Will Detroit Get Shut Out Of China’s Electric Vehicle Market?

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large scale adoption of electric vehicles. The program, which initially focused on government fleets like buses, trucks, and taxis, challenged ten cities to roll out 1,000 electric vehicles each.

Since then, the government has expanded the program to eleven more cities. In June 2010, the government started to subsidize consumer purchases of plug in and hybrid vehicles in Shanghai, Changchun, Shenzhen, Hangzhou, and Hefei. Overall, the central and local governments have earmarked $15.4 billion towards investing in new energy vehicles.

“This is a significant increase from earlier statements and sets a new threshold on the world stage,” the World Bank report says.

On the trade front, China’s Development and Reform Commission in April released proposed guidelines that, among other things, limits foreigners to 50 percent ownership of certain electric technologies and requires outside companies to form joint ventures with Chinese firms and to use Chinese manufacturers if they want to sell into the Chinese market. Even more alarming to American officials is China’s requirement that foreign companies must share their IP with domestic firms in order to sell into the country.

China’s commitment (or lack thereof) to safeguarding foreign technology and enforcing patents has strained trade relations with the United States. And for good reason, See of Lux Research says.

“The prospect of Chinese firms reverse engineering outside technology is pretty scary for foreign companies,” See says. “It does expose them. IP protection is a big issue. [The proposed guidelines] put strains on companies to share aspects of their technology and manufacturing if they want access to a giant market.”

However, See cautions, a viable electric vehicle market has yet to emerge for either China or the United States. Automakers still have to justify the higher price of electric cars to wary consumers, not to mention proving the reliability and range of batteries and electric motors.

Nevertheless, the stakes remain high. Concerns over gas prices and global climate change are unlikely to fade anytime soon. Michigan, led by the Big Three, has staked much of its economic future on developing clean energy technologies like lithium batteries and electric motors. As Levin and Stabenow’s letter makes clear, accessing the world’s largest auto market remains crucial to the state’s economic revival.

American makers of electric vehicles must start engaging the Chinese now, See says.

“You want to find the right partners, to get inside [the Chinese market] in a way that makes you feel the most comfortable,” See says. “To act sooner is better than to act later.”

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