News Risk Management 13 Sep 2017

Major automakers moving electric car production to China despite risks

| 13 Sep 2017

As China intensifies its investments in car-charging stations and research and pushes car manufacturers to use battery-powered vehicles, major automakers are moving electric car design and production to the country, despite the major risks, reported the New York Times.

Among these global players are Volkswagen, whose largest hike in production will be in China, General Motors, which is making China the hub of its electric car R&D and Renault-Nissan and Ford Motor, which have set up electric car joint ventures in China.

Under a plan called Made in China 2025, China hopes to become a dominant player in a number of new technologies, like artificial intelligence and robotics. Officials argue that this push will develop the local economy and make it less dependent on technology from overseas, a dependence which could expose it to security risks.

The NYTimes report noted that in the past, US, European and Japanese firms have shared their know-how in technologies from high-speed trains to wind turbines with China, only to have Chinese companies use such knowledge and heavy government support to compete against the foreign rivals. This is somewhat the same for the electric car case, where the foreign automakers face new Chinese regulations that put heavy legal pressure on them to transfer related technology to local partners.

Local officials are also set to impose strict regulations that would compel the car-makers to sell new-energy cars in the country, if they wish to continue selling the traditional gas-powered types as well.

The Western companies approached in the report said that they are aware of the risks of technology transfer, and that the opportunities would enable them to achieve their own electric car ambitions faster. Rules which require tech transfer are broadly worded such that some components might be made abroad and imported. Volkswagen, for example, sees it as a mutual learning process with the locals, said its chief executive Jochem Heizmann.

Quoted in the NYTimes report, Mr Michael Wessel, a commissioner of the United States-China Economic and Security Review Commission said that MNCs are already caving in to China’s policies, jeopardizing the future of the sector and jobs and economic benefits.

Another line of thinking, such as that of General Motors, which collaborates with its Chinese partner on advanced hybrid cars, is that “we build where we sell” said Mr Matt Tsien, its China G.M.

Ford has said that it would comply with all Chinese rules on JVs. Meanwhile, Honda Motor and Toyota were other automakers mentioned in the report as planning to make an electric car and plug-in hybrid car in China respectively.

Generally the automakers feel that they must grow in China as it has become the world’s largest car market—almost as big as the American and European markets combined, said the NYTimes. This means that tech transfer concerns would be of much less significance than the attractiveness of the Chinese motor market.

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