BEIJING—Joining a wave of corporate criticism about Chinese industrial policy, foreign auto makers are concerned about a Beijing plan for electric-vehicle development that could force manufacturers like Ford Motor Co. and Toyota Motor Corp. to share technology with Chinese companies in exchange for access to the nation's huge market.
The 10-year plan, being prepared by China's Ministry of Industry and Information Technology, is aimed at making the nation "the world's leader" in developing and producing battery-powered cars and hybrids, according to executives of four foreign auto makers.
The draft suggests that the government could compel foreign auto makers that want to produce electric vehicles in China to share key technologies by requiring the companies to enter joint ventures in which they are limited to a minority stake, the executives say.
Their concerns follow increasingly vocal criticism by foreign companies, such as Siemens AG, General Electric Co. and Microsoft Corp., about the business environment in China. Foreign executives and government officials have raised complaints about Chinese indigenous-innovation policies that the companies fear are designed to discriminate against them or to force them to transfer intellectual property to China.
The electric-vehicles plan is aimed at developing three to five Chinese companies into globally competitive makers of all-electric cars or plug-in hybrids by 2020, and developing two to three global suppliers of key components, such as advanced batteries and motors.
The plan calls for investment of as much as 100 billion yuan, or about $15 billion, in the effort, on areas like charging stations and other infrastructure, say two of the executives of the foreign auto makers. It isn't clear if that figure includes corporate investment in addition to government funds.
The technology requirement is "tantamount to China strong-arming foreign auto makers to give up battery, electric-motor, and control technology in exchange for market access," says a senior executive at a foreign car maker. "We don't like it."
A senior technology executive at another global auto maker said the plan "unnecessarily raises the hurdle for our plans for producing an electric car in China." Since China is going to be a major market for electric cars and plug-in hybrids by 2020, producing them locally in China will be unavoidable, he says. "But the new pending policy would make the process unnecessarily more cumbersome and complicated." Transportation costs and duties make exporting cars from elsewhere for sale in China too costly, auto executives say.
The technology-transfer provisions could be changed or scaled back before the plan is finalized. The Ministry of Industry and Information Technology recently distributed the draft to other government agencies and to some state-owned auto makers for opinions, according to the auto executives. If major opposition doesn't surface, the plan could be implemented as soon as next month, according to the executives, although they expect it will likely take longer.
Wang Lijian, director of the ministry's news office, said industrial-policy makers at the ministry responsible for the draft plan weren't available for comment.
China's government says concerns about the investment environment are unfounded. "China is committed to creating an open and fair environment for foreign-invested enterprises," Chinese Premier Wen Jiabao told global business leaders at a meeting of the World Economic Forum in China this week. "Foreign-invested enterprises in China on the whole enjoy a good environment and have reaped good returns."
Concerns about the electric-vehicle policy already have caused at least one company to delay launching alternative-fuel cars in China. Toyota had planned to introduce the latest version of the Prius gasoline-electric hybrid in China in March—which the company has been selling in the U.S. and Japan since May 2009—but has postponed the rollout until there is more clarity on China's industrial policy for what the government calls new-energy cars, according to Toyota executives in China.
China, set to surpass Japan this year as the world's second largest economy, is already the biggest car market, but it has yet to produce a major global car maker. The government sees the emergence of electric vehicles as a chance to put its auto industry into the world's top tier.
Over the coming decades, "China is going to go from following the industry to leading the industry in automotive technology," said Zhang Baolin, president of Chang'an Automobile Co., a state-owned enterprise in Chongqing. "There will be lots of opportunities for us in the new-energy automotive field."
The Industry Ministry projects that China will have five million battery cars and plug-in hybrids on the roads by 2020, and Chinese auto makers will have capacity to produce and sell three million gas-electric hybrids a year in China. "Those are very aggressive plans, and there is a debate over whether those goals are really attainable or not," says one of the foreign executives.
The plan also would toughen fuel-economy regulations as part of efforts to reduce China's reliance on gasoline and cut pollution.
The proposal would require foreign auto makers to form joint ventures with Chinese companies if the foreigners decide to produce key new-energy components—such as advanced lithium-ion batteries and high-power electric motors—in China. The plan would cap foreign ownership in the ventures at 49%, giving majority ownership—and, thus, effective control—to Chinese partners, the foreign executives say.
Last year, the executives say, the Industry Ministry required foreign auto makers who want to produce electric cars in China to use China-based intellectual property for one of the three core technologies: battery, electric motor, and electric vehicle control.
According to one executive, that means that a foreign company that produces an electric car in China, will have to get one of the three core technologies from a supplier in China, produce that technology in China, or license it to a China-based company, raising concerns that the technology could be stolen.
"We need to make sure we have a contract or agreement that allows us to continue to own and control the technology, even though we might be a minority stakeholder in the joint venture," the senior technology executive says.
