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Friday, September 17, 2010

China looking to extort EV IP in exchange for market access

China's government is considering plans that could force foreign auto makers to hand over cutting-edge electric-vehicle technology to Chinese companies in exchange for access to the nation's huge market, international auto executives say.

China's Ministry of Industry and Information Technology is preparing a 10-year plan aimed at turning China into "the world's leader" in developing and producing battery-powered cars and hybrids, according to executives at four foreign car companies who are familiar with the ministry's proposal.

The draft suggests that the government could compel foreign auto makers that want to produce electric vehicles in China to share critical technologies by requiring the companies to enter joint ventures in which they are limited to a minority stake, the executives say.

The government's electric-vehicle plan is aimed at building three to five Chinese companies into globally competitive makers of all-electric cars or plug-in hybrids by 2020. It also would promote the growth of two to three global suppliers of key components, such as advanced battery and electric-motor technologies.

The plan calls for investment of as much as 100 billion yuan, or about $15 billion, in areas such as charging stations and other infrastructure, two of the foreign auto executives say. It isn't clear how much of that would be corporate investment and how much would come from the government.

The technology-transfer provisions could be changed or scaled back before the plan is finalized. The Industry Ministry recently distributed the draft to other government agencies and to state-owned auto makers to seek their opinions. If there is no major opposition, the plan could be implemented as soon as next month, according to the executives, although they expect it will likely take longer.

So not only will most Chinese produced cars continue to look exactly like reverse engineered copies of western cars but the IP they can't access directly, software, firmware and hardware like battery and motor technology, will be extorted out of western firms via the now standard Chinese business model of a joint venture with a western firm where technology transfer is their primary goal.

The Wall Street Journal


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