Wary of Beijing's EV bets, Chinese carmakers invest in conventional hybrids

SHANGHAI -- To encourage Chinese automakers to become electric-vehicle technology leaders, Beijing offers subsidies for EVs and plug-in hybrids. Conventional hybrids such as the Toyota Prius do not qualify. Sure enough, the incentives triggered explosive growth EV and plug-in hybrid sales. But not all Chinese carmakers are dancing to the government's tune.Skeptical of Beijing's single-minded bet, a growing number of domestic automakers are teaming up to develop conventional hybrids. Last week, China Hybrid Systems Co., a company funded by a consortium of Chinese carmakers and suppliers, broke ground for a plant in the central China city of Changsha. With an initial investment of 3.7 billion yuan ($568 million), the plant, due to start production in 2017, can build as many as 300,000 powertrains a year for conventional and plug-in hybrids.The consortium is led by Zhejiang Geely Holding Group Co. and battery supplier Hunan Corun New Energy Co. In 2014, the two companies launched China Hybrid Systems to develop hybrid powertrains for Geely and other Chinese automakers.This week, at a joint press conference, Corun Chairman Zhong Faping and Geely Chairman Li Shufu explained their thinking behind the creation of China Hybrid Systems.Zhong, who spoke first, did not hide his disagreement with Beijing's subsidy policy that favors EVs and plug-in hybrids over conventional hybrids.Government officials are not technology experts and should not arbitrarily pick alternative-energy vehicle technologies for automakers, he said.Zhong, a battery engineer, is a believer in hybrid powertrains. In 2011, his company acquired a nickel-metal hydride battery plant from Japanese supplier Panasonic Corp. Today, his company produces nickel-metal batteries for hybrid vehicles in Changsha and Japan's Kanagawa prefecture.Li, speaking after Zhong, cautioned that because of the complexity of EV technology, it is hard to tell what powertrain will prevail in the long term. Still, conventional hybrids appear more suitable for China than EVs and plug-in hybrids for two reasons: The technology has proved its worth in the United States and Japan, and conventional hybrids don't need battery charging stations as EV and plug-in hybrids do.Zhong and Li doubt that the dizzying sales growth of EVs and plug-in hybrids in China can be sustained.Combined sales of EVs and plug-in hybrids soared 340 percent to 331,000 vehicles last year. But the sales growth was mainly due to generous government subsidies, they cautioned.The government plans to phase out subsidies by 2020. Without conventional hybrids, it will be extremely difficult for automakers to meet Beijing's fuel efficiency target. By 2020, automakers must cut their fleetwide fuel consumption to 5.0 liters per 100 kilometers, down from 6.9 liters last year, Li noted. That's equivalent to improving to 47 mpg from 34 mpg.Li also acknowledged that it would be hard for Geely to develop competitive hybrid technology on its own. Aside from Corun, he would like to partner with other Chinese automakers to pool resources.At the press conference, Zhong disclosed that the consortium investing in China Hybrid Systems is quickly gaining members: It now has seven domestic automakers as well as a number of suppliers.Its two newest members are heavyweights in China's auto industry: Changan Automobile Co., China's largest passenger vehicle maker; and Yunnei Power Co., a major state-owned manufacturer of diesel engines. Changan and Yunnei joined the consortium last month.Deadlines for China's fuel efficiency targets are drawing near and construction of battery charging facilities lags behind schedule.So Chinese carmakers and suppliers probably will have no choice but to join Geely and Corun to develop hybrid powertrains.Pictured: Yang Jian is managing editorof Automotive News China.

Wary of Beijing's EV bets, Chinese carmakers invest in conventional hybrids

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