SAIC Accelerates in Chinese Electric-Car Market

The Shanghai-based car maker sets up a $293 million joint venture to develop hybrid and all-electric cars.

China might be the world's biggest polluter, but it also intends to be an early market for low- or zero-emission cars.

The country's largest automaker SAIC Motor Corp. in Shanghai plans to set up a 2 billion yuan ($293 million) venture to develop gas-electric hybrid and all-electric vehicles, the company said this week, Reuters reported.

SAIC would create the venture, called Shanghai Jieneng Automotive Technology Co., with its parent company, the Shanghai Automotive Industry Corp. The parent company will hold a 90 percent stake in the venture while the carmaker will get the remaining 10 percent.

The joint venture isn't SAIC's first foray into low-emission vehicles. The company and General Motors formed Shanghai General Motors and announced i n 2004 a deal to develop hybrid and fuel cell cars in China.

The joint venture launched the first China-made hybrid car, a Buick LaCrosse Eco-Hybrid, in January this year. Shanghai General Motors plans to introduce fuel cell-powered cars after 2010. The company showed off a plug-in fuel cell hybrid prototype car to Chinese Premier Wen Jiabao when he visited the company this week, reported Green Car Congress.

SAIC, whose stock is traded on the Shanghai Stock Exchange, owns a number of subsidiaries, including Shanghai Motor Manufacturing Co., Nanjing MG, Sunwin and Sangyong Motor in South Korea.

SAIC sold roughly 1.60 million vehicles in 2007, the company said on its Website.

China is the second largest car market in the world, making it a prime target for foreign carmakers. The Chinese government has tried to prod energy efficiency by offering tax incentives for buying fuel-efficient cars as well as upping the mandatory mileage standards.

As in the U.S. the electric car market breaks down into two categories. There is the larger, but more difficult market, of building freeway-legal cars for consumers and the smaller, but far easier market, for low-speed vehicles (35 mph tops) for military bases, universities and retirement centers. Some companies plan to make both types of cars as way to hedge their investments.  

Nissan Motor plans to start selling electric cars in China by 2012, a company executive said at the Guangzhou auto show earlier this month. Nissan has a joint venture with Chinese carmaker Dongfeng Motor Group Co.

Other Chinese carmakers with ambitions to launch low-emission cars include BYD Co., a lithium-ion battery maker who entered the car business in 2003 with the purchase of the Tsinchuan Automobile Co. BYD plans to build a plug-in hybrid electric car by the end of this year and export hybrid cars to the United States by 2010.

BYD made headlines in September when MidAmerican Energy Holdings Co., a subsidiary of Warren Buffett's Berkshire Hathway Inc., invested about $230 million to get a 10 percent stake in the Chinese company (see Buffett Invests $230M in BYD).

It's a center for electric bikes too. Chinese manufacturers are pumping out 5. 5 million e-bikes a year.