Alternative wheels

As the impact of global warming accelerates, international automakers are allocating more resources to develop environmental friendly green cars, aimed at reducing carbon dioxide emissions.

While some globally renowned vehicles makers, such as Volkswagen AG, General Motor and Toyota Motor, have already unveiled their new energy hybrid cars, a few automakers in the mainland are also taking a step onto the battlefield.

Shanghai-based SAIC Motor, one of the top three automakers in the mainland, has announced it's setting up a venture with its parent Shanghai Automotive Industry to invest 2 billion yuan in developing hybrid and electric car technology in the city. The hybrid cars will be powered by gasoline or diesel together with electricity.

The Shanghai-based automaker will own 10 percent of the venture, while its parent will hold the remaining 90 percent shares, according to its statement to the Shanghai Stock Exchange late last month.

Electric vehicle maker and the largest manufacturer of rechargeable batteries on the mainland, BYD Auto has also signed a strategic partnership with MidAmerican Energy, a subsidiary of Warren Buffett's Berkshire Hathaway, in September. The partnership is expected to enhance BYD's development of green cars and further promote the company's electric vehicles to the North American market, said Chairman of BYD Wang Chuanfu in a recent press conference.

"Developing our electric vehicles requires a lot of energy, which MidAmerican Energy can supply us in the future," Wang says.

Sales of automobiles currently account for 30 percent of the batteries maker's total turnover and Wang says BYD's development and promotion of automobiles will further speed up after MidAmerican has joined in.

BYD has proposed launching petroleum and electric hybrid vehicles by the end of 2008, while the company says its first all-electric vehicles will be unveiled in the mainland by the end of 2009.

The company originally planned to try importing its electric vehicles in the US by 2010, and now says it will begin launching the clean energy cars in the American market in 2011. Wang, however, expects the partnership with MidAmerican will help to speed up the schedule of entering the North American market.

Conita Hung, head of research at Delta Asia Securities, says the strategy and idea of developing green cars in the mainland are a sound long-term perspective, yet the development is not significant at the moment.

"The 4-trillion stimulus package by the central government may just have a small impact on the overall automobile industry, as cars are not primary consumer goods," Hung says, adding that the global financial turmoil may have trimmed the assets of some people in the mainland, which inevitably drag car sales.

However, Hung says the general automobile industry in the mainland has recently showed some improvement, thanks to the falling prices of commodities such as crude oil and steel.

"Car sales will be further boosted, if the central government implements the fuel tax to substitute the current toll fee system," Hung adds.

Asking if the gloomy situation in the US automotive industry will take a toll on the overseas expansion of the mainland green car markers, Hung says she expects to see a short-term impact on the expansion, especially concerning how the US automakers will settle down their financial problem.

"However, in the long run, it may still depend on the development of individual mainland automobile brands," Hung says.

Kenny Tang, the head of research at Redford Asset Management, says the automobile industry in the mainland needs to rely on the domestic market to boost their earnings, as the overseas export rate of the mainland automakers remains low.

"Yet the mainland automakers still have their competitiveness, as the cars made in the mainland have much lower prices than those made in Europe or the US," Tang adds.

(China Daily 12/15/2008 page5)