EV, battery makers turn to China
U.S. companies seek investments, government support, a vast market
In February, Smith Electric Vehicles signed a letter of intent with Wanxiang Group for a $25 million equity investment in Smith by Wanxiang and a commitment for an up-to-$75 million joint venture in China.
Wanxiang, a Chinese components and EV maker, was especially interested in Smith's pure electric school bus and committed to a long-term partnership, said Bryan Hansel, CEO of Smith in Kansas City, Mo.
"Finding that kind of long-term vision is critical for an industry such as ours," Hansel says.
As government support for electrification has waned in the United States, EV and battery makers increasingly are turning to China for investment and manufacturing sites. While doing business there isn't always easy, those companies anticipate steadfast government support and a potentially huge market.
Last week, Wanxiang signed another preliminary deal that could result in an investment of up to $450 million in Waltham, Mass., battery maker A123 Systems.
"China needs to find ways to meet its transportation needs that are less energy intensive and less harmful to the environment," says Jack Perkowski, managing partner at JLP Holdings Ltd. in Beijing.
Perkowski, whose merchant bank designs China investment strategies, says Chinese investors are looking for technology they can't find at home. For Chinese investors, the automotive sector "is an area where they feel comfortable investing, even if they aren't in autos currently," he says. The large potential market and the speed of adoption make China very attractive to U.S. companies, he adds.
'Strong push' in China
Protean Electric Inc. of Troy, Mich., in early July announced an $84 million investment from a group that includes the east China city of Liyang. The city is providing space for Protean to start prototype production of its in-wheel electric drive system in early 2013 while a plant is being built.
Volume production will begin in 2014, says CEO Bob Purcell, a former General Motors powertrain executive.
"There is a strong push in China for this kind of technology," he says.
But don't expect to waltz in and find a partner without laying the groundwork, Purcell warns.
Protean has previewed its technology globally, including showing Mercedes-Benz E-class sedans with Protean motors at the 2011 Frankfurt auto show, he says.
"You have to be willing to spend enough time, effort and money to get your technology on the world stage," Purcell says. "If you do that, China will come to you."
Having an existing customer base or at least potential customers is also useful if you are seeking Chinese investment, says Joerg Ferchau, CEO of Efficient Drivetrains Inc., a producer of plug-in hybrid electric drivetrains in Dixon, Calif.
Efficient Drivetrains got help from Chinese investors in 2011 and expects it again this year, Ferchau says.
"It was not big money, but it kept us going," he says.
Christina Lampe-Onnerud, founder of Boston-Power, says China has a clear energy policy.
$125 million for Boston-Power
Meeting stated milestones helped battery maker Boston-Power Inc. in September 2011 land $125 million in funding from China, says Christina Lampe-Onnerud, the founder. That investment included "significant support" from the Chinese government, wrote Sonny Wu, managing director of GSR Ventures, a venture capital firm with offices in California's Silicon Valley and Beijing, in an e-mail. GSR also helped Protean find Chinese investors.
Boston-Power moved most of its operations from Westborough, Mass., to China, where it is building a plant. In China, Lampe-Onnerud says, there is a "willingness to invest" in firms with proven technology that fits the government's long-term plans.
"The fact that in the U.S. we are not clear about what our energy policy is -- that is a problem because it provides uncertainty for investors and entrepreneurs," Lampe-Onnerud says. "In China, you know."
Policies target new tech
In June, battery maker PowerGenix Corp. of La Jolla, Calif., signed a three-party agreement with China City Construction Corp. and the city of Huainan in central China's Anhui province to create a commercial-scale nickel-zinc battery plant.
PowerGenix and China City formed a joint venture in December to develop and manufacture nickel-zinc automotive batteries. China City, which owns 51 percent of the venture, brings "a tremendous amount of cash" to the deal, says Dan Squiller, CEO of PowerGenix.
"There are policies in China that clearly are targeted toward bringing in foreign technology to try to jump-start China's technology status by a decade," he says.
"China has unprecedented growth in the auto segment," he adds. "A lot of investment and money are going to the sector."
Fledgling EV maker Aptera Motors, of Carlsbad, Calif., closed in late 2011 after failing to get funding, in particular a U.S. Department of Energy loan. In May, Jonway Group, a Chinese auto and motorcycle producer, bought key assets of Aptera.
The price was less than $2 million, said Rick Deringer, a Santa Rosa, Calif., businessman who negotiated the deal and now heads Aptera's U.S. operations. The body of the three-wheeled, podlike EV will be manufactured in China and the drivetrain installed in the United States, he says.
Deringer's company, Odyssey Development Co., is looking for more Chinese investors to buy U.S. green tech companies.
"The Chinese have money," Deringer says.
Expect investment to continue to flow from China into U.S. companies with electrification technology. Beijing's new energy vehicle development policy, released in early July, encourages foreign cooperation.