Is GM handing China another win?

General Motors announced today that it has signed a memorandum of understanding with the China Automotive Technology and Research Center (CATARC) in which CATARC will reportedly...

...manage GM’s fleet of demonstration Volts and will assist GM China in meeting certain objectives.

These [objectives] will include gaining the support of key decision makers crafting vehicle electrification policy in China.

Who is CATARC?  From their English website:

China Automotive Technology and Research Center (CATARC) was established in 1985 response to the need of the state for the management of auto industry and upon the approval of the China National Science and Technology Commission. It is now affiliated to SASAC.

As a technical administration body in the auto industry and a technical support organization to the governmental authorities, CATARC assists the government in such activities as auto standard and technical regulation formulating, product certification testing, quality system certification, industry planning and policy research, information service and common technology research.

CATARC is "affiliated to SASAC" (State-owned Assets Supervision and Administration Commission) which is essentially the organization that holds the shares of central state-owned enterprises.  CATARC is also a major regulatory organization in that all automobiles need to be tested by CATARC before they may be certified for the road in China.

Since part of GM's purpose is to gain influence over policymakers, this relationship with an organization that is part of the central government cannot hurt.  But there is more to CATARC than meets the eye.

Not only is CATARC an auto industry regulator that is essentially owned by the central government, but it is also a competitor of GM's through its ownership in the Tianjin Qingyuan Electric Vehicle Company (Qingyuan).  According to Qingyuan's website, the company both develops and produces clean energy vehicles and components, which sounds remarkably like something that GM does.

Qingyuan's "principal shareholder" is CATARC, and another of Qingyuan's shareholders is the Tianjin Lishen Battery Company, a producer of lithium-ion batteries for electric vehicles, which is, of course a competitor of LG Chem, the manufacturer of the battery in the Chevrolet Volt.  (Lishen, incidentally, makes the li-ion battery for the Coda electric car.)

So what does all of this mean?  Am I saying that GM has handed its intellectual property over to CATARC so they may copy at will?  Not exactly.  CATARC, after all, also has a reputation to protect, so I am doubtful that they would so blatantly copy GM's Volt technology.  But how certain can GM be that its technology will not find its way, through CATARC, into the hands of Qingyuan, or Lishen, or any of the dozens of Chinese automakers who bring their cars to CATARC for testing?

GM is no stranger to having its IP copied in China.  Back in 2003, GM discovered that Chery had somehow obtained the plans to the Chevrolet Spark, and used them to develop the QQ which Chery got to market several months ahead of the Spark.  And when GM went to its partner, Shanghai Auto, to complain about this miscreant that had been copying its technology, only then did GM learn that Shanghai Auto was also a part owner of Chery.  (Long story short, GM sued, then settled out of court with Chery, which admitted no wrongdoing, and Shanghai Auto got rid of its shares in Chery.)

In all honesty, I find it hard to blame Chinese automakers for copying foreign technology and designs.  After all, this is what all developing countries do when they are trying to catch up.  All developed countries -- including the US -- at one time or another, copied other countries' technologies with reckless abandon.

I do, however, blame foreign automakers (and manufacturers in pretty much any industry) for sometimes naively risking their shareholders' valuable IP for a share of the Chinese market.  The goal of the Chinese automakers is to win -- as it should be.  But foreign automakers need to understand that the ultimate goal of China's automakers is to no longer need them.  When Chinese partners say their aim is for a "win-win," this means they get to win twice.*

___________________
* I don't know for certain whether I was the first person to say this about the concept of "win-win", but I had not heard it before I tweeted it from my hotel room in Shanghai in January of 2010 (as documented by @rudenoon on his blog).  :)