Electric VS hydrogen: China iIs battleground for auto giants

Updated: Friday November 22, 2013 MYT 1:16:52 PM

Electric VS hydrogen: China is battleground for auto giants

GUANGZHOU/BEIJING: German auto giants Volkswagen AG, BMWand Daimler see China’s future as being electric – encouraged by generous government subsidies – but that bet puts them at odds with some of their Asian rivals. While the Europeans were heralding the all-electric vehicle at the Guangzhou auto show this week, Toyota Moto and Honda Motor  were unveiling hydrogen fuel cell cars at shows inTokyo and Los Angeles.The two Japanese heavyweights plan to start selling their hydrogen vehicles in 2015, brushing off electric technology as being good enough only to power tiny city cars.

One of the most ambitious in betting on electric cars in China, the world’s largest auto market, is Volkswagen.

On the eve of the Guangzhou show, Volkswagen said its brands, including Volkswagen and Audi, plan to launch a total of more than 15 near-all-electric plug-in cars by 2018, many of which will be locally produced.

“We forecast high volumes in this area,” Jochem Heizmann, head of Volkswagen Group China, told reporters this week.

BMW and its local partner Brilliance Auto unveiled a jointly developed all-electric battery car inGuangzhou. The two companies plan to start leasing the car next year under a new jointly run China-only brand called Zinoro.

Daimler said it was also on track to launch an all-electric car next year under a new China-only brand called Denza, which the German company operates jointly with Chinese battery and car producer BYD Co <002594.SZ>.

The rush into all-electric cars comes as Beijing ramps up a programme to put 5 million new energy vehicles – defined as all-electric battery vehicles and heavily electrified “near all-electric” plug-in hybrids – on the road by 2020.

China this year expanded the definition of new energy cars to include fuel cell cars.

The two concepts have polarised the industry.

Fuel cell cars can run up to five times longer than their all-electric counterparts, but come with a heftier price tag.

But unlike electric vehicles which can be recharged from home as well as charging stations, fuel cellcars must stop at refilling stations. The hydrogen stations are costly to build, at about $6 million apiece.

CALL FOR FLEXIBILITY

Some industry insiders and experts believe China is too focused on all-electric cars or plug-ins.

“Toyota believes the industry isn’t likely to come up with breakthroughs to make all-electric cars a viable solution any time soon,” said Yale Zhang, head of Shanghai-based consulting firm Automotive Foresight. “Unlike China, some countries have taken a more flexible approach, rather than setting the path on one solution too early.”

Toyota, in particular, thinks all-electric car technology is good enough to power only tiny city cars – not powerful enough for larger cars.

At this week’s Tokyo Motor Show, Toyota unveiled a fuel cell concept sedan with two hydrogen tanks and a driving range of 500 km (310 miles). The car, it said, would sell for 5 million to 10 million yen when it goes on sale in 2015.

Honda also unveiled a five-passenger hydrogen fuel cell vehicle at the Los Angeles Auto Show this week. By his own admission, the company’s chief executive of its U.S. business, Tetsuo Iwamura, expects uptake to be slow due to poor infrastructure.

In China’s congested and bustling cities, electric charging or hydrogen fuelling stations are a rare sight. Volkswagen says the infrastructure is not good enough, and believes plug-in hybrid technology is the solution.

Plug-in cars come equipped with a small gasoline engine that can power the car when it is drained of electricity.

Nissan Motor <7201.T> plans to sell a fuel cell car in Japan and North America starting in 2017, but like Volkswagen, sees electric technology as the future in China, according to Ren Yong, a senior executive of Dongfeng Nissan Passenger Vehicle Co, Nissan’s Chinese venture with a local partner.

Nissan plans to start selling a locally developed electric car in China under the Venucia brand as early as next year.- Reuters

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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