China Flexes Muscle on EV Imports

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One of the major flagship programs of the Obama administration is the introduction of further electric vehicles in roads to alleviate the pressure on the environment regarding greenhouse gas production. Among its major models is the fully electric General Motors Electric Volt. This vehicle stands as the future of high technological innovation through government and private sector partnership.

Now, General Motors is on the verge of exporting the Volt to the Chinese mainland, but before it can run on the roads of the Middle Kingdom, it is facing a crossroads. The Chinese government is requiring that the company shares with China the car’s technological blueprints.

The Chinese are refusing to allow the Volt to be part of the program to receive governmental subsidies unless the carmaker agrees to transfer engineering technology in return. This would be done through a joint venture with a Chinese automaker.

Many pundits have pointed out that such a requirement would run afoul of current rules of the World Trade Organization. This is the latest in many actions that China has undertaken to leverage its vast markets to gain concessions on technologies from foreign companies. This policy has helped the nation to build industries in high technology areas such as turbine technology, high speed train and water purification. In response, Western companies say that this policy creates an uneven playing field for businesses seeking to be competitive with the domestic industries of China.

These subsidies are important to assist the electric car technology to become popular in China. In 2009, the country became the acclaimed largest car market in the world. With the current policy of reducing greenhouse gases throughout the country, these subsidies would help electric vehicles become more affordable in the region. Currently, domestic electric carmakers, such as the e6 of the carmaker BYD have given the carmaker a boost in the market. If plans push through, the Volt would be the first commercially available electric carmaker to be imported to China by a foreign carmaker.

With current pricing, the Chinese government subsidies can account for about half the Volt’s sticker price of $41,000 - aside from the $7,500 American federal subsidy.

Many European and Japanese carmakers are reticent to enter the Chinese car market despite its allure. Last year alone, 17 million cars were sold in the country and all of them are gasoline powered. The fear is the loss of trade secrets once the joint venture policy is instituted upon their business plans. With billions of dollars in research and technology investment to develop their car technologies, it is not easy to just give them up to be a player in the Chinese market.

Currently, American, as well as European Union officials, have signified their protest to the enforcement for the subsidy for technology issue. Because of the sensitivity of the issue to avoid an all out trading war, many have taken informal channels to keep the policy from being formalized. Time though is of the essence as the Chinese government is about to disseminate a formal policy to Chinese automakers by the end of the month. Overall, this is one aspect of the electric vehicle revolution that is still being fought; the dollars and cents of the business of selling cars.