China Looks to Global EVs for Its Local Electric Compliance Cars

PlugInCars.com, November 27, 2013

By Alysha Webb 

It's a Nissan LEAF, but re-badged with the Chinese Venucia brand.

Familiar-looking plug-in electric vehicles may be seen on roads in China in the next few years. Among the vehicles on display at the recent Guangzhou Auto Show in southern China were a Chinese version of the Nissan LEAF and an electric version of the BMW X1. Both were produced via the foreign automakers’ joint ventures in China. Also the latest iteration of the Denza pure electric vehicle, produced at the Daimler-BYD joint venture, was on display.

Does this mean foreign automakers believe China will be a hotbed for electric vehicle sales? Probably not. These vehicles are more likely “compliance cars,” produced to please the Chinese government, which is promoting vehicle electrification in China. Producing the cars domestically through a joint venture will qualify the vehicles for government subsidies.

“It seems the strategy in play is to leverage the JV brand mandate to add foreign EV technology to the market,” Bill Russo, president of consultancy Synergistics Ltd. told PluginCars.com. “This helps the Chinese access the foreign EV technology while the foreign player has a way to access the EV subsidies with a local brand.”

China has been pursuing electrification for more than a decade, and has released a series of plans that set target production and sales goals and subsidies for purchase of electric vehicles. The most recent plan, which covers 2013-2015, was released a few months ago.

Only Via Joint Efforts

In that plan, battery electric passenger cars are eligible for incentives of up to 60,000 RMB or $9,848 at current exchange rates. Buyers of plug-in hybrid electric passenger vehicles can receive up to 35,000 RMB or $4,103 in 2013. Those amounts will decrease by 10 percent in 2014, and by 20 percent in 2015. 

To be eligible to receive those subsidies, however, the vehicle must be domestically produced. Imported EVs are subject to high import tariffs.

Foreign automakers who want to produce cars to sell in China must do so through a joint venture with a Chinese automaker anyway. That rule was introduced to allow the Chinese companies to access advanced technology. Now, as Russo pointed out, that has been extended to electric vehicle technology.

So Nissan, after some hesitation, will now produce a Chinese version of the LEAF through the Venucia brand, a local brand produced only in China through its JV with Dongfeng, with whom Nissan also produces regular gas-powered vehicles. BMW is doing the same, producing a EV under a local brand, Zinoro, with its partner Brilliance. Daimler does not produce non-electric passenger vehicles with BYD; the Denza joint venture was formed in 2010 specifically to produce electric vehicles.

A BMW EV, but with the Zinoro brand.

The complication with all these joint venture EV launches, said Russo, “is it will only add more competition for the independent carmakers who are trying to develop their own EV products.” That includes BYD and Geely, as well as SUV maker Zhongtai (aka Zotye). The joint venture models will also compete with electric vehicles launched by the state-owned partners, most of whom have launched their own electric vehicles. For example, Dongfeng has showed its own brand EV at other auto shows in China.

For Appearances Only

Whether the local automakers expect to actually sell any of their EVs to Chinese consumers in the near term is a question, however. Supplier sources in China say that much of the activity is more show than substance. And after enthusiastically introducing electric vehicles of at auto shows in China the past few years, at the Guangzhou show this year “most of the local EV products are no longer front and center at the auto show stands,” said Russo.

To be sure, Chinese consumers are generally more interested in buying cars with a foreign badge, assuming that will mean a higher-quality product. But they haven’t been enthusiastic about buying electric vehicles of any brand.

So just having some foreign automaker DNA won’t make EVs much more alluring to Chinese consumers, Yale Zhang, principal at consultancy Auto Foresight in Shanghai told PluginCars.com. “It does not matter who produces EVs, the sales volume will be limited,” he said.

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