Who will win electric vehicle race – the US or China?

BYD EV charging stationThe future of Fisker Automotive might be viewed as a symbolic tale of where economic alliances – and competition – now stand between the US and China. Two Chinese investors are vying to take over the troubled US maker of the luxury, extended range Fisker Karma. A courtroom showdown will take place on January 10 where US Bankruptcy Court Judge Kevin Gross will likely decide whether investor Richard Li and Hybrid Tech Holdings LLC can close the deal with its proposed $25 million; or whether Wanxiang Group, a major Chinese auto parts company and new owner of the A123 Systems lithium battery company, should win the deal with its recently filed $24.725 million bid with assumption of some of Fisker’s liabilities. Either bid from these Chinese investors is much less than what Fisker has owed the US Department of Energy (DOE) for its original loan; but the federal government would like to wash its hands of it.

This symbolic tale goes back a few years – nearly five – and the story is much bigger than what’s taking place with Fisker. Starting in 2009, the Obama administration made available $2 billion in direct stimulus grants through the DOE and an additional $400 million for its ARPA-E funding program. The Chinese government has been offering about $16 billion in vehicle subsidies, R&D, and infrastructure spending for clean automotive technology. Lithium ion batteries and electric vehicles have been at the heart of these government investments.

The Obama administration policies came out of the collapse of the auto industry in Detroit and devastation of financial markets; China’s motives comes from its goal of dealing with thick air pollution in rapidly expanding cities and reducing its dependence on foreign oil. President Obama’s lofty goal of putting one million electric vehicles (EVs) on American roads by 2015 set off a race; Chinese officials said their country would do the same (which the Chinese government calls “new energy vehicles”). Overall, its goal has been even loftier – the government would like to see five million alternative energy vehicles on its roads by 2020.

While the actual EV sales figures in either country are highly unlikely to meet the million unit EV mark within the next two years, the race is still being run. Cultivating EV sales through government incentives and federal fleet acquisitions – and through capital investors with mergers and acquisitions – continues to be of high importance in the US and China, even though some of the government investments have failed.

China has been extremely important for global automakers and investors to see growth, especially as the European auto market has been shrinking. EVs have been a big part of that strategy and China has been the top selling market for overall new vehicle sales for a few years.  The investments have been impressive:

  • An electric version of the Saab 9-3 is critical for Saab a year out of its bankruptcy proceedings; Saab’s new owner, National Electric Vehicle Sweden, is targeting its home market of China.
  • Tesla Motors has been working hard to get its website domain name back in China; for now, Tesla is using the “Tousule” name for its website since the “Tesla.cn” domain was registered to a Chinese company in 2006. The website is taking pre-orders and reservation fees for the Model S and the upcoming Model X electric crossover model. Tesla is planning on beginning deliveries to China of the Model S in the first quarter of 2014. That website follows the recent opening of a Tesla Motors showroom in Beijing.
  • Ford will pursue the production and sale of hybrids and EVs in China. The global automaker will build more factories and expand in that growing market. Ford CEO Alan Mulally made the announcement during a television interview in China.
  • Warren Buffett and his Berkshire Hathaway firm have made a sizable investment in Chinese automaker BYD – and EVs play a big part of the gamble. The company plans to introduce four models for its US debut by the end of 2015. Its new Qin plug-in hybrid model will likely be the flagship model introduced in the US.
  • Geely Holding Group took over Volvo Cars from Ford in 2010 and joint EV projects play a role in that alliance – such as the Volvo C30 Electric and Geely’s Kandi brand offerings.
  • Last month, actor Leonardo DiCaprio announced he’s forming a team to participate in a new EV racing circuit that will launch its inaugural season in Beijing next September. There’s a lot of hope that enthusiasm for owning EVs will come from it; in 2012, there were only 11,000 EVs sold in China.

China’s air pollution problem is an example of the market opportunities that clean transportation has to offer. Beijing will be replacing its petroleum-powered buses with new models powered by electricity or natural gas by 2017. The Chinese government is looking at other possible solutions for reducing tailpipe emissions from its fast-growing pool of vehicles on its crowded roads. Gaining these contracts is very appealing to US investors, and to companies all over the world.

EVs – and other alternative fuel vehicles and cleantech ventures – play a significant role in the future of the US economy, according to the Obama administration and several other entities. China will continue to be a focal point for the US economy. These market dynamics have been taking on the form of both competition and cooperation. Trade agreements between the US and China have been a sore spot, but business deals continue to be made. As several economists and visionaries have been saying for a few years, the future of global economics is leaning toward cooperation. There’s not one single nation that has all of the supplies, labor, intellectual property, investment capital, and management leadership to give an industry such as automotive all that it needs to thrive.

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