Made in China: EVs and Batteries

(MoneyWatch)  As reported here, Porsche chose to introduce its new four-door Panamera sedan not in the U.S. or Europe, but at the Auto Shanghai show in China (which runs through April 28). Why? Because China is an important market for luxury cars--and an increasingly important player in the global auto wars. And a lot of the action is green.

China has the world's fastest growing auto market (with 11 million in annual sales, it's likely to top the U.S. this year), but it far from the sort of total penetration we're used to in the west. The Chinese are fascinated with the novelty of cars and driving, joining clubs whose purpose is to take long and rather pointless auto trips on the weekends. For them, automobility is the new new thing.

Sure, China's many moguls buy Porsches, Lexuses and Mercedes, but the mass market goes for cars of 1.6 liters or less, because there's a very low one percent tax on them (compared to 40 percent for bigger vehicles and SUVs).

Chinese fleet operators can get subsidies of $8,800 if they buy electric, which is one reason Nissan is launching an electric car experiment in Wuhan. At the Shanghai show, no less than eight battery EVs were on display, and their batteries are made in China, too.

Chinese EVs are priced for an emerging market. Shenzhen-based BYD (which makes batteries as well as cars) has put its gas-electric hybrid on the market in China at a very affordable $20,000 but it's sold less than 100 and may lower the bottom line to $16,000.

Warren Buffett bought slightly less than 10 percent of BYD last September, and that move is starting to look prescient. The company reportedly has 11,000 engineers and technicians working on improving battery technology.

The Department of Energy is offering $25 billion to manufacturers willing to build EV or battery factories in the U.S. That's smart, too, because battery R&D is heavily subsidized in China and if the U.S. doesn't follow suit it will no longer be competitive in lithium-ion. And it increasingly appears that li-ion batteries are the future of transportation.