When we think of automobiles the likelihood is that the U.S. is a country which will spring to mind, and then perhaps other operations in the Far East, Europe and beyond. For many years the likes of Ford and General Motors have dominated the automobile industry, giving the U.S. government enormous power to lead while the rest follow. However, there is a growing concern that the U.S. government may well be losing control of the electric vehicle market, with the Chinese authorities now keener than ever to invest in this new technology.
It seems almost inconceivable that President Obama, who has recently been forced to renege on his 1 million electric vehicle target, should lose control of the electric vehicle industry to China, but that seems to be the way in which the industry is moving.
Poor due diligence
Anyone who is interested in electric vehicles will be well aware of the ongoing issues with Fisker, the electric vehicle design company, which is literally on the verge of bankruptcy, owing the U.S. taxpayer $171 million. There is concern that the U.S. government may not have been as diligent as it might have been with regards to the initial larger taxpayer loan and indeed there is an ongoing investigation by the U.S. Senate into the funding of alternative transport technology.
On the other side of the coin, the US. .government recently received the final tranche of a loan made to Tesla Motors, which has actually been repaid nine years early. This perfectly reflects the ongoing development of Tesla Motors which has recently confirmed plans to issue an "affordable" electric vehicle by 2017. This vehicle will be in the price range of $30,000-$40,000 and could literally be a game changer for the electric car industry.
Quote from ElectricForum.com : "The $193 million loan (of which $171 million is outstanding) from the US government to Fisker Automotive is being called into question with the company now experiencing severe financial difficulties. It now begs the question as to whether it was a sensible move to give such a large loan to the company and indeed whether any of the other loans to electric car companies need to be reviewed?"
Could China become the home of electric vehicles?
In many ways the Chinese government is stuck between something of a rock and a hard place with regards to electric vehicles. Because there are major emission issues within China and the their government has effectively been forced to put its substantial power and influence behind the electric vehicle market. As you would expect from an up-and-coming technology, the Chinese government has offered an array of direct subsidies to motorists and an array of financial assistance to various electric vehicle companies in the region.
This financial assistance has taken the shape of low-interest loans, production subsidies and even land on which to manufacture their vehicles. It is also worth noting at this point that Warren Buffett, an investor who has little appetite for technology, has appeared on the shareholder list of BYD, which is one of China's best-known electric vehicle manufacturers. Indeed if you take a look at some of the stock market quoted, electric vehicle manufacturers will see significant movement in their share price as the risk factors associated with electric vehicles begin to fall and investors become more aware of future potential.
Electric vehicle production in China
As you would expect, the vast majority of international vehicle manufacturers have exposure to China in some shape or form. Even though some of the U.S.-based manufacturers are now looking to transfer at least part of their electric vehicle operations back to the U.S., this could prove difficult in a market which needs to shave off every dollar it can from production costs. The U.S. government is currently in the throes of reorganising its alternative transport funding criteria, although the ongoing issue with Fisker and the recent collapse of battery service company Better Place (which went through $850 million of investment funding, non-government funding) has certainly reduced enthusiasm amongst U.S. investors.
While many U.S.-based automobile manufacturers are very keen to support their home market, the fact is the U.S. government’s support of the industry in financial terms is minute compared to that afforded to the oil industry. There are multibillion dollar tax breaks for oil companies and indeed there seems little hope this will change in the short to medium term. As a consequence, we can fully expect the Chinese authorities to plough further ahead with their plans for domination of the electric vehicle market, while President Obama struggles to fight fires on his home turf.
You may consider the Chinese government’s support of electric vehicles, both directly and indirectly, as a means to an end to tackle the emissions problem in the country, or maybe the Chinese government has spotted a market for the future. Whatever the reality, the Chinese government is at this moment in time more vocal than its U.S. counterpart and indeed is willing and able to fund electric vehicle, and also battery technology, operations within China and overseas. The Chinese government is also looking to replace government fleets with more environmentally friendly modes of transport, which opens a perfect door for the electric vehicle industry.
Incidentally, it is also worth noting that China is, and continues to be, a major investor in Latin America, which is very prominent in the automobile industry. Could the Chinese government be covering all bases with subsidies and low-interest loans to Chinese companies, incentives to Chinese motorists, as well as an ever closer trading relationship with their Latin American counterparts?