Is the Chinese government really forcing foreign car manufacturers to hand over tech secrets?

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Recent media reports have indicated that the Chinese Ministry of Industry and Communications is ‘forcing’ foreign automakers to divulge secrets of its hybrid and electric car series, the report itself first appeared in the Wall Street Journal and quickly spread. The report cites China’s plans on developing a 10 year action plan to turn China into a world leading producer of electric and hybrid vehicles and push forward China’s own domestic electric car industry.

There seems to be a lot of complaint on various forums, blogs, and news outlets at China’s apparent strong arming of foreign auto makers that plan to produce hybrid vehicles in China, as any foreign automotive producer would have to share its technology secrets with its Chinese partner. When China first opened its doors to foreign trade and investment, one of the greatest threats was foreign technology to its five pillars of the economy of which one was automotive production.

The big automakers in China are state owned dinosaurs. During the mid 1990′s these state owned dinosaurs, such as First Automobile Works (FAW), Beijing Auto Works (BAC), and Shanghai Industry Corp (SAIC) had to shed their deadwood workforce and become leaner enterprises to work with foreign automakers, it was decided that if foreign automakers were to produce in China, they would have to partner up with a local state owned firm to avoid the market being overrun by foreign technology. Fast forward to 2010, the upside to this agreement is that Chinese automakers are happily building automobiles with their foreign partners for the Chinese market, and more than happy to buy out dated technology from their partners for use within their own range of cars, which so far largely control the bottom of the rung markets in developing countries.

In the twenty plus years that First Automobile Works has been producing Volkswagen vehicles, they have yet to produce a major rival in terms of quality and engineering to a Volkswagen car, so if they one day produce an electric variant of the VW Golf, it will be highly unlikely that the following year that they will produce their own electric car based on Golf know-how. Mercedes, BMW, and Audi are all more than willing to put their luxury models into production in China, yet their joint venture partners have yet to manufacture a car that can rival them in terms of luxury. FAW has been producing the Toyota Prius for several years, yet where are their own hybrid cars? Not at the production stage yet.

BYD, China’s own electric car maker, has put its own BYD E6 pure electric sedan into testing as a fleet car within a taxi company. The car itself is supposedly able to drive 300km on a single charge and also reach full capacity in 10 minutes. The E6 isn’t available to consumers as of yet (although we keep hearing it will be soon), but it seems to be a genuine threat to foreign electric vehicles. BYD plans to enter the American and European market later this year, it will be the first Chinese car to hit American shores but is likely to be the third major Chinese automaker to venture onto European shores. BYD will more than likely hit upon a harsh market in the USA, but they are bringing a product that is in high demand so they are likely to be in different position to the Japanese and Korean automakers from the 20th century.

The case for sharing secrets with your partner is a not a new one, but the case for fear of the Chinese auto industry is a new one. Sharing technology secrets is not a new concept, automakers share secrets with suppliers, automakers share secrets with governments, so why not share them with a partner? The chance for espionage and corporate theft is just as high as in the West as it is China.