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Detroit’s fightback in the electric car business

April 3rd, 2009 · No Comments

We reported about China’s move into electric cars, which is a nice strategic jump in technology which you often see from newcomers which do not have a dominant position in the existing technologies. Although it’s often difficult for existing producers to engage in radical innovation because they are wedded to their existing capabilities (the so called ‘innovators paradox’), but the American car manufacturers are not giving up without a fight (that is, if they still exist in a couple of years, or couple of months..)

Why China Won’t Clobber The U.S. In Electric Autos
Jay Yarow|Apr. 2, 2009, 9:28 AM|

China tells the New York Times that it’s going to produce a half million electric and hybrid autos by the end of 2011. If you choose to believe that, then it sounds like bad news for the U.S. However, picking at the meat of the news, it really doesn’t look all that bad.

China is offering a $8,800 subsidy for purchasing electric or hybrids. The U.S. offers a $7,500 subsidy for electric cars. There are also subsidies for hybrids available.

Chinese research on electric batteries is increasing. It is in the United States as well. We’ve got MIT scientists working on the problem around the clock. We’ve had auto companies investing in it for years now.

China wants to raise its annual production to 500,000 hybrid or electric cars by 2011, from 2,100 today. We’ll believe it when we see it.

Many Chinese, just like many Americans live in urban areas, where it’s not feasible to drag an exension cord from their apartment to their car to charge over night. There’s no infrastructure in place for charging. That will need to be developed in either nation.

If China was poised to clobber the U.S. and the rest of the world in the next two years with electric and hybrid cars, you’d think that there would be some concrete examples of viable Chinese car companies–yes, plural. There isn’t.

Instead we mostly  hear chatter about BYD, a company that the Wall Street Journal describes as “fledgling.” (Which is a common adjective slapped on electric car companies–Tesla, Fisker, Detroit Electric come to mind. Hell, throw in GM and Ford while you’re at it.)

BYD is developing a car that will cost $30,000. Hardly an affordable car for many people in China. And that company is currently trying to sell its batteries to U.S. auto makers. There’s a ton of battery companies in the United States, A123, ENER1 just to name two. And Tesla is also selling its battery technology.

There are reasons to believe the U.S. auto industry will get obliterated by China. It happened with Japan not that long ago. Of course, we could emerge from the bailout nation, under the mandates of Steve Rattner with an entirely new, slimmer trimmer, smarter auto industry.

Even then we can get crushed because China has money, it has determination and it has a reputation that’s intimidating. However, it should be noted that the United States has been working on electric cars forever. In 1907, we had an electric car. It was eventually nudged out of existence in the late thirties. (Here’s Wikipedia on the matter.)

In 1966, Ford promised its electric car was just a few years away (see this Forbes article.) In the early nineties we were just a few more years away from getting an electric auto. At Naked Capitalism, Yves Smith recounts that “GM spent over $1.5 billion manufacturing and marketing the EV1, its electric car, despite its ambivalence (at least when I was investigating, which prior to the 1996-2000 opportunity to lease the car in Arizona and California).”

Maybe those are knocks against the U.S. However, we choose to think of it as evidence that building an electric car isn’t as easy as saying, “I want 500,000 electric cars in two years.” It takes a lot of work. It also takes time for battery technology to improve. The U.S. isn’t that far away though, now.

We’ve got the Roadster and Model S by Tesla, designed, manufactured, tested. We have the Chevy Volt. We have Ford’s Fusion hybrid. We’ve got a mandate from the government to car companies to get their butts in gear on developing new cars.

And according to China, we’ve got competition. Well, that’s fine. We’ve got a century long head start. If China thinks they’ll just turn it all on in two years, then to them we say good luck. They’ll need it, because we can’t think of any great technological innovations or incremental improvements on technology that’ve come out of China that make us nervous.

Then again, that’s what people would have said about Japan 30 years ago. Let’s just hope there was a lesson learned.

Tags: Alternative energy · Car Market