GM Hybrid Cars—in China First?

6 July 2004

The Detroit News. GM may assemble a gasoline hybrid car in China with its venture partner, Shanghai Automotive Industry Corp. This comes amid Toyota’s earlier statement that it would take the Prius into the country.

With auto sales growing rapidly in China, Beijing officials are urging automakers to introduce fuel-efficient technology to limit pollution, already a problem in China’s big cities, and check China’s rising oil imports.

GM is interested in building a hybrid to prevent Japanese automakers from cornering the market for advanced-technology vehicles in China, a GM official familiar with the matter said. GM is now the second-largest foreign manufacturer in China after Volkswagen AG, but competition is fierce in what is forecast to eventually become the world’s largest auto market. GM is considering demonstrating its hybrid technology in Shanghai in October at the Bibendum Challenge.

GM has focused more on fuel-cell technology, but that is not expected to be viable for many years. The Chinese government, which exerts strong control over the auto industry, wants to encourage fuel-efficient technologies now.

“...in coming years, the government will pay more attention to fuel-efficiency and to the environment,” said Chen Qingtai, vice minister for the State Council Development Research Center. He cautioned that China was considering imposing fuel taxes to steer demand away from gas-guzzlers. In 2003, China’s oil imports jumped 30 percent.

And why isn’t there that fierce competition in the US to be the dominant vendor of advanced- and alternate-technology vehicles?

To generate that sort of competition around new technologies, you need either (a) a surge in immediate end-user demand or (b) a policy framework that forces rapid innovation to meet aggressive targets. (Or a combination.) If we can’t get the policy framework, then we need to work on educating the market to help generate the demand.

Given its sales results from June (down 15% from June 2003), GM should be thinking about being more immediately aggressive with new approaches in the US, too.