Quotes of the Day

Correction and Clarification Appended: September 1, 2009

As Kevin Czinger breaks free of midtown Manhattan's heart-attack traffic and floors what would be the gas pedal in a more conventional car, the only sound is the hiss of the rain outside and something like an accelerating yawn from the electric motor. Czinger is showing off his company's battery-powered car, the Coda Automotive sedan, which emerged in public this June. As one more car to save the planet, the Coda is nice enough. It gets around 100 miles per charge, handles well and — unlike many of its competitors — actually exists in drivable form and not just in a press release. But what really sets the Santa Monica company apart from its fellow dreamers, and what might make this electric car financially viable, isn't the car itself but where it comes from. "We can do this because we don't have the manufacturing infrastructure," says Czinger, Coda's CEO. "We can outsource that."

Just under 7,000 miles (11,000 km) away, in the industrial northeastern Chinese city of Tianjin, Richard Liang, Tianjin Lishen Battery Co.'s vice president of marketing, passes by photos of Chinese state leaders before he reaches a display that contains the heart of the Coda: a gray box of power cells that makes up the car's lithium-ion battery. Lishen manufactures the $12,000 battery as part of its pioneering joint-venture deal to build and sell an electric car in the U.S. and, eventually, China. The idea is simple — Lishen, one of the biggest battery manufacturers in the world, provides hardware manufacturing at a reduced cost, while its American partner provides the sales smarts and high-tech expertise. "It's a product of Sino-U.S. cooperation," says Liang. "[Coda] did market research and provided funding, and we were in charge of the power system." It's the sort of globalized relationship that has worked for countless products before — and now Coda and Lishen will try to make it work for the car of the future.

The electric car, so long promised, may finally be pulling into your driveway. In the U.S., a humbled General Motors just showed off one of its rare rays of light — the plug-in Volt, which GM says will get 230 miles per gallon when it hits roads in late 2010. Daimler is trialing an electric version of its baby Smart car and claims to get the equivalent of 300 m.p.g. In Japan this month, a confident Carlos Ghosn said that Nissan's upcoming, all-electric Leaf will get 367 m.p.g.

Compared with those experienced players, Chinese manufacturers are like teenagers just getting their car keys. When it comes to electric, though, that could be an advantage. Beijing knows that promoting electric vehicles could be a way to stem the country's rising dependence on foreign oil and clear its polluted air. At the same time, Chinese battery companies like Lishen and Shenzhen-based BYD are looking to leverage their technology and leap into electric cars. Foreign automakers may have a century-long head start on conventional cars, but Chinese companies can compete on new electric technology today — on cost and on performance. "When it comes to electric and hybrid cars, China is challenging the automotive industries in the Western industrial countries," writes Wolfgang Bernhart, a consultant with Roland Berger who estimates that electrics and plug-ins could account for more than half the auto market in China by 2020. "The race for electric mobility is just getting under way."

Priority Lane
It won't be an easy race for China to win. The Chinese auto industry is fractured and weak. The domestic market is dominated by foreign manufacturers such as GM (which is doing much better in Beijing than it is in Detroit) and Volkswagen. But the government in Beijing has made it very clear that it considers electric and plug-in vehicles a priority for Chinese companies, and it's willing to spend. The Chinese State Council announced in January that it would spend $1.6 billion over the next three years to develop alternative fuels, and there's already an $8,800 subsidy for local governments and taxi companies that buy electrics and hybrids — which is more than the U.S. government offers. And China already makes more lithium-ion batteries — the energy-dense technology key to new electric cars — than any other country on the planet. "This is a priority for the Chinese government," says Kelly Sims Gallagher, author of the book China Shifts Gears: Automakers, Oil, Pollution, and Development. "They see it as a pathway to a more energy-secure future."

Though Chinese automakers like SAIC and Chery have announced plans to produce electric cars, it is China's battery makers who have taken the first steps. BYD was already a major global battery producer, chiefly for mobile phones, when in 2003 it entered the car business by buying a defunct state-owned auto company. BYD proved a surprisingly quick study at automaking — its F3 sedan is a best seller in China, beating popular foreign brands — and now it has moved into electrics. The company is already selling the F3DM, a $22,000 Volt-style plug-in car with a backup gasoline-powered generator that recharges the battery, and it will begin selling an all-electric car in China in the next few months.

BYD is far from perfect — a concept car it revealed at the Paris auto show this year had its tires mounted backwards — but it received a boost last fall when American financial wizard Warren Buffett bought 10% of the company for $230 million, a stake that is now worth at least four times as much. "BYD is obviously way ahead of everyone," says Jack Perkowski, a Beijing-based businessman who has worked as an executive in the Chinese auto industry. "It has a core competency in the fundamental technology you need for electrics."

The same thinking lies behind Coda Automotive. The joint venture began after Lishen started producing electric batteries for Miles Electric Vehicles, a small-scale startup founded by former Ralph Lauren executive and philanthropist Miles Rubin. Coda Automotive, Rubin's next project, takes that relationship a step further. The Coda sedan (the body is made by another Chinese auto company, Hafei Motor) will run for about $45,000 when it goes on sale in California in 2010. Coda expects to sell about 2,700 cars in the first year, with an annual sales target of around 20,000. For Coda's Czinger, the China connection allows him to keep his costs low and, more importantly, to manufacture on demand, which cuts his risk considerably. There's no other way a startup could compete — even one that just pulled in $24 million in venture capital funding and gave former U.S. Treasury Secretary Hank Paulson an advisory seat on its board. "It allows us to manufacture flexibly without putting huge amounts of capital into metal-bashing facilities," says Czinger, who has years of experience working with Chinese companies. "It makes a big, big difference for our value chain."

Coda's future lies not just in the U.S. Lishen told TIME it is in discussions with 20 Chinese electrical-vehicle manufacturers to supply power systems for their cars. And while much of the attention is on how American, Japanese or European customers will respond to electrics, Chinese drivers could push the technology fastest. Auto markets are shrinking or stagnant in most countries, while the Chinese car market is still growing rapidly, even in the midst of a recession. And Chinese customers may prove more receptive to electric vehicles than their international counterparts. For an American driver who has owned a car for years and is accustomed to the power and range of a gasoline-powered engine, the first electric vehicles might feel like a letdown. Most Chinese drivers will be on their first cars, and won't have memories of Thunderbirds and Corvettes as they make their selection. An electric car, if priced well, might seem like a smart choice, especially as the cost of gas rises again. "The Chinese customer is just getting off a bike, so they're not worried about not being able to drive six hours without a recharge," says Philip Gott, a director for automotive consulting at research firm IHS Global Insight. "China has the chance to work out the kinks in its own backyard."

China's Great Advantage
There will be kinks. Chinese customers are likely to be just as sensitive to price as American ones, if not more so — and even China's low-cost manufacturers have yet to figure out how to make a reasonably-priced battery. Then there's the question of infrastructure. Few Chinese live in houses with easy access to plugs to power their cars, and there is little infrastructure ready for public charging. But none of that takes away China's late-starter advantage. Chinese companies don't have a hundred years of auto manufacturing to unlearn before they tackle electrics. Just as the country skipped ahead on mobile phones, it could do the same on electric cars. "Electrics could be a way for Chinese automakers to leapfrog the rest of the globe," says Perkowski.

If automakers in the U.S. and elsewhere aren't worried about losing the race for the next great technology to the Chinese, they should be. On Aug. 5, U.S. President Barack Obama announced a long-awaited $2.4 billion in government grants to support the manufacture of electric cars and batteries. "I don't want to just reduce our dependence on foreign oil and then end up dependent on foreign innovations," Obama told an audience in the economically depressed state of Indiana. "I want the cars of the future and the technologies that power them to be developed and deployed right here, in America." U.S. automakers will need to move fast — China is already pulling away.
With reporting by Austin Ramzy / Tianjin

The original version of this story has been amended. It now emphasizes that Lishen provides hardware manufacturing while Coda provides sales know-how and high-tech expertise. And also, Coda Automotive is based in Santa Monica, Calif., not Silicon Valley as stated.

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