Will Detroit Get Shut Out Of China’s Electric Vehicle Market?

7/11/11Follow @xconomy

China has been a Godsend to Detroit. Even as Ford Motor, General Motors, and Chrysler have stumbled in recent years, the country has provided a nice boost to sales of American cars equipped with traditional internal combustible engines.

But when it comes to electric vehicles…well, China has its own plans.

The country is spending billions of dollars to develop home-grown battery and motor technology, hybrids, and full plug-in cars, trucks, and buses. And to protect its nascent industry, the Chinese central government has recently issued draft guidelines that limit foreign investment in certain electric vehicle components and require overseas firms to disclose intellectual property secrets to Chinese companies.

“China wants to place some serious restrictions” on foreign auto makers, says Kevin See, an analyst with Lux Research in Boston. “Clearly, the companies inside China are well positioned to benefit. China wants to protect its value chain all the way to the vehicle.”

The proposed restrictions have alarmed American officials. In an April  letter to U.S. Trade Representative Ron Kirk, Michigan Senators Carl Levin and Debbie Stabenow said the guidelines would block U.S. auto makers from accessing a potentially huge market for electric vehicles.

“We are concerned that these draft regulations continue China’s long history of breaking international trade rules,” the letter reads. “These new draft regulations appear to represent another attempt to illegally gain an unfair advantage over the U.S. automobile industry that will cost our country jobs.”

“If China does implement these practices, [Kirk's office] must use all its available resources—including possible legal action at the World Trade Organization—to end China’s discrimination,” the letter warns.

Since 2009, China has overtaken the United States as the world’s largest auto market. One trip to the country and you’ll see why.

Three years ago, I visited the Changan Ford Mazda car factory in Chongqing, China’s largest municipality, … Next Page »

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