U.S. and Europe, says Roche. “We would have to buy and import some of the Chinese charging stations to test our product,” he says.
Harder than it looks
As the PEV market grows, Gridtest may run into Interoperability testing problems that it hasn’t anticipated, says Ted Bohn at Argonne National Laboratory’s Advanced Powertrain Research Facility. www.anl.gov Argonne and the SAE are working on a standard – J2953 – to establish best practices for plug-in electric vehicle and EVSE interoperability. http://www.transportation.anl.gov/pdfs/B/827.PDF Bohn is on the committee working on it. He clearly feels frustrated that many – including the folks at Gridtest – don’t get how many variables go into testing interoperability. There is a “big state department meeting” about the issue on July 18, says Bohn. “There are a whole bunch of resources behind it; everybody has it on their minds,” he says. Except even some of his colleagues at Argonne don’t grasp its significance, adds Bohn.
Bohn says that testing interoperability is about testing functionality between two definitive devices, a vehicle and an EVSE. “You can’t plug in a tester and say this is an inoperable charger. You can only say it about a vehicle and a charger,” he says. “You can’t universalize because there are too many differences.”
Gridtest’s “EV in a box” might measure what the vehicle does, but “what you really need is a precise measure of what happens on each side,” insists Bohn. There are three areas that need to be measured, he says: Plugging and unplugging; what happens when unexpected things occur on the grid such as a lightning strike; and timing issues specific to each vehicle, such as does the ignition turn all the way off before charging begins.
Okay, then what good is J2953? At least it will minimize the differences, says Bohn. So there are a lot of variables that Gridtest will have to consider. At least when J2953 come out later this year it will have something to start with….
Meanwhile, back in China, Argonne is working with China “as best we can” to have some similar standards as the U.S. and Europe, says Bohn. But China wants to simplify everything, he says with exasperation (sort of the same tone he used when discussing Gridtest). The Chinese “are trying to get at the broad answer without knowing what is the question,” says Bohn.
China’s electric infrastructure might be able to handle a bunch of buses plugging in at night, but not a bunch of individuals plugging in at random times of the day pulling 220 amps (China’s electricity is all 220V; don’t plug in your hairdryer there or it is a goner.), says Bohn. Can you say PEV-induced brownout?
Details, details. Hey, maybe that means it will be easier for Gridtest to enter then Chinese market than Roche thinks. In any case, Gridtest is focusing on the U.S. and Europe right now, says Roche.
China’s passenger vehicle market is in the crosshairs of many U.S. companies with “green” automotive technology. The bus market is also getting a lot of attention. There hasn’t been much focus on efforts to make the medium and heavy-duty truck sector more environmentally friendly, however.
That is a missed opportunity, said Bill Van Amberg, senior vice president of Calstart, a California-based non-profit consulting group focused on expanding clean energy transportation. www.calstart.org Van Amberg and others from Calstart have been traveling to China, meeting with companies and officials, to prepare for the second annual US-China Clean Truck and Bus Summit 2013, taking place in Shanghai in October. http://www.calstart.org/events/calstart-events/13-04-09/The_US-China_Clean_Truck_and_Bus_Summit_2013.aspx?Events=EventItem
The Summit, which last year was held in Beijing, is part of a program launched about a year and a half ago with the U.S. Department of Commerce. www.commerce.gov For the Department of Commerce, the primary goal is to help U.S. companies sell their technology in China, said Van Amberg. For Calstart, the broader goal is growing the use of greener technology globally. China is a hot market for that. “For fast-paced environmental improvements, China is a huge emerging space,” he said.
And it is emerging even more quickly since China’s netizens have become super-critical of China’s air pollution problem. China’s central government tried to pretend the air wasn’t that bad. Posts by the air quality monitor at the U.S. Embassy in Beijing ended that façade. http://beijing.usembassy-china.org.cn/aqirecent3.html Now, Chinese consumers vociferously express their discontent with the air quality via Weibo and other social media channels.
So Beijing has started paying more attention to the problem. There is a fleet of electric buses in the capitol city, at least.
Meanwhile, medium and heavy-duty trucks, while shrinking as a percentage of total vehicle sales, are still a major presence on China’s roads. Many of those trucks are older, highly-polluting models. It doesn’t help that the diesel used in China has a higher sulfur content that that used in Europe and the U.S.
Though the central government has long talked about requiring cleaner diesel, it hasn’t acted. That would mean higher fuel prices for users of the fuel, which includes a lot of farmers. They wouldn’t be happy and the central government wants social stability above all else. If the price didn’t rise, however, the companies refining the diesel would have to absorb the cost increase, which would make them unhappy. A no-win situation for the central government.
Something is changing, however. In February, the central government announced that it would soon publish new diesel quality standards that will slash sulfur omissions to one-seventh the current level, and that it would allow refiners to pass the cost on to consumers. The new standards would be enforced by the end of 2014, said the central government. http://online.wsj.com/article/SB10001424127887324906004578287693562980384.html
Of course, the central government has also talked a lot about growing the use of new energy vehicles, which includes battery electric and plug-in hybrid electric vehicles, among other technologies. http://europe.chinadaily.com.cn/business/2013-05/31/content_16550740.htm Sales are still slow, however. Hybrids seem to be the technology du jour. Just how committed China is to EVs depends on who in the government you are talking to, said Van Amberg. But, “I still think from an economic development and future technology standpoint, (China) remains highly interested in new energy vehicles,” he said.
From a pragmatic standpoint, said Van Amberg, there is a lot of interest in technology that makes diesel, natural gas, and gasoline-powered commercial vehicles more efficient and cleaner. A lot of that opportunity is at the supplier level, he said.
As for what “green” technology Chinese commercial vehicle makers are looking for they are interested in control systems for electric vehicles, said Van Amberg, ranging from hybrid drive train control to battery management systems to power electronics to control the small motors used in EVs. And of course — as companies such as Ener1 discovered when they were approached by Wanxiang about a partnership — Chinese companies are very interested in cell packaging technology. http://www.prnewswire.com/news-releases/ener1-agrees-to-joint-venture-with-wanxiang-largest-auto-parts-supplier-to-the-chinese-car-industry-95048544.html
In the non-EV area, said Van Amberg, “there is some real interest in China in more advanced diesel technology, in advanced treatment for fuels, in natural gas engine controls, and in fuel system controls.
As anyone who has spent time in China knows, there are plenty of CNG-powered buses (and taxis) running around. Those buses may be less polluting than a gas-powered version, but that doesn’t mean they are very efficient. That is an opening for U.S. companies, said Van Amberg. Even though CNG vehicles purchases aren’t incentivized the way EV purchases are, the lower price of natural gas as a fuel is creating demand for them, he said. “The first natural gas systems in the U.S. were not that efficient,” said Van Amberg. “There were a variety of things we had to work through, that is what China is working through.”
In the EV bus area, however, he thinks China is farther along than the U.S. In the U.S. electric buses are being tested in very small numbers at various cities, said Van Amberg. Even though California has a regulation in place to push zero-emission buses, few are in operation, for example.
In China, a side trip after last year’s summit visited a battery swapping site for Beijing’s fleet of 100 electric buses.
The southwest China municipality of Chongqing has a fleet of fast-charging electric buses. “In China, not only are they fielding the buses, they have been in use for years,” said Van Amberg. “This is a technology that some people in the U.S. would have been very dubious of. In China they just did it.” I pointed out that in China the governments didn’t have to answer to voters or a budget, which makes trying out new technology easier….
Plenty of big-name U.S. companies were at last year’s summit, which had about 120 participants. They included Navistar www.navistar.com , Eaton Corp www.eaton.com, BAE www.baesystems.com , and service sector companies A.T. Kearney and Well Fargo Bank. But Chinese companies and government ministries and agencies were also a big presence, from Beijing Municipal Science Commission http://www.bjkw.gov.cn/n244495/ and the Hangzhou Public Transit Group www.hzbus.com.cn to the Ministry of Industry and Information Technology. www.miit.gov.cn Chinese automakers were there, including heavy-duty truck makers such as FAW www.faw.com.cn and Foton. www.foton-global.com
Weichai, which produces trucks, engines, and transmissions among other products, was a sponsor, said Van Amberg. No surprise there; on its website Weichai Group bills itself as “green power, drive your dreams.” www.weichaigroup.com Not to be confused with Build Your Dreams automaker BYD www.byd.com , which also sent its marketing manager Sherry Li. Plenty of smaller companies were there as well, however. Micro-EV component maker Shanghai Edrive www.chinaedrive.com was there last year and will return. Nidec Motor www.nidec-motor.com of St. Louis, MO participated last year.
Calstart is aiming for 180 to 200 participants this year, said Van Amberg. It doesn’t want to get much bigger because it aims to be a venue in which U.S. companies can get to know potential Chinese partners as well as a venue for information, he said. “The companies we would love to have take part are U.S. suppliers and manufacturers of key components,” said Van Amberg.
The BYD local sourcing question has been answered, albeit not in detail. The electric buses BYD www.byd.com will soon begin building in the city of Lancaster will have more than 70% local content, BYD SVP Stella Li told me during a press event at the company’s new Lancaster plant on May 1. “Close to 80% if the charger is included,” she said. And it can be.
A bit of background. Chinese automaker BYD in March won a contract to supply the southern California city of Long Beach with 10 all-electric buses. The city is using federal funding to cover some of the cost, so there is a requirement that at least 60% of the electric bus content be sources in the U.S. http://www.greencarcongress.com/2013/05/byd-20130503.html
Those buses will be built in Lancaster, a hot and windy city out in the desert northeast of Los Angeles. BYD bought the building from Rexhall Industries, an RV maker. The CEO of Rexhall, William Rex, will stay on at general manager of BYD Coach & Bus LLC, according to a BusinessWire story. Some current Rexhall employees will also stay on, it said. Talk about creating goodwill! http://eon.businesswire.com/news/eon/20130501005574/en
On May 1, I attended the opening of BYD’s plant in Lancaster. BYD likes Lancaster– in July of 2010 it showed off a KB Home in Lancaster that was equipped with BYD solar panels, a BYD charging station in the garage, and a BYD e6 electric car in the driveway. http://investor.kbhome.com/releasedetail.cfm?releaseid=487340
Well, the e6 has been relegated to the fleet heap, at least in the U.S. There were several of latest iteration of the electric crossover vehicle at the Lancaster event on May 1. But the model will only be used in fleets, several BYD folks told me.
For now, BYD in the U.S. is all about buses. The Lancaster plant is the first to be opened in the U.S. by a Chinese automaker and the first bus plant for BYD in North or South America said Li. It has an annual capacity of more than 1,000 units. Production is due to begin in October of 2013, “if we keep to our aggressive schedule,” said Li. It aims to produce 50 units in the first year of operation.
As for local content, the battery pack will be assembled in Lancaster, in a building a few miles from the bus plant. The cells will be imported from China. That will likely account for a big chunk of local content.
Other local content includes the multiplex electronic controls, which will be supplied by I/O Controls www.iocontrols.com in Azusa, CA, said Michael Kuang, regional vice president of engineering for Azusa. He was at the event. There are plenty of other things that are easy to source domestically, such as seating and lighting, he suggested.
True that. And, BYD can count the two inductive chargers that will be supplied by WAVE http://www.waveipt.com/ , a Utah-based start-up, as local content as well, says John Inglish, a board member at WAVE. He was also at the event.
As noted up top, there were several e6 BEVs parked at the event. But Li said BYD is focused on taxi fleets for the e6 sales. She also said, however, that BYD wants to sell cars to consumers in the U.S. in the next several years. Assume she means electric vehicles, though I guess she could mean gasoline-powered cars. In any case, Li said that if there was sufficient demand BYD might localize car production in the U.S. within 10 years. That includes the fleet vehicles, I ‘m guessing.
One thing I know: The City of Lancaster is pretty psyched to have BYD come to town. All the city officials showed up for the plant opening, as did an assortment of state and county officials. Lancaster is part of Los Angeles County. Inexplicably, there were at least a dozen LA County Sheriffs at the event. Lancaster contracts with the Sheriffs to provide its police force, but surely they didn’t all need to turn out for the peaceful event….
I asked Los Angeles County Supervisor Mike Antonovich if he expected any blowback because BYD is a Chinese company. There has been some noise in the press about Long Beach Transit awarding BYD the 10-bus contract over several U.S. companies.
Antonovich said: “This is a global economy. We have German companies here, we have companies from the United Kingdom here (in Los Angeles). Just as we are selling our products in China, they are selling here. What you don’t want to have is protectionism.”
I went to the Shanghai Auto Show in April. More specifically, I was there on press day, April 20. The Shanghai show venue is gigantic. Enormous. Stupendously huge. Wear comfortable walking shoes. Even then, I always feel a bit dazed while there, though some of that may be jet lag now that I fly in a few days before to attend. It was rainy and cold on April 20.
A few random thoughts:
Chinese automakers have really improved their design language. Used to be bad or weird. Now that many use the same design houses as the foreign automakers, and the others copy foreign automakers’ design, Chinese automakers’ vehicles are nice looking. But boring, just like most of the vehicles I saw at the show. Still, it is an improvement.
Local automakers are trying to impress with their innovation in engines and transmissions, but they aren’t there yet. They still borrow or copy much. Separate blog soon on that from interview with Gary Tan, head of Ricardo China. www.ricardo.com
Mercedes www.mercedes.com is really trying to boost China sales. The Mercedes stand was huge. Half a hall. Not surprising. The luxury market in China is one of the fastest growing – sales rose 25% in the first two months of the year to 116,606 units according to LMC Automotive. The passenger vehicle market as a whole rose 22% in the first two months of the year, though it fell 6% in February. China’s luxury car segment is seen as the holy grail of China’s automotive market. http://www.forbes.com/sites/kenrapoza/2013/03/07/luxury-car-market-turning-chinese/
Mercedes is lagging in China http://www.businessweek.com/articles/2012-10-25/mercedes-needs-to-rethink-china . It sure garnered some press with all the money it spent before and during the show. That might result in bigger market share. But Mercedes www.mercedes.com.cn is still viewed as a bit less cool than BMW www.bmw.com.cn and even Audi www.audi.com.cn in China.
Not sure what GM’s plan is for Buick www.buick.com.cn in China. The Buick stand was boooring. All the cars were champagne color or silver. Or so it seemed to me. The Chevy stand was filled with color and sound and new and old Chevy models. Dan Akerson, GM’s chairman, has said Chevy and Cadillac will be the focus of GM’s global push. http://europe.autonews.com/article/20130225/ANE/302259730#axzz2SAlFKze1 Bob Socia, president of GM China, said at a press event during the show that GM’s focus in China would be luxury –which I figure means Caddy — and SUVs. The SUV market is the other holy grail of China’s auto market– up 19% in the first two months of the year. GM says it will introduce 9 new or refreshed SUVs to the China market over the next five years. Here is anotgher take on the press event: http://online.wsj.com/article/SB10001424127887324493704578432144026830614.html
Where does that leave Buick? Buick is big, big, big for GM China. I guess GM could launch a Buick-badged SUV in China, but Buick is better known there for its executive van, the GL8. It will be interesting to see how Buick fits into GM’s future in China given it is being relegated to the back of the line in the rest of the world. To be fair, GM’s Riviera concept car, another fishlike concept car from PATAC, was badged Buick. But it is only a concept….
The youth market is in! The Chevrolet www.chevrolet.com.cn presser was all about appealing to the youth market, which makes sense. Relative youth will even be the focus of GM’s Cadillac marketing effort, it seems. According to GM, the average luxury car buyer in China is 35 to 40 years old, ten years younger than in the U.S. Other automakers were also courting the youth market at their stands and in their pressers (admission: I didn’t make it to that many pressers this year. Was too busy walking around looking at stuff….).
As for electric vehicles, they were everywhere and nowhere, sort of like their market presence in China. Every automaker an EV or two in its stand. SAIC had a row of six EVs: The SAIC 550 PHEV, the SAIC BEV550, a Shanghai brand Light Weight Fuel Cell Vehicle, the Roewe 750 light hybrid, the Shanghai Volkswagen e-Lavida sedan, and the Springo BEV from Shanghai GM.
Impressive, but then I ask the young men at the stand which of the EVs are available to buy right now. Only the Roewe 750 is on the market, and sales are slow. The PHEV will launch later this year, they said. Shanghai GM www.shanghaigm.com just started production of the Springo pure EV, David Dunahay, interim executive director of electrification strategy told me. GM is going to “bring it out slowly,” he said.
The GM Riviera concept car was a PHEV. Does that signal the future direction of GM’s www.gmchina.com EV strategy in China, I asked Dunahay? “I wouldn’t take it as a signal,” he naturally told me. “We want to participate in a variety of (EV) segments.”
BYD www.byd.com wasn’t touting it pure-electric car, though it did have the next-gen e6 pure BEV at its stand. Rather, it highlighted the latest generation of its “Dual Mode” hybrid technology, embodied in the Qin electric vehicle. BYD claims the BYD DMII Qin can go 50 kilometers in pure electric mode. It will be launched in the third quarter of 2013, said a BYD spokesperson.
(An aside. I attended the opening of a BYD manufacturing plant here in California on May 1. It will initially produce electric buses. There were several e6 crossover EVs there. They are intended for fleets, I was told. Check out the rest of the story at http://www.plugincars.com/chinas-byd-opens-electric-bus-production-plant-california-127131.html )
Great Wall www.gwm.com.cn had a tiny EV called the Kulla, but it was just for show and likely will never go into production. The star of its booth, as befitting a company that is China’s largest SUV producer, was the H7 luxury SUV with a traditional engine. But, Great Wall’s stand also had a Haval SUV plug-in hybrid electric. Production will begin in 2015, I was told. Great Wall plans to offer PHEVs across the entire Haval lineup in the future, Wang Dingcai, a new energy vehicle engineer at Great Wall’s engineering institute told me.
Word is that Beijing will issue a revised EV policy soon (not soon as in “mashang,” which could mean years, but soon as in “xianzai,” a matter of weeks) and the new policy will subsidize plug-in hybrid electric vehicles and even regular old hybrids at higher rates. The way the subsidy is distributed may also be changed. Right now it goes to the manufacturer; it may become a direct-to-consumer subsidy.
But no one knows for sure which technologies will be favored. A Ford China executive put the situation in China’s EV sector bluntly: “Automakers don’t know what technology the government supports so we have to support them all,” said J.D. Tang, head of marketing, sales, and service for Ford Motor (China)’s import business. www.ford.com
Ford China is taking a cautious approach to China’s EV market. It showed no electric vehicles at its stand in Shanghai. It is waiting to see what types of EVs there is market demand for, said Kumar Galhotra, vice president of product development at Ford Asia Pacific. “You have to have technology and we have it,” he told me. “But whether or not we deploy it will come down to a demand for it. It is not something that can be forced on the market.” Tell that to Beijing.