Stick And Carrot: Why Beijing Will Become The World's Electric Vehicle Capital

It’s long form Saturday! Most of you probably thought you would never see the day Bertel writes a fiery manifesto for the Electric Car. Today is your day.Yesterday, we were first to run with the story that Beijing most likely will become EV capital of the world. Not because Beijing scientists have developed the miracle battery. Not because Chinese EVs suddenly go 400 miles on a single charge. Physics did not change. Beijing changes. Months ago, new car buyers in Beijing stopped dreaming about buying a new car.That dream was shattered. Now suddenly, an EV has become the only car a new car buyer can buy and drive tomorrow. Or on Monday. If one would be on sale. Here is what happened:In Beijing, the car market has completely collapsed.That does not grab you? Then what if the car market had come to a complete halt in Australia? Beijing has about the population of Australia and had car sales approaching those of Australia. Why did the Beijing market collapse? Because the city doesn’t want more cars on its roads. New car registrations are strictly rationed. More here.On Thursday, we picked up rumors, and on Friday, we received confirmation that Beijingers will be able to buy a car again. If it is an EV. The media didn’t believe it or ignored it.Foreign reporters hop off their bar-stool at Maggie’s and go into a tizzy when someone drops a white flower in front of a Beijing McDonald’s. Reporters end up taking pictures of each other, because nobody else is there. Now, they are asleep at the wheel when the EV the media supposedly adores so much does become law. (And if you ask me: People from Glen Beck to John Stewart are missing great material.)On Friday, the news was in the Chinese press only, and not served on an ready-to eat, fork & knife English platter. Today, the English speaking papers have it. From CCTV to People’s Daily to Global Times, they all run the story that EVs in Beijing will not only be “enjoying the same level of preferential subsidies with Shenzhen”, but will also “have the sole privilege of license-plate-lottery-free, no traffic restrictions and tax-free exemptions (paid by the government).”You need to live amongst the people of Beijing to understand how big that last one is.

Before we do that, let’s go back to Shenzhen and the subsidies. They are huge: 60,000 yuan from the city and 60,000 yuan from the central government to the buyer of a pure plug-in. That’s a total of 120,000 yuan, or $18,362.64 in today’s dollars. That would be a big amount of money stateside, and the purchase power proponents will agree, it is is even bigger in China.In Shenzhen, however, the money remained in the government coffers. Nobody wanted it.Why would a customer not buy the BYD E6 over the BYD F3 with such a munificent donation? First, because there is no BYD E6 commercially available. Second, because the conventional F3 costs $9,000 or so, maybe less with generous BYD-in-distress discounts. Whereas the E6, even assuming a low $30,000 MSRP, would still cost $11,638 after subsidies. They are Chinese, it makes a difference. With the F3, they can drive to Guangzhou and back, whereas with the E6 – do we really believe the 249 mile range? Anyway, moot matter, no E6 available.In Beijing, the first time buyer does not have that choice. Whether F3 or A7, with a mei you (no have) license plate, any ICE powered car is for all intents and purposes out of reach. With an EV, the car can be driven on Monday. It can be driven on any day of the week (conventional cars must stay off the streets for one day, as per Beijing regs). No tax on top, to sweeten the deal until it drips and you need a napkin.For a Beijinger, it can’t get any better. Even if Ed McMahon himself would knock on my door and hand me the keys to the BMW 7series I just won in the Chinese Family Publishers sweepstakes, I could not drive it – no tags. McMahon can’t hand me the tags, not transferable. No, you can’t even give a regular car away in Beijing.Suddenly, $11,638 or even $20,000 or more for an EV are mere afterthoughts. Remember: In Shanghai, people pay more than $7,000 for the license plate.The only problem: Which EV? I would not know which EV I could buy on Monday, as Ash Sutcliffe rightly comments over at Chinacartimes. We shall see miles of cable in a week at the Shanghai Auto Show, snaking into parking lots of electric cars, but none for sale. Mock-ups we have seen for years. What are they waiting for? A market.

This being Beijing, the press is full of mentions of Beijing’s carmakers Foton and of Beijing Auto. Both are owned by BAIC, which is controlled by the City of Beijing. Get the picture? No wonder the plan was waved-through so fast. Foton has an electric taxi out, the Foton Midi. I can’t buy it. It’s used as a trial in Yangqing, which still is in Beijing proper, but way out there. I’m told, if I would tell the driver to take me downtown, or to the airport, he’d say “bu yao” – no good. Too far from the charging station in Yangqing. Those taxis don’t stray farther from that charging station than little chickies from their mother hen.Beijing Auto has electrified versions of the former Saab in development. BAIC has a number of other vehicles in development. The operative word is “development.” So nothing from there – yet.Who else?Well there would be Nissan with a Leaf, or Mitsubishi with an i-Miev. Both market ready.

The Leaf would be just what the doctor ordered for Beijing. Nissan has plans for a few hundred in Wuhan this year, says Reuters. Wuhan is the city Nissan’s joint venture partner Dongfeng calls home. According to the Reuters report, Nissan wants to “make the Leaf in China as soon as possible, but the key issue to the decision is the sales volume.” That according to Tsunehiko Nakagawa, vice president of Nissan China Investment.Dozo, Beijing is wide open. Let’s bring the Japanese price of $44K down a bit (this is China), say to $40K, deduct 18,362.64, and you have $21,638 – not bad if it’s the only choice you have. Around 140,000 yuan, a nice price point. Tough sell anywhere else, Nakagawa is right when he worries about sales volumes. He won’t find it in Wuhan. But in Beijing? The Leaf could become more ubiquitous than the Made-in-Beijing Hyundai Elantra taxi.Mitsu’s i-MiEV would be ready also, but we have no China plans on the RADAR.Shipping them from Japan may not be such a good idea at the moment, it would eat up 25 percent in customs duty anyway, spoiling all the fun.Being first in this cornered market is absolutely essential. Let’s not forget: If you sell EVs here, you will be selling to first time buyers. They have never driven a car they owned. They will grow up with an EV and will know nothing else than a car must be electric. A car filled with gasoline will be as alien to them as chopsticks to most of us. Here is the chance to sell to first-time affluent, worldly buyers, in the world’s second or third largest city (they are fighting it out with Shanghai), in the capital of the world’s largest auto market, with the world watching in awe. I bet Dongfeng would not mind at all.If neither Nissan nor Mitsu will occupy every street-level wall socket in Beijing (all conveniently 220V, and rock-solid supply), someone else will:

A few days ago, Volkswagen had sent out a blurb about “becoming the friend of the National Museum in China.” I probably wasn’t the only one who immediately (electronically) spiked it.Who cares whether VW donates a few cars to take people museum hopping in Beijing? Who cares whether “as part of this sponsorship, Volkswagen will launch its first electric vehicle fleet in Beijing?” We’ve heard that greenwashing before. Who cares whether “China plays an important role for Volkswagen´s goal to become the leader in the global electric vehicle market by 2018?” Hyperbola in green. Recycle bin.In front of the new regulatory backdrop, (or “unter den geänderten Rahmenbedingungen” as they so much fancy to say in the Fatherland), the electric museum shuttles become a stroke of genius. Whoever had the sheer luck or inside information (being familiar with VW, my money is on sheer luck) just started the best timed promotion there is. Most likely he or she will get promoted. They run a fleet of Golf Blue-e-motion (to be launched in Germany in 2013, in the U.S. in 2014) and Touareg Hybrids (available). They are the only electric cars on Beijing’s streets, while everybody is absolutely dying to have one. They can keep the Touareg Hybrid, and should launch the Golf Blue-e-motion immediately in Beijing. It would sell like hotcakes while the rest of China scrambles to make their prototypes ready for market.Volkswagen doesn’t honestly believe that the Golf Blue-e-motion will be a volume model anywhere else anyway. What did Volkswagen’s sales chief Christian Klingler say? “The electric car is not a request from the customer, the electric car is a request from the government.” Now he could say: “The electric car is a request from the customer, the electric car is a request from the government. We have a win-win!” They love win-wins in Wolfsburg.Volkswagen’s joint venture partner FAW, maker of the Golf, would be delighted to produce the electrified version. Mei wen ti! (No problem.)

Volkswagen’s southern JV partner SAIC has more electric know-how, but FAW wouldn’t mind picking some up. And while they are at it, they could also update the English version of their website. It’s from 2009 and in the old CI that never went anywhere. Bu kequi.No Volt. So sorry. Pure plug-in only. Them’s the rules. Try the lottery. Do I sound excited? Yes, I am. As most around here know, I do not believe that the EV will be taking over the world anytime soon. I am a pragmatist. Most buyers are pragmatists when they get into the showroom. I have sat in too many focus groups, listened to how they lied about protecting the environment at all cost. In the store, they take the car that makes the most sense for their money. I never really cared what propels a car, as long as it’s fast and peppy. Drive-trains are not a religion. I believe in cars that make sense.In Beijing, the only car that makes sense for a first time buyer that did not win the lottery is an EV. It’s a market, ripe for the plugging. It’s long form Saturday! Most of you probably thought you would never see the day Bertel writes a fiery manifesto for the Electric Car. Today is your day.Yesterday, we were first to run with the story that Beijing most likely will become EV capital of the world. Not because Beijing scientists have developed the miracle battery. Not because Chinese EVs suddenly go 400 miles on a single charge. Physics did not change. Beijing changes. Months ago, new car buyers in Beijing stopped reaming about buying a new car.That dream was shattered. Now suddenly, an EV has become the only car a new car buyer can buy and drive tomorrow. Or on Monday. If one would be on sale. Here is what happened:In Beijing, the car market has completely collapsed. That doesn’t move you? What if the car market had come to a complete stop in Australia? Beijing has about the population of Australia and had car sales approaching those of Australia. Why did the Beijing market collapse? Because the city doesn’t want more cars on its roads. New car registrations are strictly rationed. More here.On Thursday, we picked up rumors, and on Friday, we received confirmation that Beijingers will be able to buy a car again. If it is an EV. The media didn’t believe it or ignored it.Foreign reporters hop off their barstool at Maggie’s and go into a tizzy when someone drops a white flower in front of a Beijing McDonald’s. Reporters end up taking pictures of each other, because nobody else is there. Now, they are asleep at the wheel when it becomes law that the only vehicle a first time buyer stands a chance to drive is the EV the media supposedly adores so much.On Friday, the news was in the Chinese press only, and not served on an ready-to eat English platter. Today, the English speaking papers have it. From CCTV to People’s Daily to Global Times, they all run the story that EVs in Beijing will not only be “enjoying the same level of preferential subsidies with Shenzhen”, but will also “have the sole privilege of license-plate-lottery-free, no traffic restrictions and tax-free exemptions (paid by the government).”You need to live amongst the people of Beijing to understand how big that last one is.First, let’s get back to Shenzhen and the subsidies. They are huge: 60,000 yuan from the city and 60,000 yuan from the central government to the buyer of a pure plug-in. That’s a total of 120,000 yuan or $18,362.64 in today’s dollars. That would be a big amount of money stateside, and the purchase power proponents will agree, that is is even bigger in China.In Shenzhen, however, the money remained in the government coffers. Nobody wanted it.Why would a customer not buy the BYD E6 over the BYD F3 with such a munificent donation? First, because there is no BYD E6 commercially available. Second, because the conventional F3 costs $9,000 or so, maybe less with generous BYD-in-distress discounts. Whereas the E6, even assuming a low $30,000 MSRP, would still cost $11,638 after subsidies. They are Chinese, it makes a difference. With the F3, they can drive to Guangzhou and back, whereas with the E6 – do we really believe the 249 mile range? Anyway, moot matter, no E6 available.In Beijing, the first time buyer does not have that choice. Whether F3 or A7, with a mei you (no have) license plate, any ICE powered car is for all intents and purposes out of reach. With an EV, the car can be driven on Monday. It can be driven on any day of the week (conventional cars must stay off the streets for one day, as per Beijing regs). No tax on top, to sweeten the deal until it drips.For a Beijinger, it can’t get any better. Even if Ed McMahon himself would knock on my door and hand me the keys to the BMW 7series I just won in the Chinese Family Publishers sweepstakes, I could not drive it – no tags. McMahon can’t hand me the tags, not transferrable.Suddenly, $11,638 or even $20,000 or more are afterthoughts. Remember: In Shanghai, people pay more than $7,000 for the license plate.The only problem: Which EV? I would not know which EV I could buy on Monday, as Ash Sutcliffe rightly comments over at Chinacartimes.This being Beijing, the press is full of mentions of Beijing’s carmakers Foton and of Beijing Auto. Both are owned by BAIC, which is controlled by the City of Beijing. Get the picture? No wonder the plan was waved-through so fast. Foton has an electric taxi out, the Foton Midi. I can’t buy it. It’s used as a trial in Yangqing, which still is in Beijing proper, but way out there. I’m told, if I would tell the driver to take me downtown, or to the airport, he’d say “bu yao” – no good. Too far from the charging station in Yangqing.Beijing Auto plans electrified versions of the former Saab. BAIC has a number of other vehicles in development. The operative word is “development.” So nothing from there – yet.Who else?Well there would be Nissan with a Leaf, or Mitsubishi with an i-Miev. Both market ready.The Leaf would be just what the doctor ordered for Beijing. Nissan has plans for a few hundred in Wuhan this year, says Reuters. According to the Reuters report, Nissan wants to “make the Leaf in China as soon as possible, but the key issue to the decision is the sales volume.” That according to Tsunehiko Nakagawa, vice president of Nissan China Investment.Dozo, Beijing is wide open. Let’s bring the Japanese price of $44K down a bit, say to $40K, deduct 18,362.64, and you have $21,638 – not bad if it’s the only choice you have. Around 140,000 yuan, a nice price point. Tough sell anywhere else, Nakagawa is right when he worries about sales volumes. But in Beijing? The Leaf could become mor ubiquitous than the Made-in-Beijing Hyundai Elantra taxi.Mitsu’s i-MiEV would be ready also, but we have no China plans on the RADAR.Shipping them from Japan may not be such a good idea at the moment, it would eat up 25 percent in customs duty anyway, spoiling all the fun.Being first in this cornered market is absolutely essential. Let’s not forget: If you sell EVs here, you will be selling to first time buyers. Have never driven a car. They will grow up with an EV and will know nothing else. Here is the chance to sell to first-time affluent, worldly buyers, in the world’s second or third largest city (they are fighting it out with Shanghai) with the world watching. I bet Dongfeng would not mind at all.If either Nissan or Mitsu will not occupy every street-level wall socket in Beijing (all conveniently 220V, and rock-solid supply), someone else will: A few days ago, Volkswagen had sent out a blurb about “becoming the friend of the National Museum in China.” I probably wasn’t the only one who immediately (electronically) spiked it.Who cares whether VW donates a few cars to take people museum hopping in Beijing? Who cares whether “as part of this sponsorship, Volkswagen will launch its first electric vehicle fleet in Beijing?” We’ve heard that greenwashing before. Who cares whether “China plays an important role for Volkswagen´s goal to become the leader in the global electric vehicle market by 2018?” Hyperbola in green. Recycle bin.In front of the new regulatory backdrop, (or “unter den geänderten Rahmenbedingungen” as the so much like to say in Deutschland), the electric museum shuttles become a stroke of genius and whoever had the sheer luck or inside information (being familiar with VW, my money is on sheer luck) just started the best timed promotion there is. Most likely he or she will get promoted. They run a fleet of Golf Blue-e-motion (to be launched in Germany in 2013, in the U.S. in 2014) and Touareg Hybrids (available). They can keep the Touareg Hybrid, and should launch the Golf Blue-e-motion immediately in Beijing. It would sell like hotcakes while the rest of China scrambles to make their prototypes ready for market.Volkswagen doesn’t honestly believe that the Golf Blue-e-motion will be a volume model anywhere else. What did Volkswagen’s sales chief Christian Klingler say? “The electric car is not a request from the customer, the electric car is a request from the government.” Now he could say: “The electric car is a request from the customer, the electric car is a request from the government. We have a win-win!” They love win-wins in Wolfsburg.Volkswagen’s joint venture partner FAW, maker of the Golf, would be delighted to produce the electrified version. Volkswagen’s southern JV partner SAIC has more electric know-how, but FAW wouldn’t mind picking some up. And while they are at it, they could also update the English version of their website. It’s from 2009 and in the old CI that never went anywhere. Bu kequi. Do I sound excited? Yes, I am. As most around here know, I do not believe that the EV will be taking over the world anytime soon. I am a pragmatist. Most buyers are pragmatists when they get into the showroom. I have sat in too many focus groups, listened to how they lied about protecting the environment at all cost. In the store, they take the car that makes the most sense for their money.In Beijing, the only car that makes sense for a first time buyer that did not win the lottery is an EV. It’s a market, ripe for the plugging.