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Electric Vehicles Going Out of Style? Not in China

What is China seeing in electric vehicles that the rest of the world is missing?

Chinese car companies are behaving like they really know something. If history is any guide, the answer could reside with Xi Jinping and a future master plan for cars and energy in China.

This week, Geely Automobile, Dongfeng Motors and other Chinese automotive firms are bidding to take over Fisker, maker of the Karma premium electric sedan. And Buffett-owned BYD plans to launch the Denza — a brand new electric car developed in a joint venture with Daimler – later this year.

Bloomberg News
The Denza concept electric vehicle, a joint venture between Daimler AG and BYD Co. Ltd., on display at the auto show in Beijing, April 27, 2012.

China’s Wanxiang Group received U.S. government approval just last month to purchase A123 Systems AONEQ +32.14% for $256 million. Before bankruptcy, A123 Systems had been America’s most advanced developer of batteries for electric cars and a recipient of $133 million in grants from the federal government.

“The future is bright for A123,” Pin Ni, president of Wanxiang America Corp., said last month. “It is a company with exceptional talent and potential.”

China’s relentless pursuit of electric cars looks curious because it comes at a time when confidence in electric cars in the U.S. and elsewhere appears to be hitting new lows.

Electric vehicle sales remain a mere drop in the automotive sales ocean. For all the news headlines they generate, electrics still account for a tiny fraction of one percent of cars bought each year. Private buyers just are not convinced yet.

Take for example the Leaf, Nissan’s highly touted all-electric car. Despite aggressive marketing, the Leaf managed to win over just 9,819 customers in 2012 – less than half of the annual sales target. “It was a disappointment for us,” said Carlos Ghosn, Nissan’s respected CEO.

Electrics got another black eye this month when a New York Times test-drive of the highly acclaimed Tesla Model S resulted into the car having to be towed to a nearby station after it lost power.

Holding back sales are two stubborn shortcomings:

First, batteries can add up to $10,000 to the cost of a conventional sedan. Case in point: The gasoline-powered Chevrolet Cruze outsells the electric–powered Chevrolet Volt by 10 to 1 even though they are built on the same basic platform.

Second is range anxiety. If you get an edgy feeling when your mobile phone battery flashes low, imagine running out of juice on a cold winter day on a highway between cities, as happened with the Tesla.


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