The Chinese government has posed a most novel problem for General Motors. It is basically telling GM, “If you want access to our enormous car market to sell your Volt (as planned for the end of this year), you’ll have to share some of the car’s core technology.”
The story broke in the New York Times and promises to grow into one big brouhaha unless cooler heads prevail. Of course, cooler heads are scarcer than hen’s teeth these days—or a good cliché.
Here’s the nub of the problem:
The Chinese government is refusing to let the Volt qualify for subsidies totaling up to $19,300 a car unless G.M. agrees to transfer the engineering secrets for one of the Volt’s three main technologies to a joint venture in China with a Chinese automaker, G.M. officials said. Some international trade experts said China would risk violating World Trade Organization rules if it imposed that requirement.
China has pushed hard for the development of clean cars, giving large subsidies not only to buyers but to carmakers and developers, like BYD. But they need advanced technology to go to the next level. From the government’s point of view, why shouldn’t GM trade off something for the millions, nay, billions it will make in the world’s largest and hottest green-car market?
As Keith Bradsher, the NYT author, pointed out, that $19,300 is almost half of the Volt’s U.S. price. Now, those subsidies are only for cars made by Chinese automakers, “giving them a huge competitive advantage.”
The Volt, produced in Detroit, would be the pioneer—if the issue can be settled—and there is also the matter that China’s “discrimination” against the Volt, if that’s the word, would put them in violation of World Trade Organization rules. So now American and EU officials are getting into the act.
Other companies, like Ford, appear to be giving in to the Chinese demand. Ford is willing to transfer some core technology to a joint venture in China when it moves ahead with a vehicle to sell there.
Toyota, as reported on Automotive News and in the Wall Street Journal, is unlikely to shift production of next-gen hybrid parts to China, wanting to keep that stuff proprietary and out of Chinese hands. The company may, however, shift production of some present hybrids to China and build those cars in joint-venture operations.
Hyundai is reported to be developing a new EV brand just for China in a joint venture with Beijing Automotive, producing cars by 2012. So, it looks like auto companies are beginning to accept the government’s joint-venture policy. So is Nissan.
The reason is simple: By one prediction, there will be 500,000 EVs and hybrids on the roads in China by 2015. That number will double by 2020.
GM is still pushing China to let the Volt in without producing it there. Who will win that contest?