China's Electric Cars & the Road to an Affordable EV

BYD Auto has been the poster child for electric cars in China ever since Warren Buffett invested in the company back in September. But in recent months new players, including the Renault-Nissan Alliance, Daimler AG and battery maker Electrovaya, have come onto the scene as well — making China look more and more likely to give electric cars a strong push into the mass market.

Plug-ins are slated to hit the Chinese market in earnest over the next few years. BYD’s plug-in hybrid F3DM went on sale (for fleet operators) late last year, and it’s supposed to launch its first all-electric model — the E6 — in the second half of 2009. Nissan announced plans in November to start selling electric cars in the country by 2012. On Friday, the Renault-Nissan Alliance said it expects to roll out electric cars (and charging infrastructure) as part of a pilot project in central China’s Wuhan by 2011. In February, China’s Chery Automobile unveiled an electric concept car at the Detroit Auto Show.

Some of these companies are also working on electric models for the U.S. market. BYD plans to sell its electric E6 and a plug-in hybrid sedan in the U.S. by 2011. Renault-Nissan has started working with governments and utilities in California and Oregon to gear up for regional electric vehicle rollouts next year. Daimler, which is working on an electric version of its Smart Fortwo, has just introduced the gas version in China, joining a league of lower-priced lookalikes.

The big boon for automakers and battery suppliers — and consumers looking for more affordable alt-fuel cars — would be scale: China has the world’s second-largest car market (it exceeded U.S. sales for the third month in a row in March), and as the Wall Street Journal reports, the government is determined to help it grow an average of 10 percent a year for the next three years. If plug-ins take off among Chinese consumers, it could help companies drive down production costs with higher volumes — whether by selling their own vehicles or benefiting from battery suppliers’ economies of scale.

But there’s a bit of a Catch-22: Prices remain high for mass adoption in China. With a price tag of roughly $22,000, BYD’s F3DM — available only to fleet operators at this point — is too costly for companies to go for it en masse. According to reports from Chinese media picked up by AutoblogGreen and GM-Volt today, BYD has sold just 80 F3DM units in four months.

BYD aims to bring that price down to about $16,000 through higher production volumes, helped along by U.S. and EU buyers. That would put the F3DM well below GM’s $40,000 Chevy Volt and competitive with Honda’s 2010 Insight, expected to have a base price of just under $20,000. According to Fortune magazine’s cover story this week, BYD’s cost-cutting moves so far include hiring people to assemble batteries instead of buying the $100,000 robotic arms used by Japanese competitors, flying executives in coach for business travel and putting them up in suburban rentals instead of posh downtown hotels for events.

For those of you ready to hit the comment button and point out that China gets most of its energy from coal, which means electric cars would be plugging right into dirty energy, some food for thought: Taking a gas-powered car off the road in China and replacing it with an electric one would cut greenhouse gas emissions by 19 percent, according to a MicKinsey report noted recently in the New York Times. Think it’s a bad trade? The floor is yours.

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