By on April 20, 2009

A few weeks of vacation from the blogosphere’s non-stop news cycle can leave a blogger feeling a bit behind the times. Two weeks is an eternity in internet time, but stepping away from the barrage of news, spin, hype and hysteria is good for the sense of perspective. Especially if the down time is spent exploring countries on the local typical family vehicle, complete with two wheels, four speeds and about 100ccs of thundering power. Beyond the sheer novelty of seeing entire families commuting on a moped (“Daddy, Nguyen isn’t staying on his side of the pillion seat”), travel in the developing world shows how insulated America is from the transportation realities of the rest of the world. If the $1,000 entry to the world of moped ownership is a major (if attainable) hurdle for workaday Vietnamese, even sub-$10K vehicles face what a GM sales release might call “a challenging sales environment.” Try to explain the “green premium” for hybrids and plug-in vehicles to an auto-aspirational third-worlder, and watch as the idea of paying more for less room and power draws only puzzled bemusement. Hair shirts, it appears, are strictly a fad for the western and wealthy. Case in point: the world’s first plug-in hybrid, the Chinese BYD F3DM.

BYD’s Corolla-aping PHEV raised more than a few eyebrows (many skeptical) when specs and concepts first appeared. Warren Buffet’s hefty investment into the cell phone battery maker quieted the skeptics and gave green-hued futurists a license to thrill. A 60-mile plug-in range, a multiple-mode hybrid system and a price tag under $25K had American hypermilers factoring in local tax credits and greengasming at the fantasy of it all. But in the world’s new largest market for automobiles, even $20K is a huge amount of money. And it turns out that one society’s eco-fantasy is another society’s overpriced, overly-complex answer to a question nobody has asked.

Xinhua reports (yes, nearly a week ago) that BYD’s F3DM has utterly failed to attract Chinese consumers; the firm has sold only 80 models since it went on sale in December. Apparently 20 of those were bought by the city of Shenzhen (think China’s Detroit) with the rest going to the local branch of China Construction Branch. In fact, BYD never even attempted to target private consumers with the model, despite the fact that an F3DM costs 30-40 percent less than a Toyota Prius (which only sold about 3,500 units in China between 2006 and 2008). Even the government isn’t rushing to put its citizens in the alleged volks-hybrid, offering a $7K hybrid subsidy to fleet buyers only.

Even with government help bringing the F3DM’s price under $20K, fleet sales aren’t as strong as BYD had hoped. Shenzen’s plan to buy more for the city’s taxi fleet is on hold as even BYD officials admit that the price needs to come down. BYD’s CEO Wang Chuanfu says that increasing production volume could help bring the F3DM’s price to a more-realistic $15K, but without institutions stepping up to prime the sales pump, the promise of a sub-$10K PHEV (after government subsidies)—and mass market sales—remain out of reach.

And even though the F3DM isn’t dependent on a charging-station infrastructure, price isn’t the only concern keeping buyers away. BYD faces an image challenge having never made anything more car-like than a laptop battery just a few years ago, and even its much-vaunted battery technology seems to struggle to meet on-paper performance numbers. According to Xinhua (hardly bomb-throwers when it comes to Chinese businesses), the 60-mile electric range is only attainable driving at a steady 30 mph. And recharging from a home wall socket takes nine hours.

But these tradeoffs and the correlating plug-in efficiency rewards only have meaning in the context of price, and here the lesson for Chevy’s Volt are plain to see. GM’s $40K profitless wonder defies fiscal logic on a comparable scale, offering only the most image-conscious greenies a value proposition worth even including. Like the F3DM, the Volt’s target audience (if not consumer) is the government, and the same increased volume-decreased price mirage lingers on the horizon. But unlike China (BYD expects its sales to double for the second year in a row, hitting 400,000 units), America’s demand for automobiles is in double-digit decline. And that includes demand for the much cheaper hybrids that are already available in the marketplace.

But we don’t have theorize about private PHEV sales levels for much longer. Shenzhen rolled out hybrid subsidies for private consumers this month which would cut the price of an F3DM in half, to about $10K. This coincides with a BYD plan to launch “a mass marketing excercise to promote the car to private buyers.” But if the car-crazed, yet pragmatic Chinese do start buying the F3DM, it will be at half the original MSRP, a feat that GM can’t hope to pull off with its Volt. Unless they just slap in powertrains from BYD, which is hedging its consumer-market gamble by offering to license technology to Western firms. In any case, BYD’s consumer sales push will give us some idea of private PHEV demand (and its required stimulus) by the time the Volt launches. Sales trends are easier to follow when they start at 80 units per quarter.

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9 Comments on “Editorial: Volt Syndrome Strikes In China...”


  • avatar
    menno

    Wow. Just wow.

    So, when the governments decide to stop subsidizing this stuff, companies which have been relying upon selling same will have the catastraphe that has befalled GM and Chrysler, with massive decreases in sales and profits…

    I guess the idea of the free market seems to be dead worldwide.

    It used to be “invent a better mousetrap and the world will beat on your doorstep and make you wealthy.”

    Now it’s more like “how much is it to buy the politicians to make sure I stay wealthy/get wealthier, by their ‘adjusting’ how much one person gets stolen from in taxation in order to subsidize my customers?”

  • avatar
    menno

    Yes I realize China is communist. I just didn’t realize they were also Fascist. But then, there isn’t a lot of difference!

    (Fascism = government and business in bed together)

  • avatar

    Chinese officials are scared to death of global warming, which threatens to dry out the rivers that nourish their agriculture. Those rivers depend on glaciers on the Tibetan Plateau, which are shrinking.

    But, even in the automobile-saturated US, cars represent only about 15% of greenhouse emissions. In china, with copious coal plants, and relative non-saturation of automobiles, it must be a lot less. Hence, it is not surprising this pHEV isn’t going anywhere fast.

    Enjoyed the view of Hanoi. Glad you two were wearing helmets.

  • avatar
    carlisimo

    Menno, fascism has traditionally been the subservience of the individual to the state, and communism (in practice, as opposed to theory) is state control over industry. They often go hand in hand, and many fascist states have held government monopolies over large industries (for example, pre-1996 Taiwan aka Republic of China was a fascist state in which the leading party, the KMT, controlled some major industries and had undue influence over most others). The PRC is not very communist anymore, but is certainly fascist.

    I think the best bet for developing countries that care about their air is strict emissions standards for normal internal combustion engines. They’ll either add a few hundred bucks to car costs or force smaller engines, but consumers in such countries are used to low power levels that we wouldn’t tolerate. Americans would rather pay an extra $5,000 than have 75 hp on hand.

    David, I’ve seen different figures for cars and trucks’ contribution to greenhouse gas emissions in the US, usually 33% of CO2 emissions, with CO2 emissions being 80% of weighted greenhouse gas emissions coming out of the US. In other words, more like 26%.

    In the next few decades airplanes are expected to become a significant source, as their use increases exponentially worldwide. Cement production has always been 8-9% globally, but that’s decreasing in the US and Europe now that we’ve found cheap by-products from power plants that can displace half the cement needed in concrete (it only works if you have power plants burning low-sulfur coal, unlike China’s). Buildings are getting more efficient and they’re the biggest users. I’m in the building industry and we’re making a lot of progress.

  • avatar
    Paul Niedermeyer

    Note to BYD: export; to countries that have a an existing (green) population segment interested in PHEVs. There may well not be one yet far enough along in China.

    But the bigger question raised is very valid. Low oil/gas prices are playing havoc with that segment in the developed world.

  • avatar
    folkdancer

    So, when the governments decide to stop subsidizing this stuff,

    I suggest reading “Hot, Flat, and Crowded” by Friedman to understand how we now subsidize oil. For some reason when we attempt to slow our use oil and subsidizing its use some people think the government is becoming Fascists or Socialist.

    We ARE already socialist in our support of the oil business.

    Maybe many of the governments of the world want you to have clean air and want to stop subsidizing the oil infrastructure. Maybe the government leaders get worried seeing their treasuries disappear while we build poor quality houses, businesses, power plants, and cars.

    Instead of throwing around nonsense about socialism and fascism maybe you should have a different chant: use lots of oil – support Saudi Arabia – get a U.S. soldier killed.

  • avatar
    Aqua225

    folkdancer:

    I have never seen a decent argument to date that Big Oil is subsidized. Could you expound upon Friedman’s thesis?

    I know that money is spent on things that Big Oil is also interested in, like Middle Eastern stability, but that is spent because it is currently within our national interest (ie., worthy of military support), to stabilize regions we depend upon for oil. If oil was to be suddenly shut off to this nation, we’d quickly crash into the abyss of bygone empires.

    I would agree that in the interest of national security that we need to ween ourselves off oil, but realistically, it isn’t going to happen overnight, and artificially inflating electric car technologies before they are truly ready for the masses, is not the solution.

    I think the problem would have taken care of itself, as oil prices naturally rose. However, throw in Global Warming Alarmists who currently have the ear of the Administration in Washington, and it changes the game. This will, in the end, breed a peculiar and vicious market instability that our children will end up having to deal with, if we force a movement off oil unnaturally.

  • avatar
    sutski

    @Aqua225

    “If oil was to be suddenly shut off to this nation, we’d quickly crash into the abyss of bygone empires”.

    Shhhhhhhhhh….don’t tell anyone….

    …..and for an excellent interview with Dr. Colin Campbell, the most prominent current advocate of the Peak Oil scenario…

    http://europe.theoildrum.com/node/5315

  • avatar
    DearS

    Saw a lot of F3s in the Dominican recently, I was surprised they were so common. A lot of F3 taxis so close to our shores, in a poorer country they seem to make good sense right now. Also saw Chinese bikes and pickups.


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