China is currently the world's largest auto market, and is on track to sell anywhere from 15 to 20 million cars this year. By 2030, China could be buying 50 million new cars annually. That is a lot of cars, though thankfully, China is hoping to be the world's leader in electric cars and other alternative fuels. They are shoveling money at domestic car makers to get them to produce electric and hybrid vehicles. They are also considering some less-than-friendly methods of acquiring new technology as well.
Chinese leaders are mulling a plan that would require foreign automakers to merge with domestic Chinese car makers and share their intellectual property with them if they want to sell electric or hybrid vehicles in China. Naturally, foreign car companies are crying foul.
The Chinese market is of growing importance to automakers around the world. With so much money up for grabs, everybody wants to get a piece of the pie. China also wants to position itself as a leader in green technology, which includes electric, hybrid, and other alt-fuel vehicles. Companies like BYD are already touting their electric cars designed for the masses. While much of the technology that we find in our cars and computers today is manufactured in China, they aren't quite up to par with the rest of the developed world when it comes to research and development.
So China's leaders want foreign car companies to bring their technology to China. The catch? Form a joint venture with a Chinese car company in which the foreign company could only hold a 49% stake. They would have to share their technology with domestic Chinese automakers. So far, this plan is merely a draft, but it has kept companies like Toyota from launching its latest Prius in China until the rules are clearer.
This news came out about the same time that Japan accused China is halting shipments of rare earth elements to their companies in response to the arrest of a Chinese fishing captain. China is getting pretty bold in its strong-arm tactics, but these same tactics could backfire. China hasn't cultivated a domestic car company that can compete with the rest of the world, so they are trying to force other automakers into bolstering their lineups. I doubt any European, U.S., or Japanese company will willingly sign up for this though. Would you want to give up your hard-earned technology to some up-and-comer who hasn't even cut their teeth in the industry yet?
Is the business worth the risk of losing their intellectual property?
Source: Wall Street Journal Image: BYD