Carlos Ghosn Shocks The WSJ

Carlos Ghosn has the Wall Street Journal flabbergasted. To the utter dismay of the WSJ, Ghosn said that Nissan is talking to their joint venture partner Dongfeng about transferring lithium-ion battery know-how and other electric-car technology to the joint venture. Even more worrisome to the WSJ is Ghosn’s statement that “there’s no limit to technology we bring to China.”

According to the WSJ, “Ghosn’s remarks on electric vehicles, at a news conference Monday, come amid worries by many foreign auto executives about a ten-year plan China is drafting for the electric-vehicle industry that they fear could compel foreign companies to transfer technology to local joint ventures in a way that might result in their losing control of the technology.”

These worries are either worries by junior executives, or the imagination of even greener Wall Street Journal reporters.

Nothing to see, move along: Ever since AMC brought the first Jeep to China, ever since Volkswagen laid the ground works to China’s mass motorization in the early 80’s, foreign companies transferred technology to local joint ventures. That’s just the way it’s done here. If a foreigner wants to build a car in China, he needs a joint venture. If he wants to build parts, he can do it himself and doesn’t have to share with nobody. Advanced technology is often hidden away in parts companies that are 100 percent in foreign hands.

The rules have been written down in the “Catalogue of Guidance to Foreign Investment”, as amended in 2007. The “manufacturing of complete automobiles” by foreigners is “encouraged” with the proviso that “foreign investments shall not exceed 50%.” The manufacturing of “automobile engines”, “key spare parts”, the “production as well as research and development of automobile electronic devices” can be done 100 percent under foreign control. The rules expressly specify that the manufacture of “power cell (NiH and Li-con) and control systems” is limited to equity joint ventures. These rules are available on-line, maybe the WSJ needs help in using Google.

Ghosn is a bit more worldly and seasoned than the WSJ. He has a down-to-earth perspective of the matter: “It often makes little sense to hold back in sharing technology because a partner like Dongfeng is a fast learner and can catch up relatively quickly on any technology.”

Actually, sharing technology in a joint venture is a safer way than not sharing at all. In a joint venture, contracts are written, and payments for licensing are negotiated. If you don’t share, the Chinese will just buy a few cars and quickly reverse engineer the technology, without a dime going to the inventor.