China not embracing electric cars

Nathan Bomey, Detroit Free Press | USATODAY

SHANGHAI -- Fears that China will catapult past the U.S. in the race to put electric vehicles on the road have fizzled.

Despite choking pollution in big Chinese cities, the government faces the same obstacles as the U.S. in the push for electric vehicles: They're still expensive, many consumers don't understand them and many drivers don't have anywhere to charge the batteries.

Although China has offered tax incentives on electric vehicles in an effort to reduce the massive air pollution problem, there are few of the vehicles on the roads.

"I think everyone would say it hasn't really taken root yet," GM China President Bob Socia said last month near the Shanghai auto show. "Objectives are worthy, but progress is slow."

Automakers will have to persuade Chinese consumers to give electric vehicles a try. Experts once said that Chinese consumers would embrace electric vehicles because four out of five car buyers are purchasing a vehicle for the first time. They've never had an experience with internal combustion engine cars, so they won't know what they're missing, the thinking goes.

That thinking was wrong.

Similarly, progress is slow in the U.S. The federal government offers tax credits of up to $7,500 for the purchase of an electric vehicle or semi-electric car, such as the Nissan Leaf or Chevrolet Volt. But most people are still buying conventional vehicles.

That means the door is still open for leaders to emerge in the electric vehicle space, as researchers pursue next-generation technologies amid a growing consensus that the current technology of lithium-ion batteries won't get much better or cheaper.

In 2012, the Chinese bought 12,791 hybrid and electric vehicles, according to the Chinese Association of Automobile Manufacturers.

But the real number of electric vehicles sold in China last year was actually about 3,000, when factoring out hybrids and vehicles that aren't roadworthy, such as golf carts, said Namrita Chow, a Shanghai-based analyst for IHS Automotive.

"EVs haven't taken off for a number of reasons," she said. "Consumers are not comfortable with electric vehicles."

In the U.S. in 2012, automakers sold 53,172 plug-in electric vehicles and 434,498 hybrids, representing a total market share of 3.4%, according to HybridCars.com. President Barack Obama's administration has rescinded its previous target of putting 1 million electric vehicles on the road by 2015.

The Chinese government set a goal of getting 500,000 electric vehicles on the road by 2015, with the central and provincial governments offering incentives and investing in infrastructure.

"They're going to continue to push it ... there are some pretty fundamental issues with respect to charging stations," Socia said.

Chow said the central government's EV incentives expired Dec. 31, "which means everyone is waiting" for new subsidies to be announced under China's new president, Xi Jinping.

But Yale Zhang, managing director of Automotive Foresight Shanghai, said "half a million" is not a "mandatory target" set by the government. "It takes 10 years to have this segment be more realistic," he said.

In both countries, electric vehicles are more expensive than traditional vehicles. For example, the Volt, the most popular plug-in electric vehicle in the U.S. last year, starts at $40,000. Price is a big obstacle for many U.S. buyers.

"It's exactly the same here," Chow said of China. "Even with the subsidies, the cost of EVs is way higher than a traditional gasoline-powered engine vehicle."

Silicon Valley-based start-up Tesla Motors is opening dealerships in Shanghai and Beijing with high hopes for its Model S luxury electric sedan. GM sells the Chevy Volt in China in limited quantities, and Chinese automaker BYD, backed by billionaire Warren Buffett, markets its own electric vehicle.

But people who can afford expensive cars in China prefer luxury gasoline-powered vehicles like BMW, Audi, Mercedes-Benz and Buick.

"Brand image is really, really important — and if you look at some of the EV choices, they're not necessarily aligned with the high-end brand image," said Steve Merkt, president of transportation solutions for auto supplier TE Connectivity, who previously ran the company's China-based Asia business.

That's why some automakers are tinkering with their electric-vehicle strategies in China. For example, BMW and its joint venture partner, Brilliance Auto, plan to launch a new electric-vehicle brand in China called Zinoro later this year.

But some automakers announce electric vehicle plans in China for show, with few intentions of following through, Chow said.

"They want to appease the government," she said.

Still, many automakers are hoping for breakthroughs from their Chinese operations. Technology developed in China can be applied to electric vehicles throughout the world.

GM is conducting EV research with its joint venture partner, SAIC, and is conducting battery cell testing, validation and chemistry research on its own at its new Advanced Technical Center in Shanghai. In a tour of the center, which finished its second phase of expansion in November, GM executives said the Shanghai facility has the same battery capabilities as the sprawling GM Technical Center in Warren.

Debbie Murphy, GM's director of China engineering, said there's "a potential" to start procuring battery cells from Chinese suppliers, too. Currently, GM gets cells from Korea-based LG Chem and turns them into battery packs at a plant in Brownstown Township.

"Batteries are a key focus for China, and that will enable them to get more electric vehicles here quicker," she said. "That's why we decided China was the right place to do this."