While the Chevrolet Volt may be ineligible for Chinese subsidies intended to make that country the world's number one electric vehicle market, there is little doubt GM has a strong interest in growing its business there.

In this article, we will look at some facts of a much broader story, but will confess up front: Some of our information is sketchy. But then, some details of policies being formed to spur Chinese New Energy Vehicle (NEV) investment are “opaque” even to the office of the U.S. Trade Representative (USTR) Sen. Ron Kirk, whose staff we spoke with on background.

But before we get to that, we’ll note that in April, the Chinese reported they intend to dominate the world advanced-tech transportation market – most notably hybrid and battery electric vehicles – by a large margin.


GM China Group President and Managing Director Kevin Wale drives the Chevrolet Volt on its unplugged journey (China).

In doing so, while there are some who disagree, it appears possible the Chinese government-owned industry will continue a longstanding policy of getting intellectual property by hook or by crook.

Last month it was reported China has begun a development plan for the next 10 years that will invest $15.28 billion (100 billion yuan) toward making EVs more prevalent.

According to an April 8 China Daily article, in light of the Chinese government's heavy investment plans, Chen Qingquan, chairman of the World Electric Vehicle Association, said he expects by 2020 China will lead the electric-vehicle sector with an estimated 15 percent market share for hybrid and pure-electric vehicle sales in the world's biggest automobile market.

As soon as 2012, China expects to have 100,000 NEVs on the road, which in turn will spur more life into its battery industry there worth 6 billion yuan.

Of hybrid and electric vehicles specifically, the China Daily said by 2020, “China is aiming for the top position in the global new-energy vehicle sector with sales volumes of 5 million units.”

The plan, which has been expected for some time, was drafted jointly by China’s Ministry of Industry and Information Technology (MIIT), Ministry of Science and Technology, Ministry of Finance, and the National Development and Reform Commission, and was expected to be finalized soon according to the April article.


The Chinese intend to be the world's largest car market, and within this, the world's largest EV market. It is heavily subsidizing its own industry and consumers to make it so, while doing all it can to attract top foreign investment.

Fitting in with these plans, consumers in Beijing are being offered tax breaks and other incentives to make BEVs akin to the only game in town.

You may recall Beijing, which has a population about the same as Australia, has overcrowded streets. Until 2010, it was registering as many as 2,000 new cars a day, and bought about 700,000 vehicles last year. But the government declared stricter limits on license plate issuance and now allows only 240,000 per year dispensed by lottery – except, that is, for domestically made battery electric vehicles which were subsequently called for to be made exempt.

The combined incentives for Beijingers to go electric could be as high as $18,200 per BEV – a huge amount by Chinese standards – and waiving the license plate restriction for domestically produced EVs makes them a no-brainer given that buying an electric car may be the only way for most people to get any kind of car on the road in Beijing at all. This plan is said to be a model for other Chinese cities to follow.

At the same time, other issues are percolating toward the bright and glorious electric vehicle future in the People's Republic.

A couple days ago, officials at the USTR’s office told us that while China is open to all sorts of “new energy vehicles” it really wants to go straight to BEVs. While hybrids and other alternative vehicles are part of the mix for its NEV proposal, they are keenest on gas-free BEVs.

These initiatives are part of China’s 12th Five-Year-Plan (for 2011-2015) still being working on.

In question is how the Volt would fit in. As a $40,000-plus car, it would also be subject to an additional 25-percent import tariff, and not eligible for breaks – due to its gasoline engine – that other BEVs made in China would take advantage of.

How it will sell compared to much lower priced domestic EVs or even GM’s own $10,800-$13,800 gas-powered Baojun 630 intended for outlying areas – and based on the Buick Excelle platform – remains to be seen.


The Chevrolet Volt begins its journey on the morning of March 24 from GM China's headquarters in Shanghai (China).

We would have liked to be able to tell you, but written and phoned-in requests for comment by GM for the past two days were not returned.

Why, we do not know.

What we do know is GM intends to get the Volt to China by year’s end and since last year has been doing photo ops and driving tours to promote the car.

And while we’re on these topics, we’ll mention another murky issue confronting not just GM, but any automaker or possibly OEM parts suppliers wanting to do business in China.

The USTR officials said China, as does other nations, has a strong desire to attract leading-edge technologies to its market, including, of course, those in the advanced-tech vehicle industry.

In China, it has been a policy that automakers wanting to sell there must establish up to a 50-percent joint venture, a concession GM has made already for its petrol-powered cars, most notably SAIC-GM-Wuling and FAW-GM.

The murkiness surrounds new questions regarding OEM components makers. Previously, they were not required to create a JV with a Chinese “partner” (read: government-owned company).

Going forward, whether they will need to do such things as create a joint venture, or make other technology transfers in order to get at the honey pot that is China is not clear.

According to an article by The Truth About Cars (TTAC), some political excitement revolving around these questions is much ado about nothing. At the end of last month, two Michigan-based, Democrat U.S. senators wrote Trade Ambassador Kirk a stern letter warning of the evils of China trying to co-opt America’s intellectual property.


The Truth About Cars said this is just ignorant saber rattling – and may be correct. If so, the USTR still hasn't caught on yet. Also, the respective senators' staffers told us they are still waiting for a reply. We got one by calling and asking. Paraphrased, USTR officials said, "Thanks, we're on it."

TTAC found documents from a legal firm stating a re-write to proposed NEV policy in China had already taken place, thus fears and "saber-rattling" were unfounded.

But in fact, China’s policy is still not settled. We thus remain unsure, and must say that the USTR’s office might know something not readily found by TTAC, or else the USTR and the Michigan senators really are as ignorant as TTAC alleged.

Since we have no evidence either way, we will report what the USTR officials told us two days ago. They said they do not get complete information from the Chinese regarding their formulation of regulations for the proposed NEV policy. They said they have a number of communication channels, have their ear to the ground, and they remain vigilant toward potential regulations that could adversely affect OEM hybrid and EV component makers.

We asked them what new measures could cost American companies wishing to do business in China.

“The question is in order to produce and market NEVs in China what would U.S. automakers need to do that they would not otherwise choose to do?” said the USTR official. “So basically it [China’s policy] sets the terms and conditions for foreign companies as they invest, and establish production facilities in China, assemble the automobiles – these NEVs – and then market and distribute those vehicles in China.”

In 2008, the Chinese were told by the World Trade Organization (WTO) to back off aggressive policies alleged to have the aim of strong-arming intellectual property, and China did comply.

However, the USTR officials told us they still are getting grape-vine reports of one-on-one confrontations between Chinese government representatives and foreign companies. An example could be something like a U.S. or other international company wanting permission to expand in China will be asked to do such things as set up a research institution, form a JV, or directly hand over proprietary information or other trade secrets it would not otherwise have wanted to.


2011 Chevrolet Volt April 26, 2011 (China).

In addition to cutting no breaks to the Chevy Volt, the Chinese may or may not be looking at new policies that could add EV component makers to the list of those who may be asked to fork over trade secrets, form joint ventures and thus share profits with Chinese companies as a condition of doing business.

“So the regulations you know, if there is ultimately a regulation [that would be finalized and made law] which forces them to produce all the major components in China where they would not have otherwise have done that that would raise the cost,” the USTR official continued, “It would make it more difficult for them to use the sort of broader production strategy that they might otherwise pursue, you know, if they have to establish a new brand and they can’t market an existing brand; that can be very costly.”

The USTR officials were careful in their language but said China has continued to cause “concerns” for allegedly “inappropriate” tactics, and potential "discrimination." The U.S. government has made its concerns loud and clear. They said they think China has heard the U.S. concerns.

Coming back to the question of what GM is doing, thanks to its joint ventures, China is already its number-one market. The way GM can make this claim is when it issues financial reports, GM keeps a percentage of the profits based on the JV split, but declares 100 percent of the Chinese-American companies sales as its own.

This you can see, as follows: “General Motors and its joint ventures sold 203,367 vehicles in China in April,” GM of Shanghai said, “It was the third time in 2011 that GM’s monthly sales in the world’s largest vehicle market have exceeded 200,000 units.”

The company said in April it sold 44,292 Chevrolets, 53,085 Buicks, and Cadillac increased 77.1 percent to sell 2,550 units. The Buick and Chevrolet sales represent increases in the middle 7-percent range, and the other half of GM’s “largest" market came from its JVs.

“Domestic sales by GM’s other manufacturing joint ventures, SAIC-GM-Wuling and FAW-GM, totaled 100,262 units and 6,470 units, respectively,” GM said, “SAIC-GM-Wuling continued to lead China’s mini-commercial vehicle segment. GM and its joint ventures have sold a record 888,950 vehicles in China in the first four months of 2011, representing an increase of 6.3 percent from the same period last year.”


Chevrolet Volt 118 kilometers from Hangzhou (China).

As for the humble Volt, GM’s marketing plan is unknown, at least to us, so we will just end this with questions and comments we wish GM would have answered.

How will the Volt fare without GM turning over intellectual property rights to China?

Whether GM wants to or not, it appears China is making it painful not to.

Because the car is not now made in China, it has a competitive disadvantage against domestic Chinese BEVs. In fact, because it is a plug-in with a gas generator, it would not be eligible for the better incentives available to pure BEVs anyway. These could potentially be available to the Nissan LEAF, or Mitsubishi MiEV.

So, will GM build one or more BEV just for China? Would it also look to export them to the just-as-lucrative India market, as it is doing with other Chinese-made cars?

As we reported in March , GM already is looking at building small, inexpensive BEVs in India.

If it did this in China, would it be labeled a Chevrolet or Baojun or something else?

And meanwhile, who will buy the American-made Volts expected to be imported there at significant cost, only to be priced three to five times more than a domestic BEV? We already know it intends to assemble Volts somewhere in Europe. Would it export them from Europe to China, or follow the trend to set up shop in the country of consumption?

Will GM’s comfortable arrangement with its JVs evolve to include the Volt? Would it agree to turn over intellectual property in such an arrangement? Since the Chinese are adept at reverse engineering designs anyway, will it be seen as a minor concession to give them delayed release of GM's in-house information?

And beyond GM, we are waiting to see what will happen with many other EV automakers and component suppliers, some of which are sitting on the sidelines of what otherwise looks like a great growth opportunity.

China has said it will be number one. It is playing for keeps. Our apologies for raising as many questions as answers. We will keep digging and let you know more when we do.

Sources: China Daily , Global Times , GM Shanghai , TTAC