US and China Will Cooperate, Not Compete, on Electric Cars

Published May 10, 2010

China is often regarded as a major threat to the US auto industry for two major reasons. First, as of last year, China surpassed the US to become the biggest auto market in the world and it’s getting bigger. Second, the Chinese government wants to go directly to electric cars and skip past the gasoline internal combustion engine. According to experts on the Chinese electric vehicle market, China is much more likely to be a partner than a competitor in building an electric car future.

Why would China want to work with the US to produce electric vehicles? In simple terms, the country is desperate for rapid change. “The country has big problems and needs big solutions. Their current pathway is not sustainable,” said Roland Hwang, transportation program Manager at the Natural Resource Defense Council. Those problems include dismal air quality and a need to import as much as 80 percent of their oil for its cars by 2030. Hwang and other experts discussed China and electric cars at last week’s Electric Cars 2.0, a Berkeley-Stanford Cleantech Conference, in San Francisco.

China has the need but faces major challenges to achieving its electric car goals. It’s about five to 10 years behind the world in automotive technology, quality and safety. And the average Chinese consumer can’t afford the $5,000 or so price premium for an electric car.

Risks and Rewards

This spells opportunity for US companies. Jit Bhattacharya, CEO of Mission Motors, said his company’s phone rings off the hook with Chinese companies seeking help with anything that runs on electric power, from cars and scooters, to lawn and garden equipment. Mission Motors manufactures a $68,000 150-mile-per-hour electric motorcycle in California, but has shifted much of its business to selling its electric-powertrain technology. “Chinese companies call us, and say we don’t know how we’re going to get on this learning curve fast enough to actually get a vehicle to market in the next three to four years.”

Hwang pinned the current Chinese electric vehicle market, mostly electric bicycles, at about 100 million. “Where is the electric car market headed? You can count on China being a big player. I’m convinced that they will be a big part of the market, as consumers, battery manufacturers and suppliers.”

US start-up companies have a huge opportunity to partner with Chinese manufacturers, scale up their businesses, and bring the technology back home. Major US and Japanese carmakers producing electric cars are also eager to break into the Chinese market, while Chinese companies, like BYD and Geely Automotive, are trying to bring their electric vehicles to North American markets. It's an inter-connected market.

The opportunities for big and small companies alike are not without risks, according to panelist Marc Gottschalk, partner at Wilson Sonsini Goodrich & Rosati. The investment firm has a number of electric car clients, including Mission Motors and Tesla. “There is a struggle. Companies want to take advantage of that huge market in China,” Gottschalk said. “There’s also the feeling that they want to do everything you can possibly do to protect yourself from having the technology stolen and commercialized and used against you in the future.”

Common Goals

According to Hwang, one of the first things that the Obama’s new Energy Department appointees did was to establish a forum for the US and China to discuss their common electric vehicle challenges. “The concept is that China and the US, now the two largest automobile markets in the world, will forge simultaneously with the marketplace for electric vehicles,” Hwang said. “There are lots of synergies, lots of economies of scale, lots of advantages of going down that learning curve together.”

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