Executive Shows China’s First Home-Grown Electric Sports Car

The Wall Street Journal, April 22, 2015

A Chinese company’s new electric sports car is aimed at the luxury end of the market, currently dominated by European brands. The WSJ's Colum Murphy reports.
By Colum Murphy

CH-Auto's electric sports car, the Event!, is seen at Shanghai Auto 2015, China's annual auto show, in Shanghai on April 20, 2015. Photo: Miguel Gonzalez Jr./The Wall Street Journal

BEIJING—In a quiet technology park near the Chinese capital’s airport, a former Beijing Jeep executive is completing a plan to create China’s first homegrown electric sports car.  
Lu Qun’s idea: design and build a battery-powered sports car that is cheaper than imported European gasoline-engine roadsters. If successful, Mr. Lu’s first car would go into production in late 2016 and challenge similar models from much bigger foreign companies.  
His CH-Auto Technology Co. has a track record. It has designed gasoline-powered cars for Chinese manufacturers including Zhejiang Geely Holding Group, Jiangling Motors Corp. and a Dongfeng Motor Group. joint venture.  
British auto maker Aston Martin Lagonda Ltd. also has plans for an electric sports car that it will sell in China and everyone from Tesla Motors Inc. to Toyota Motor Corp. have big plans to expand electric-car sales here. Aston Martin Chief Executive Andy Palmer said he was aware of at least two other companies in addition to CH-Auto looking into similar electric-car projects. 
Electric cars are enticing because the Chinese government has pledged substantial support for their development to address air pollution produced by conventional-engine vehicles. China also hopes adoption of electric cars will bolster energy security by reducing dependency on imported gasoline. 
Sales of electric vehicles in China rose to 18,000 units last year, quadruple the number in 2013, according to the China Association of Automobile Manufacturers.
But success for electric-car makers in China—including Tesla—remains elusive. Shenzhen-based BYD Co. , backed by renowned investor Warren Buffett, has struggled for years to gain traction. Last year BYD sold around 21,000 pure electric and plug-in hybrid vehicles, according to the company. Tesla sold 32,733 vehicles globally last year. It doesn’t disclose sales figures for China, but for the year, Asia as a whole supplied 15% of Tesla’s sales. 
Challenges include the high price of most electric vehicles, as well as difficulty in developing infrastructure such as charging stations for a nation as vast as China.
Mr. Lu says the solution is to give customers a reason to buy an electric vehicle, which is where sports cars—already high-ticket items popular with wealthy Chinese—come in. Mr. Lu plans to first target the high end of the market with Event, the name of the company’s first battery-powered sports car. Once the brand, with its dragonfly logo, is established, CH-Auto would follow with cheaper electric cars made in greater volumes.
This week, CH-Auto displayed three cars, including a high-tech two-seater that it said runs on a 48-kilowatt-hour battery and can go from zero to 100 kilometers an hour in 4.6 seconds. It claims a range of 250 kilometers (155 miles) and can be recharged in six hours using a standard 220-volt power supply. 
The company didn’t reveal the price, saying only that it will be significantly cheaper than imported sports cars. 
Industry analysts expect the Event to be priced around 700,000 yuan, or about $115,000. A Maserati Gran Turismo sports car, by comparison, costs 1.95 million yuan in China. 
Industry watchers say the odds for success are still long, especially for lesser known companies like CH-Auto, which face costly investment in manufacturing facilities and difficulties in creating a brand. 
“I don’t think it’s crazy, but the road ahead is fraught with potential pitfalls,” Mr. Palmer said of his potential competitors, which don’t have Aston Martin’s100-plus-year track record. 
CH-Auto said it recognizes the challenges but is confident its vision is sound and it can adequately address any obstacles that may arise.
‘Can they do what Tesla does? That is a bit of a stretch.’
Bill Russo, managing director at Gao Feng Advisory
Mr. Lu has selected Suzhou, in eastern China, for CH-Auto’s production base, and hopes to begin building a factory there this year. The company declined to say how much it is investing.  
Eventually, CH-Auto hopes to produce as many as half a million vehicles a year, if it is successful in expanding into mass-market passenger cars, he said.
To finance production of its first vehicle, the company this summer plans to sell shares in the company on Beijing’s over-the-counter stock exchange that is designed for growth enterprises. 
Mr. Lu said CH-Auto plans to go it alone, but he didn’t rule out partnerships with other companies. 
Mr. Lu, who was chief production engineer of the Jeep Cherokee in China until 2003, says his dream is for the Event to become as famous as Chinese smartphone maker Xiaomi, online retailer Alibaba and drone maker DJI, and help China graduate from low-cost car-making to true automotive innovation.
That is a tall order. China’s giant Internet and technology brands have succeeded by the business-model innovations brought to consumers, said Bill Russo, managing director of consulting firm Gao Feng Advisory.
But Mr. Russo said CH-Auto takes a different approach than China’s internet companies. “Their approach is innovation driven by product and technology. It’s not business-model innovation,” he said. “They probably can make a cool sports car and sell a few hundred, or even a few thousand. But can they do what Tesla does? That is a bit of a stretch” for a small, little-known company like CH-Auto, said Mr. Russo. 
“When a technology is disruptive, newcomers have an edge on existing players,” said Oded Shenkar of the Fisher College of Business at Ohio State University. In addition, he said, the Chinese government is eager to nurture national electric car champions by offering assistance ranging from tax breaks to export rebates and preferential status for government procurements. 
But for CH-Auto to benefit from such support, it will have to show first that it is viable as there are multiple contenders for such assistance, Mr. Shenkar added.
—Rose Yu and Lilian Lin contributed to this article. 

Write to Colum Murphy at colum.murphy@wsj.com 

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