China considers plan to force US automakers to hand over EV tech

If foreign automakers want to produce EVs in China, they would have to share their technology

Amid reports that a Chinese automaker SAIC is considering buying a major stake in GM, China's Ministry of Industry and Information Technology is considering a controversial plan that would force U.S. companies that want to make electric vehicles (EVs) in China to hand over their EV technology to Chinese companies.

Under the 10-year plan, China would become "the world's leader" in electrified vehicles -- hybrids, battery electric vehicles, and plug-in hybrid electric vehicles.  As part of that plan, U.S. automakers who want to manufacture electrified designs in China would have to enter a joint venture with a Chinese automaker, in which they become the minority partner.

The move would essentially force American companies to share their most guarded EV secrets with China's automakers.  China has long copied and reverse-engineered auto technology from the world's auto manufacturers, but it has seldom been able to force American automakers to directly give it such technology, perhaps until now.

The proposal would also apply to other automakers from other nations with strong automotive legacies -- such as Germany, South Korea, and Japan.  It is unclear as to whether the policy would apply only to automakers who assemble electrified vehicles in China, or whether it would also force automakers who have parts supplied from China (such as GM) to share their secrets as well.

International automakers are quite unhappy about the development.  A senior executive at one non-Chinese automaker is quoted in The Wall Street Journal as saying, "[This plan is] tantamount to China strong-arming foreign auto makers to give up battery, electric-motor, and control technology in exchange for market access.  We don't like it."

As China approaches becoming the world's richest nation, its foreign economic policy, particularly under the auto sector, is coming under fire.  China is accused of masterminding schemes to commandeer foreign intellectual property and give its products an unfair advantage over its foreign competitors.

One such technique is China's decision to keep its currency artificially low.  That decision helps China to produce goods cheaper than its foreign competitors and helped China experience less of a severe recession than America and Europe did.  U.S. Treasury Secretary Timothy Geithner, speaking before a Congressional panel Thursday, scolded China for its currency schemes, but advised Congress not to resort to punitive action, saying such actions would be counterproductive.

The U.S. did file two trade discrimination cases with the World Trade Organization, claiming that China was discriminating against U.S. steel makers and credit-card companies.

Many U.S. companies recently have bemoaned the headache of dealing with the Asian superpower.  Google temporarily pulled the plug on its Chinese version of its search engine, redirecting traffic to an uncensored Hong Kong page.  And General Motors has recently griped about the fact that China refuses to give EV subsidies to foreign automakers, while the U.S. will happily do so.

China is aiming to have five million BEVs and PHEVs on the roads by 2020.  The nation also hopes by 2020 to be producing three million gas-electric hybrids a year.  Forcing foreign automakers to unwillingly share their expertise could give the nation a great head-start in reaching those ambitious goals.

The nation already has one dominant advantage in the EV sector over its Japanese and American counterparts -- its dominate position in the rare earth metals market.  Electrified vehicles use approximately twice the rare earth metals as non-electrified ones and China controls around 95 percent of the world's rare earth metal production.