China Putting Screws To Automakers Seeking EV Entry Into Huge Market

The Chinese government knows how important the vastly untapped Chinese car market is to automakers around the world. If you want to gain entry in the widely anticipated electric vehicle category, however, there's going to be a significant price to pay.

You're going to have to share your technological know-how with the Chinese government.

China's Ministry of Industry and Information Technology is preparing a 10-year plan aimed at turning China into "the world's leader" in developing and producing battery-powered cars and hybrids, according to executives at four foreign car companies who are familiar with the ministry's proposal.

The draft suggests that the government could compel foreign auto makers that want to produce electric vehicles in China to share critical technologies by requiring the companies to enter joint ventures in which they are limited to a minority stake, the executives say.

The plan is "tantamount to China strong-arming foreign auto makers to give up battery, electric-motor, and control technology in exchange for market access," says a senior executive at one foreign car maker. "We don't like it."

Automakers have been spending billions on next-generation vehicles and electric vehicles of different configurations, so giving up these technologies to the Chinese government without any compensation is a taking that these companies can't afford - not when it is all too likely that the technologies will be incorporated into Chinese-made cars that will sooner or later compete with the automakers who conceived of the technologies at significant cost.

China has yet to develop a home-grown automaker that can compete with its imports, including GM and Ford, each of which has gained significant market share and profits from sales in the country.

Yet, these same automakers can't afford to avoid the electric vehicle segment in the Chinese market because of its size.

It's a catch-22, and it will be interesting to see who blinks first.