Monday, February 23, 2009

Another Money-Losing Electric Car: Why?

Following on the heels of BYD's announcement of its "dual-mode" plug-in hybrid in December, Chery, a state-owned automaker in Anhui Province has announced a pure electric car.

The new S18 has a top speed of 120 km/hr (~75mph) and can travel up to 150 km (~93 miles) on a single charge. It uses a lithium iron phosphate battery (
磷酸铁锂电池), the same technology being used by BYD. It can receive a full charge in four to six hours, or can be charged to 80 percent in half an hour.

Chery's General Manager wasn't very forthcoming with information on price, however, saying that the price is "suitable for families". As with most alternative energy autos being produced today, I suspect the price is significantly more than one would pay for a comparably sized gasoline powered car.

Another issue that would probably make this a less-than-attractive prospect for a Chinese family is the lack of places to plug the thing in. I can imagine families on lower floors of apartment blocks running long extension cords down from their balconies at night.

(On a related note, NPR did an interesting story this morning on the difficulty of getting electric vehicles to market in the US. A link to the podcast is here.)

So why are Chinese car companies all scrambling to get "new energy" (新能源) vehicles to market? I can think of a few possible reasons, the strongest of which relates to corporate survival. Despite the fact that these vehicles are currently money-losers, the central government has made it very clear that production of "new energy" vehicles is a priority, and it is pouring cash into state-owned automakers to fund their development.

This, combined with the fact that the central government has been calling for a consolidation in this industry for a long time, pushes every auto company to develop new energy vehicles so as not to be viewed as expendable in the inevitable wave of consolidation. My assumption is that every auto company would prefer to be an acquirer rather than an acquiree. Those with the strongest brands and best technologies are more likely to come out on top in a merger.

Within ten years, China's 130 auto assemblers will be whittled down to fewer than ten. The market will have only a minor part in the decision as to which survive.