[R-G] China Invests to Be Leader in Electric Vehicles

[Yoshie Furuhashi]

This is the sort of program that Green Keynesians in the USA think
that the USG should pursue, taking over the Big 3 and retooling them
from R&D to production.  But workers are not in revolt in the USA, so
the USG is under no pressure to invest, let alone invest
environmentally.  Rather, it's busy robbing workers (cf.
<http://www.nytimes.com/2009/03/31/business/economy/31contracts.html>)
and the rest of the public (cf.
<http://www.nytimes.com/2009/04/01/opinion/01stiglitz.html>) to
re-enrich the capitalist class -- Yoshie

<http://www.nytimes.com/2009/04/02/business/global/02electric.html>
April 2, 2009
China Invests to Be Leader in Electric Vehicles
By KEITH BRADSHER

TIANJIN, China — Chinese leaders have adopted a plan aimed at turning
the country into one of the leading producers of hybrid and
all-electric vehicles within three years, and making it the world
leader in electric cars and buses after that.

The goal, which radiates from the very top of the Chinese government,
suggests that Detroit’s Big Three, already struggling to stay alive,
will face even stiffer foreign competition on the next field of
automotive technology than they do today.

“China is well positioned to lead in this,” said David Tulauskas,
director of China government policy at General Motors.

To some extent, China is making a virtue of a liability. It is behind
the United States, Japan and other countries when it comes to making
gas-powered vehicles, but by skipping the current technology, China
hopes to get a jump on the next.

Japan is the market leader in hybrids today, which run on both
electricity and gasoline, with cars like the Toyota Prius and Honda
Insight. The United States has been a laggard in alternative vehicles.
G.M.’s plug-in hybrid Chevrolet Volt is scheduled to go on sale next
year, and will use rechargeable batteries imported from LG in South
Korea.

China’s intention, in addition to creating a world-leading industry
that will produce jobs and exports, is to reduce urban pollution and
decrease its dependence on oil, which comes from the Mideast and
travels over sea routes controlled by the United States Navy.

But electric vehicles may do little to clear the country’s
smog-darkened sky or curb its rapidly rising emissions of global
warming gases. China gets three-fourths of its electricity from coal,
which produces more soot and more greenhouse gases than other fuels.

A report by McKinsey & Company last autumn estimated that replacing a
gasoline-powered car with a similar-size electric car in China would
reduce greenhouse emissions by only 19 percent. It would reduce urban
pollution, however, by shifting the source of smog from car exhaust
pipes to power plants, which are often located outside cities.

Beyond manufacturing, subsidies of up to $8,800 are being offered to
taxi fleets and local government agencies in 13 Chinese cities for
each hybrid or all-electric vehicle they purchase. The state
electricity grid has been ordered to set up electric car charging
stations in Beijing, Shanghai and Tianjin.

Government research subsidies for electric car designs are increasing
rapidly. And an interagency panel is planning tax credits for
consumers who buy alternative energy vehicles.

China wants to raise its annual production capacity to 500,000 hybrid
or all-electric cars and buses by the end of 2011, from 2,100 last
year, government officials and Chinese auto executives said. By
comparison, CSM Worldwide, a consulting firm that does forecasts for
automakers, predicts that Japan and South Korea together will be
producing 1.1 million hybrid or all-electric light vehicles by then
and North America will be making 267,000.

The United States Department of Energy has its own $25 billion program
to develop electric-powered cars and improve battery technology, and
will receive another $2 billion for battery development as part of the
economic stimulus program enacted by Congress.

Premier Wen Jiabao highlighted the importance of electric cars two
years ago with his unlikely choice to become minister of science and
technology: Wan Gang, a Shanghai-born former Audi auto engineer in
Germany who later became the chief scientist for the Chinese
government’s research panel on electric vehicles.

Mr. Wan is the first minister in at least three decades who is not a
member of the Communist Party.

And Premier Wen has his own connection to the electric car industry.
He was born and grew up here in Tianjin, the longtime capital of
China’s battery industry, 70 miles southeast of Beijing.

Tianjin has thrived in the six years since Mr. Wen became premier. It
now has China’s first bullet train service (to Beijing), a new Airbus
factory and an immaculate new airport. Tianjin has also received a
surge of research subsidies for enterprises like the Tianjin-Qingyuan
Electric Vehicle Company.

Electric cars have several practical advantages in China. Intercity
driving is rare. Commutes are fairly short and frequently at low
speeds because of traffic jams. So the limitations of all-electric
cars — the latest models in China have a top speed of 60 miles an hour
and a range of 120 miles between charges — are less of a problem.

First-time car buyers also make up four-fifths of the Chinese market,
and these buyers have not yet grown accustomed to the greater power
and range of gasoline-powered cars.

But the electric car industry faces several obstacles here too. Most
urban Chinese live in apartments, and cannot install recharging
devices in driveways, so more public charging centers need to be set
up.

Rechargeable lithium-ion batteries also have a poor reputation in
China. Counterfeit lithium-ion batteries in cellphones occasionally
explode, causing injuries. And Sony had to recall genuine lithium-ion
batteries in laptops in 2006 and 2008 after some overheated and caught
fire or exploded.

These safety problems have been associated with lithium-ion cobalt
batteries, however, not the more chemically stable lithium-ion
phosphate batteries now being adapted to automotive use.

The tougher challenge is that all lithium-ion batteries are expensive,
whether made with cobalt or phosphate. That will be a hurdle for
thrifty Chinese consumers, especially if gas prices stay relatively
low compared to their highs last summer.

China is tackling the challenges with the same tools that helped it
speed industrialization and put on the Olympics: immense amounts of
energy, money and people.

BYD has 5,000 auto engineers and an equal number of battery engineers,
most of them living at its headquarters in Shenzhen in a cluster of 15
yellow apartment buildings, each 18 stories high. Young engineers earn
less than $600 a month, including benefits.

When Tianjin-Qingyuan puts its entirely battery-powered Saibao midsize
sedan on sale this autumn, the body will come from a sedan that
normally sells for $14,600 when equipped with a gasoline engine. But
the engine and gas tank will be replaced with a $14,000 battery pack
and electric motor, said Wu Zhixin, the company’s general manager.

That means the retail price will nearly double, to almost $30,000.
Even if the government awards the maximum subsidy of $8,800 to buyers,
that is a hefty premium.

Large-scale production could drive down the cost of the battery pack
and electric motor by 30 or 40 percent, still leaving electric cars
more expensive than gasoline-powered ones, Mr. Wu said.

But Mr. Wu has plenty of money to pursue improvements. He interrupted
an interview at his company’s headquarters on Thursday to take a call
on his cellphone, politely declined an offer from the caller, and hung
up.

The general manager of a state-controlled bank had called to ask if he
needed a loan, he explained.