Joint ventures’ local brands may make EV market worse

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LEAF 2011 24 300x200 Joint ventures local brands may make EV market worseChina Car Times previously reported that the Nissan Leaf will be produced in the city of Guangzhou as a Venucia model, although this is not unexpected news, it still makes us worried about the prospect of electric car market in China, which so far has been far behind the government’s original plan.

In the automotive field, the Chinese government has paid great attention to two critical issues: One is the development of local brands and local R&D, it is a shame that the world’s largest car market is dominated by Volkswagen, General Motors and other western brands, while Chinese local brands can only wallow in low-end market that joint ventures disdain. The other one is electric cars, because most officials and specialists believe the EV technology gap between China and western world is smaller than the gap of conventional gasoline powered cars.

Thus, it is understandable that government is encouraging joint ventures to unveil local brands and build electric models. The encouragement means if you do not do so, to building a new plant or merely expanding in China is almost an impossible mission, let alone to establish a new joint venture. Thanks to this policy, Shanghai-GM unveiled the Baojun brand , Shanghai-VW is expected to unveil Tantus, FAW-VW has the Kaili brand in the works, Dongfeng-Nissan has already unveiled Venucia, Dongfeng Honda are working on the Ciimo nameplate, Guangzhou-Honda has already revealed and launched their first Everus model. Although these brands are currently churning out older name plated cars from the original joint venture, the ultimate goal is to make them into electric brands for the Chinese market – and possibly elsewhere.

However, electric cars attached to a JVs’ local brand may make the consumers more confused. Think about this: you have owned a Nissan Qashqai or Teana, and now you go to Nissan’s dealership to trade another new car. Maybe the Nissan Leaf comes up on your radar because of its environmentally friendly powertrain, unique styling and intelligent instrument panel, despite of the higher price. But will you choose a tongue-twisting brand you have never heard, called Everus? Would you invest 300,000RMB in a car from a brand with an unknown history and future? It would be a hard sell in a wealthy country, let alone a developing country where such a sum of cash would undergo months of research before a decision is made. Not all of China’s consumers are dropping mad money on top dollar brands, the 99% are looking for reliability, a future, and confidence.

The low-end product lineups of JVs’ local brands will make things worse. Although government hopes JVs’ local brands can develop new cars in China, rather than a direct introduction from overseas factories, most of their models are just revivals of old cars which had been out of production in China. For example, Venucia’s D50 is a facelift of the old Nissan Tiida, while Everus S1 is barely a facelift of the old Honda Fit saloon. The expensive avant-garde electric cars are under the same roof with cheap old models – this should be the last thing a product planner wants to do.

Perhaps, attaching a local brand on the hood of an electric car is just to cater for government. The joint ventures do not expect to attract volumes consumers to buy electric cars, since the internal combustion engine is likely to be the main attraction for consumers over the next few years.

Electric cars are the peak of automotive industry. China should face the challenge head one, no matter how difficult it is, because no rival will help them sincerely.

About the author  ⁄ Gong Zai Yan

Gong Zaiyan is a researcher at the Center for Automotive Industry, School of Automotive studies, at the prestigious Tongji University.Going Zai Yan focuses on the study of the green vehicle industry in the Chinese market, he also focuses on policy and regulations in the overall market.

5 Comments

  • joninchina
    April 12, 2012

    Well written – and I couldn’t agree more. Part of the answer is connected to a age old question…….which came first – the chicken or the egg? You see, there is the problem – manufacturers are reluctant to invest heavily in EV production because there is no infrastructure yet in cities to charge them easily (except for a few cities like Shenzhen), and cities are reluctant to invest in infrastructure for EV’s because there are very few of them on the streets at this time. My feeling is that both sides should “bite the bullet” and INVEST IN THE FUTURE. However, I DO see an opportunity here for the domestic auto companies in China to make the leap ahead of their joint venture counterparts……..

    Out of curiosity, I looked up the electric Geely Panda….and found several articles pertaining to the Yulon/Geely joint venture to sell electric Pandas. The most interesting part of one of the articles was this quote –
    “The car is expected to cost slightly more than the cost of the non-electric variants, which at present is between $5,000 and $10,000. In addition to a change in the engine, the car is also expected to boast a much better exterior, without any change in the car’s “Panda” look.”

    Now, this is a old article (2009), but my point is this – they were (and hopefully still are) planning to sell the electric Panda for SLIGHTLY MORE than the non-electric version. The top of the line Panda is about 60,000rmb, so “slightly more” would be in the 70-80,000rmb range. Even if Geely had to sell the electric Panda for about 100,000rmb, it is still a GREAT BARGAIN compared to the prices of other electric cars right now (in the range of 250,000-300,000rmb). THIS is the opportunity I’m talking about – the domestic companies have the capability to produce and sell a electric car in the 80,000-100,000rmb range in my opinion, and they need to TAKE ADVANTAGE of it! The Panda, Chery A1, Changan Ben Ben Mini, BYD F0…..these are all prime candidates for EV versions that can sell in the 100,000rmb range. Market them as city cars, keep the top speed around 100kph (fast enough for ring roads and airport access highways), give them a range of 120-150km between charges………it CAN be done and the technology is here already. This is the way that domestic companies can undercut and beat the joint venture brands…….while at the same time finally giving the consumer some EV’s that are actually AFFORDABLE for most people (and building the market as well)!! The one question remaining is…….WHEN WILL THEY FINALLY FIGURE IT OUT AND DO IT??

  • Qwan
    April 14, 2012

    jon
    why am I going to give up 90-100000rmb for something that I
    cannot charge at home currently on the electric situation here. Can drive it from province tp province without doing a lot of pre-planning on where to get recharged.
    Must not have it on too long with the batteries running the lights if I get stuck in traffic (which is everyday) Cause the thing may cut off then i have to push it ?or get it towed by gas vehice or get it pushed in trffic by anoter vehicle or get animal to pull it to charging station.
    No one in their right mind is going to be the beta tester for these products with out some on going payment for doing so. Not just a subsidy to the manufacturer, a subsidy to the consumer for the inconvenience as well.

    Until the electric grid problems are fixed thru most of the country don’t expect people to embrace this I don’t care how costly petrol gets. BEing able to get from place to place is the purpose of he car. Not being stuck somewhere.

  • Qwan
    April 14, 2012

    Now maybe if i were a hybrid and had both a gas engine and a electric engine I might part with 100000rmb for it. But not until that range is further then 400km.

  • joninchina
    April 14, 2012

    @Qwan –

    You need to read my post in better derail….I’m not suggesting that EV’s should be used for provincial or national travel. I know the charging grid is not comprehensive…..YET. As I stated in my earlier post, market these cars as CITY cars – easy to park, no pollution, enough range for the AVERAGE person’s commute (your commuting requirements might not be appropriate for owning a electric vehicle, I understand that – but for most other people it would be no problem), and charging facilities in most medium and big cities are being installed NOW. It’s also getting easier and easier to charge a EV in your apartment garage (my complex has them set up now – only 2 or 3 stalls at this point but they can add more as needed) so that should be “peace of mind” for potential customers as well.

    Now let’s do some simple math – it costs an average of 1 rmb to charge a electric bike, and e-bikes can go about 40-50km between charges. Yes, they’re lighter than cars and don’t need as many batteries…..so let’s say apartments charge 15, even 20 rmb to charge a car overnight. That’s 20 rmb to go 120km – 60 rmb to go 360km (about the same range as an average car on one tank of gas). If your gas car has a 50 liter gas tank, it would cost you AT LEAST 400 rmb to fill up your tank right now. So – 60 rmb for a EV or 400 rmb for a gas car…..for people who do MOST of their driving in the city, this could be a real incentive to consider purchasing a EV for their city needs. And, in a few years provincial travel will be no problem as well – as more and more high speed charging stations (a high speed charger can charge about 80% of the EV batteries in 15-20 minutes or so) get established you’ll be able to stop at a roadside charging station, eat a snack while charging the car and get back on the road quick.

    Finally, here is a link to a article on Yahoo TODAY – it supports many of the things I’ve posted here before – EV’s and hybrids are gaining acceptance with high gas prices being a prime motivator, costs are coming down as more EV’s and hybrids come on the market, and market share will continue to increase. China is still considered a world leader when it comes to development of EV technology, and China has the opportunity NOW to set an example for the rest of the world. So, here’s a simple question – WHY MISS THAT CHANCE? The link to this article is posted below:

    http://news.yahoo.com/hybrid-electric-cars-see-record-sales-march-205250036.html

  • Gong Zai Yan Author
    April 14, 2012

    Dear joninchina,
    I am sorry to tell you that a Panda EV should be much more expensive than we expected. Some small EV cars, like Zotye 5008 EV, are cost around 200,000 RMB in the market.
    The “slightly more” may means the price with subsidies. In some cities, the subsidies are up to 120,000 RMB theoretically, but consumers can hardly get the money. Even they can get all subsidies, as we know, the government subsidies can not last too long.

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