'New energy': Shining title for a traditional paradigm

Similar situation

Many domestic automakers have also announced new-energy vehicle plans, but very few of them have actually invested in battery technology. Most are using outsourced key components from foreign companies.

The situation is similar to Suntech's position in the PV industry - relying on foreign manufacturers for core technology while merely performing the assembly work.

Due to the high costs of new-energy vehicles and little new progress in battery technology foreseen in the short term, the industry is bound to become wholly reliant on government subsidies.

Meanwhile, the rising new-energy vehicle industry has triggered increased global demand for rare earth, leading to dramatic over-mining and smuggling of the resource.

According to customs statistics, 20,000 tons of rare earth was smuggled out of the country in 2009, about a third of total exports.

The output of rare earth mining was equally high, some 180,000 tons. Large amounts of hydrochloric and sulfuric acid used in the extraction process have flowed into farmland and ravines, polluting water and soil. The damaged environment cannot be restored for several generations.

There are other striking similarities between the new-energy vehicle and the PV industries - a beautiful "green" halo with huge amounts of pollution, enthusiastic local government support, the lack of core technology, high costs and massive use of taxpayer money.

It inevitably begs the question - will the new-energy vehicle sector will eventually become the next PV industry?

The author is a director of LMC Automotive Asia Pacific Forecasting. He can be contacted at jzeng@lmc-auto.com.