The Detroit News - Bill Klehm, a former Ford Motor Co. executive, sensed right away that he was seeing a valuable asset when he was shown the prototype for a transmission at Fallbrook Technologies, a California start-up that recruited him in 2004.
When Rudy Schlais, a retired General Motors manager, heard about Fallbrook's transmission five years later and met Klehm, its CEO, he felt sure there was a big market for it — in China.
They teamed up when Schlais, a China veteran who negotiated GM's successful venture with Shanghai Automotive Industry Corp., offered to market the transmission, which improves the efficiency of electric cars.
Their project took a giant step forward Wednesday, when the government of Shanghai's Yangpu District selected Fallbrook and Schlais's consulting firm to develop prototype transmissions in China for electric vehicles.
At a ceremony in Shanghai attended by dignitaries and business leaders, Yangpu officials also marked the opening of an electric vehicle design center in the city.
The district provided several million dollars in financing to build the center, where the transmission's capabilities can be demonstrated and receive official validation — a key step in China.
The deal reflects the huge appetite in China for technology, particularly technology that improves fuel efficiency.
Klehm has shown the transmission to executives in Detroit, but the response has been tenuous. "A lot of guys in North America are in wait-and-see mode," he said in an interview from Shanghai. "The need for electric vehicles is so much greater in China."
The Chinese seem determined to overcome all obstacles to establishing electric cars, he said.
China's big cities are choking from air pollution, and the number of vehicles is expected to double and triple in the not-too-distant future from last year's total exceeding 18 million. Most important, China doesn't want to be dependent on oil imports.
"If you think about what China's doing with electric cars, think of John F. Kennedy's declaration to send a man to the moon," Klehm said. "They have declared with the same vigor that they're going to win the race for electric vehicles."
He wouldn't disclose sales estimates, but said the potential was huge. Some forecasts see electric car sales rising to 8 million a year in China by 2020.
David Cole, a member of Fallbrook's advisory board and former head of the Center for Automotive Research in Ann Arbor, said the transmission was impressive because it had a wide range of applications and was easy to manufacture. "It doesn't have the complexity of some continuously variable transmissions," he said.
"The Chinese are moving very aggressively to invest in technology," Cole said, citing the recent sale of GM's Nexteer steering business to Pacific Century Motors, a Chinese company.
"I'm not saying it's a good or bad thing, but it's something we should think about," he said. "One of our key edges has been innovative technology, and now that can move around the world very easily."
Fallbrook Technologies is negotiating with a Chinese supplier to form a venture to build electric vehicle drivetrains.
It already produces bicycle transmissions near Shanghai on a contract basis. And last year it tested a transmission for the air-conditioning compressor of a bus made by Chengdu, a local firm.
Schlais, chairman of Shanghai-based consultants Advanced Strategic Leadership Partners, first heard about the transmission in 2009 and flew to Austin to meet Klehm and see it.
The technology was conceived by Donald Miller, now a shareholder in Fallbrook, a privately held firm whose backers include Macquarie Capital Markets Canada Ltd. and Robeco of the Netherlands.
Most electric cars are equipped with rudimentary transmissions with a couple of forward gears and one reverse, Schlais said.
But with the continuously variable transmission, the motor fine tunes the amount of power it draws from the battery. "You can downsize the battery and reduce the cost," said Schlais.
While efforts are under way across the industry to lower the cost of electric cars, nowhere is this push stronger than in China.
Car sales are booming, and millions more consumers will be piling into the market. Currently, there are fewer than 50 vehicles per 1,000 people, Schlais said.
That compares with between 700 and 800 vehicles per 1,000 people in Europe and the United States.
"They're going to be buying a lot of vehicles," he said. "The potential of a transmission that increases the range of an electric vehicle is phenomenal."
