China’s SAIC Motors and GM Complete Electric Car JV

September 27, 2011 Posted by China Briefing Reading Time: 3 minutes

Sept. 27 – General Motors (GM) recently announced a joint venture (JV) in the promising electric car market with Chinese auto giant, SAIC Motor, in what will be the 11th JV between the two industry leaders. The partnership, Pan Asia Technical Automotive Center (PATAC), will constitute what’s being called “a new electric vehicle architecture” in China with GM and PATAC engineers collaborating on the development of key components and vehicle structures, according to a GM news release.

As expected, GM will bring to the table much of the needed technical expertise and its global network, with SAIC Motor contributing its knowledge of the domestic market and distribution channels. GM innovations in batteries and inverters will be transferred to PATAC, while SAIC will inject an undisclosed cash contribution into the project in recognition of GM`s past and present technological contributions, according to GM`s Vice-Chairman Stephen Girsky.

In the end, the two companies expect to see new innovations hit the market faster, and improved economies of scale, said SAIC President Chen Hong.

Tim Lee, president of GM International Operations, expressed similar sentiments, acknowledging that the two parties know full well the disadvantages of going it alone in this industry.

“The co-development of this new electric vehicle architecture demonstrates the broad range of benefits made possible by the strong partnership between SAIC and GM,” Lee said. “For almost 15 years, our two companies have forged some of the industry’s most successful joint ventures. This unprecedented level of cooperation is another demonstration of our companies’ commitment to work collaboratively.”

GM has avoided politicizing the issue, as questions have arisen about the whether or not the Chinese government’s efforts to compel foreign automakers to transfer valuable electric car technology to joint ventures gave the impetus to this partnership. Generous subsidies from the Chinese government for “new energy vehicles” are only offered to foreign automakers if critical technology is handed over to a joint venture, despite WTO warnings against such eligibility requirements.

Aside from this partnership, both GM and SAIC will make their own forays into the new energy car market. SAIC announced last year that it would release electric minicars under its own Roewe brand, while GM is going ahead with plans to import its plug-in hybrid, the Chevrolet Volt by the end of this year. Historically, GM has only leased rather than sold its electric cars for fear that foreign auto manufacturers might import and reverse engineer them. It`s little wonder why the Volt`s hybrid technology will not be transferred to PATAC, and why manufacturing will remain in the United States.

GM and SAIC Motor both stand to benefit significantly from the Chinese government`s strategic plans in this sector. China’s 12th Five Year Plan (2011-2015) aims to increase the country’s production capacity of “new-energy” vehicles to 1 million. Pure-electric cars, such as those produced by GM, along with plug-in hybrid cars, will account for 50 percent of this output. Roughly 100 billion yuan (US$15.67 billion) in government funds will be pumped into the sector over the next 10 years, with a target of a whopping 5 million new energy vehicle sales by 2020.

Given these ambitious plans, combined national and municipal subsidies for electric vehicles could total up to US$19,300 per car, likely putting the partnership’s vehicles at a very competitive price in China. GM and SAIC will encounter some competition from a joint venture between BYD Co. Ltd. and German automaker Daimler AG, which will launch a new brand of electric cars. Its first model will hit the Chinese market in 2013. Specific product details from the GM and SAIC Motors tie up have yet to be released.

U.S. Manufacturing Moving Overseas – The New Wave

What’s China Good for Investing in? It’s All About Innovation