Tesla fans: Study Ford’s China joint venture very carefully

Send in the clones: Zotye’s Macan left, Porsche’s Macan right – Pictures Carnewschina.com

Hopping on the Chinese EV bandwagon, and trying to comply with looming tough EV mandates in China, U.S. carmaker Ford has signed a joint venture agreement with Zotye Auto to make low-cost electric cars in China. Investors in Californian carmaker Tesla should closely study this agreement.

The jointly produced cars won’t be sold as Ford cars, but under “a new brand,” Ford group vice president Peter Fleet told Reuters. Why would Ford give up the strong brand cachet it has, and embark on the long, arduous, and expensive schlep to build a new brand nobody has ever heard of? Simple answer:

The Chinese government wants it that way.

Foreign OEMs interested in building EVs in China quickly hear of the government’s desires that made-in-China EVs should not be sold under the foreign brand. Instead, it should be a Chinese brand owned by the joint venture. Nissan could not sell a Made-in-China Leaf, and instead had to offer it as a Venucia e30 – to very limited success. Quite recently, China’s top regulator, the National Development and Reform Commission (NDRC) refused an application by Volkswagen to sell EVs made by a joint venture with Chinese carmaker JAC under Volkswagen’s SEAT brand. The vehicles will be sold under a new brand.

Renault on the other hand could avoid the costly wishes of the government after agreeing with China’s Dongfeng to jointly produce EVs. Renault spokesperson Florence de Goldfiem told me that an “A-SUV EV designed by eGT will be sold with the Renault Logo in 2019.”

So far, Renault is the outlier. “No foreign brands for new branded NEVs” is the policy of the Chinese government, an insider told the Financial Times. Stripped off their brand-power, foreign makers lose their edge in the highly competitive, and hugely brand-aware Chinese market.

Joint ventures need to be approved by China’s powerful regulator NDRC. Ignoring its “strong suggestions” usually leads to no approval. The NDRC can decide as it pleases. This policy is very much known in the industry, but very little talked about. Out of fear to displease the NDRC, mouths are kept shut.

As far as Tesla is concerned, there have been many rumors of its impending production in China. The rumors are usually put forward by Bloomberg, and so far, they never were true. A week ago, Elon Musk said not to expect Made-in-China Teslas before three years are over, and he called it “a rough target.” If Musk calls something a rough target, it probably means “not in your lifetime.” And right he is. Not being able to sell Tesla cars as Tesla cars in China would be a death sentence.

Another part in the Ford deal likewise pours cold water over Tesla’s China hopes: The number of desirable Chinese joint venture partners appears to dwindle. In choosing Zotye, Ford had to scrape the bottom of the barrel. The smallish Chinese carmaker is “infamous for being inspired by Western automakers such as Porsche, Volkswagen, and Audi,” writes Carnewschina. Zotye’s SR9 is a veritable clone of the Porsche Macan. Ford usually is very protective of its intellectual property, it famously prevented Tesla from calling what became the Model 3 a Model E, and ruined Tesla’s plan to have a “S-E-X’ model range.