China’s electric car tactics rattle automakers

SHANGHAI (AP) - The toylike electric cars at the Shanghai Auto Show are a glimpse of the high-tech automotive future China’s leaders are pursuing _ and a harbinger of possible disputes with its trading partners.

Geely’s two-seat McCar, Dongfeng’s Shuaike microvan, the four-seat M1 REEV from Chery and others promise a range of more than 100 kilometers (60 miles). Most are still in development but some are appearing on China’s streets.

Beijing sees electric cars as a field where it can take a global lead, helping to transform China into a creator of technology. But while it pushes its fledgling automakers to create their own products, it also has alarmed global producers that operate in China by pressing them to hand over know-how and limiting access to its market.

Draft investment rules issued last month would allow foreigners to own only a minority stake in Chinese manufacturers of electric car components. Next month, Beijing is due to release a 10-year industry development plan for “new energy vehicles,” and automakers worry it will impose further curbs on production or imports.

Foreign manufacturers are concerned Beijing might require them to hand over valuable technology and help local partners create “indigenous brands” as the price of being allowed to sell electric cars in China.

“They certainly worry about that,” said John Zeng of JD Power and Associates. “They are still at the stage of investing heavily in research and development. So right now, they are not ready to transfer technology.”

Beijing already requires that for a foreign manufacturer to produce an electric car in China, its local joint venture must own the technology for one of the three “core components” _ the battery, the motor or the power-management system.

Developing powerful but safe batteries has been a key challenge for Chinese automakers. Batteries in Chinese cars have exploded more than 10 times during development, the business magazine Caijing reported this month.

“This makes drivers not dare to drive these cars,” the magazine said.

Electric cars are the latest industry in which Beijing hopes to use China’s fast-growing market as leverage to develop its own technology and global brands. It passed the United States in 2009 in number of vehicles sold annually and foreign producers are looking to China to drive sales, putting them under pressure to cooperate.

Beijing requires foreign automakers in China to operate in joint ventures, in hopes their local partners will learn and grow. But communist leaders have been disappointed with the results: Today, China’s market is dominated by General Motors Co., Volkswagen AG and other foreign brands. Local producers such as Chery Automobile Co. and Geely Holding Group, the new owner of Sweden’s Volvo Cars, are growing fast but are far behind.

Electric cars offer a fresh start in a field with no entrenched leaders.

“They see it as a big opportunity. They want to be dominant in some vehicle market and the old technologies have already been taken,” said Deborah Seligsohn, a researcher in Beijing for the Washington-based World Resources Institute.

Electric cars also are a key part of China’s efforts to curb its voracious appetite for imported oil and gas, which communist leaders see as a strategic weakness.

“The energy security advantages for them are enormous,” said Seligsohn. “Switching people to electricity that you can produce domestically is very appealing.”

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