What China brings to the table, aside from a price advantage, is an ability to do product development at a rapid pace compared to overseas rivals. General Motors, for example, announced its groundbreaking Chevrolet Volt plug-in electric hybrid at the 2007 Detroit Auto Show. The car is slated to go on the market at the end of 2010 in what must be considered for GM a crash program. In China, the BYD (Build Your Dreams) Auto, known for its lithium-ion cell phone battery prowess, has built a plug-in hybrid based on an electric-powered version of its gasoline-powered F3 sedan. The electric version of the car (F3E) is already sold as a government vehicle and the plug-in hybrid (F3DM) went on sale in China at the end of 2008. The company announced it would begin selling these cars in the U.S. in 2011, and if Chevrolet is just a couple months late with the Volt, the first plug-in hybrids sold here might come from China.

Just about everybody in the industry and on Capital Hill is pointing at plug-in hybrids as the future of the auto industry. The key to this future comes from the on-board batteries these vehicles will carry. They must be light and durable, yet capable of powering the vehicle some significant distance before the on-board gasoline engine kicks in to charge them. The most likely candidate is the lithium-ion battery. You probably already have experience with lithium-ion in your cell phone or laptop computer. Much of the world's lithium comes from salt evaporation in the deserts of South America. In 1999, a new deposit of lithium was discovered at 14,000 feet in the Chabyer salt lake in Tibet. This is now regarded as the number-one lithium reserve in the world and China has become the world's largest producer of lithium-ion batteries, making more than 19 billion of them annually.

It isn't just batteries that make hybrid cars practical. The electric motors used in these vehicles are made with supermagnets that use rare-earth elements. Although the U.S. used to be the primary source for these rare-earth elements, that operation shut down in 1994 and China, with vast rare-earth resources in inner Mongolia and southern China, now supplies more than 90 percent of the world's rare-earth element production capacity.

China, therefore, has the necessary manufacturing capability, the manpower, the natural resources, and the expertise in working with new technologies to build the world's next generation of plug-in hybrid vehicles. At one time the image of carmakers like Audi, Mercedes-Benz, BMW, Volvo, and Saab might have produced a halo of quality that would convince buyers of the superiority of such brands. We now live in a vastly different world, and price has proven time and again to be the primary consumer concern. There's little doubt that the Chinese manufacturers can deliver an acceptable automobile, incorporating new technologies and materials, meeting all regulatory and consumer requirements, with a reasonable level of quality at a price that knocks all comers, American and European, into the weeds. In a couple of years--about the time the European brands wake up to this reality, and when the U.S. manufacturers finish their endless restructuring and downsizing--they may look around to see American roads have already become flooded with the kinds of cars they can only just dream of building.

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