Eastern promise

Hybrid car manufacturers could clean up in China’s burgeoning automotive market, says Simon Mounteney.

China’s economy has been consistently — and somewhat hyperbolically — described as expanding ‘exponentially’ for what feels likes an interminable period of time. So long that its growth should surely have reached terminal velocity by now.

However, the country’s amazingly rapid growth is set to continue well into the future. The need to put this growth into perspective is more than academic, because it could give western firms the foresight to recognise the prospects China still offers, rather than seeing it as an out-of-control freight train that will fly straight by them.

Marks & Clerk recently produced a report, Focus on China, on the republic’s industrial progress in three key sectors (automotive, pharmaceuticals and telecoms) through an examination of patents filed there. It unearthed a number of opportunities for western firms to share in the republic’s future economic success.

Nowhere was this more apparent than for the automotive sector, in which the report discovered a significant gap in the market for developing ‘green’ technology.

Rocketing demand

Until the past few years, there was little demand in China for cars and those that were marketed were predominantly replications of older European models. But consumer demand has now rocketed. This repercussion of economic growth has seen China emerge as the world’s second largest consumer markets for cars.

Unfortunately, there is a big problem with its insatiable appetite for the petrol-powered carriage: its severe lack of oil to support booming levels of consumption.

Statistics on China’s consumption suggest that this is a serious problem for its future. The State Council Development and Research Centre estimates that annual vehicle demand will have reached 18.9 million units by 2020, accounting for 60 per cent of the nation’s total consumption of oil. Amid a continuing industrial revolution, how will a country already facing a dearth of oil sustain this level of fuel consumption on its roads, while also powering industry?

A move to more sustainable forms of transport is clearly needed and there are powerful incentives to exploit the deficiency of China’s oil supply through the development of ‘green’ technology. Its government is willing to back developments in this area in its 10th Five-Year Plan, which identifies the development of hybrid vehicles as a key project under the Ministry of Science & Technology’s 863 Programme.

Less fuel-efficient engines have also been targeted by a 20 per cent consumption tax on cars with engine capacities of over two litres.

China thus has the potential to be a world leader in the development of cleaner, green vehicles, because its hand is forced by the poverty of its natural resources.

Despite this potential, investment in this necessary technology still has a long way to go. The Marks & Clerk report revealed that while patents for hybrid technology have increased in China over the past few years, patent applications made similar increases across the entire automotive sector. Hybrid figures actually form only a small proportion of total automotive patents filed.

World leader

Of those patents filed in hybrid technology, Toyota is the recognised world leader, a position it has also secured in China. A number of European and US manufacturers have joined the likes of Japan’s Toyota, Nissan, Honda and Mitsubishi in the global list of hybrid technology leaders, yet western firms are conspicuously absent from lists of China’s patent filing activity. Even General Motors and Volkswagen are absent, despite their eminent production facilities.

Japanese and Chinese domestic motoring companies could well steal a march on other global players who have failed to recognise the impending sustainability crisis facing China — and, consequently, the golden sales opportunity for themselves.

Innovative firms in the green technology field should wake up to this opportunity within the automotive sector and beyond. With the Chinese government demonstrating concern about its resources, it will no doubt start to look at the development of sustainable technology across all industrial sectors.

More importantly, western firms should make the most of the technological expertise they can bring to China, for it is widely recognised that the country must shift its manufacture from imitation to innovation to compete globally and sustain its economic growth. Now is the time to make the most of China’s staggering commercial opportunities, rather than let this economic freight train pass us by.

Simon Mounteney is a partner at Marks & Clerk, patent and trademark attorneys