9.01.2010

The GM Volt in China: (Price) range anxiety?

Financial Times, August 31, 2010


By Patti Waldmeir in Shanghai and John Reed in London

As General Motors announced the arrival of its long-awaited Chevrolet Volt plug-in electric vehicle in China, there was a feeling that the age of the electric vehicle may finally have dawned.

The Volt - which will be sold in the US from the end of this year, and in China next year - will be among the first in a wave of mass-produced electric cars powered by lithium-ion batteries from global automakers. It’s as if Henry Ford and Thomas Edison got together to design a car: posthumously. But will anyone in China buy it?

(Price) range anxiety?

GM says the car is the world’s only “extended range” electric vehicle, taking away the postmodern malaise known as “range anxiety” (fear that your car will run out of electricity in the middle of nowhere). Volt can run 60 kilometres on its electric battery - far enough to cover most commutes, GM says - and 450 more on its petrol-powered “engine/generator”, GM says. Bill Russo, auto analyst and former head of Chrysler in China, says the Volt “has the potential to be the first true high volume electric vehicle to launch to date”.

But despite all the razzmatazz at today’s Chinese launch of the Volt, the automaker is far from sanguine about initial sales in China. Detroit will not say how much Volt will cost in China, but in the US, the price is $41,000 (less a $7,500 tax credit).

A plug-in without any plugs

In China, where the government is super-bullish about the potential for such vehicles as a way to save energy and improve the environment, the Volt will not qualify for a subsidy (at least according to current government regulations). GM officials admit candidly that only wealthy Chinese, eager to make a statement about environmental awareness, are likely to buy one.

Chinese buyers can save about $2,000 a year on petrol costs, GM says, plugging it into the wall at home at night to recharge. But many Chinese car owners live in high rise apartments without a convenient wall socket; and if they have to pay the equivalent of $41,000 for the pleasure of owning a car they need to take down the road to recharge, they may well decline.

Cleaning up

Meanwhile Chinese carmakers are rushing to produce their own forms of electrical propulsion - aiming at price and quality levels well below the Volt. Eventually, China could become the world’s leading producer and market for electric vehicles, auto analysts believe, because of its low car-ownership rates and large battery manufacturing capacity, as well as its government’s desire to reduce pollution and improve energy efficiency.

China recently launched a pilot programme in five cities comprising hefty Rmb50,000-60,000 subsidies for buyers of electric cars and substantial investment in recharging infrastructure. Beijing plans to have 5m clean energy cars by 2020.

But Li Shengmao, analyst with Shenzhen-based China Investment Consulting Corp, says that while he is optimistic about the electric vehicle market in China, he thinks the market share for such vehicles will not surpass 2 per cent in the next five years. And though Volt may be early to bid on that tiny share of the market - it will be far from the last.


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