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General Motors’ hybrids, electric cars fizzle in China

Bloomberg News

General Motors Co. is delivering millions of cars a year in China, its largest market. That could become a problem if CEO Mary Barra doesn’t figure out how to sell more that are electric.

GM is setting records with shipments by its Buick, Cadillac and Baojun brands. But the company sold fewer than 20 plug-in hybrid or battery-electric cars in China last year. It’s stayed on the sidelines as rivals Volkswagen AG and Ford Motor Co. have partnered this year with local automakers to produce EVs.

Under Barra, who met with reporters Friday in Shanghai, GM has opted to go it alone and wait for the government to finalize requirements that will compel companies either to sell more EVs or pay for offsetting credits. The automaker is forgoing a shortcut Ford and VW took by partnering with Anhui Zotye Automobile Co. and Anhui Jianghuai Automobile Group Corp., respectively.

That enables the U.S. and German carmakers to put off setting up their own production lines from scratch, even as it raises some political capital with Chinese regulators who set electric-vehicle sales targets.

“Electrification is a crucial element of our global strategy to reduce CO2 emissions, reduce petroleum use and help customers to save money,” Barra said at a briefing. “Battery technology improvements will continue to make electric vehicles more desirable and more affordable.”

GM expects to cut the average carbon dioxide emissions for its China fleet by 28 percent between 2016 and 2020, Barra said. By 2025, GM’s global brands will offer a range of electrification technology in almost all of its models in China.

The company plans to have 10 new-energy vehicles — a category including plug-in hybrids and battery-electric cars — and annual sales of 150,000 units in China by 2020 across its Buick, Cadillac and Chevrolet brands. It’s targeting a half million units by 2025.

China is poised to become the largest market to seek a phase-out of the internal combustion engine, following France, the U.K., India and Norway. China will consider granting foreign investors more access into its electric-vehicle market, according to the National Development and Reform Commission, without elaborating.

In the meantime, draft rules released in September for public consultation said that companies will be required to obtain a minimum new-energy vehicle credit score next year, derived from different weightings assigned to various types of zero- and low-emission vehicles. Companies that fail to meet the requirement face fines or have to buy credits from those that exceeded the minimum.

“It’s a very challenging task for GM,” said John Zeng, Shanghai-based managing director of researcher LMC Automotive. He estimates the automaker will have to produce at least 50,000 new-energy vehicles next year and 70,000 in 2019 to be on track to meet the proposed government quotas.

Barra, in Shanghai to attend an annual meeting of an advisory group to the city’s mayor, is ramping up production of the E100, a compact EV that GM launched with its local partners in July. Sold under the entry-level Baojun brand, the model is priced from 35,800 yuan ($5,500) after government subsidies, according to Cui Dongshu, secretary-general of the China Passenger Car Association.

Unlike other new-energy vehicle models in GM’s stable — the Buick Velite 5 and Cadillac CT6 plug-in hybrid — the E100 qualifies for central and local government subsidies that lop about 60 percent off its sticker price.

While a sea change to electric cars won’t happen for decades — the U.K. and France are talking about banning combustion engines by 2040 — China’s concerted approach is prodding automakers to speed up their plans and invest more heavily in profit-sapping electrification.

VW has said it will target to sell as many as 400,000 electric vehicles a year in China by 2020. Ford has said it plans for 70 percent of all of its vehicles sold in China to have electrified powertrain options by 2025.

Tesla Inc. is working with the Shanghai government to explore local manufacturing in China, the Palo Alto, California-based company said in June. The electric-car maker led by Elon Musk has said it expects to more clearly define production plans by the end of the year.

With foreign automakers scrambling to line up capacity to meet the impending policy demands, building clean autos may turn out be the easy part.

“From the credit system to the ban on fossil-fuel vehicles, for sure GM should promote new-energy vehicles aggressively in China,” LMC’s Zeng said. “Production is easy, but selling, now that’s hard.”