There isn't a market that's more "mass" than China. And thanks to a powerful shove from the government, China is where electric vehicles are going to go mainstream.
China is already the world's largest consumer of electric vehicles, with more than 300,000 sold last year and a similar amount made. But the Chinese government would like to see e-production capacity to increase to two million units per year by 2020.
That's part of a broader push to meet a target that electric, plug-in hybrid and fuel-cell cars make up at least 20% of total vehicle sales by 2025. And when the government sets a target in China that it controls, it gets its way.
The world's car companies are lining up to lead that charge, if you'll forgive the pun. Since foreign companies are restricted to owning no more than 50% of an auto producer in China, that means setting up a joint venture.
The new company, eGT New Energy Automotive, will design, develop, produce and sell electric cars entirely within China. Dongfeng will own 50% of the joint venture. Renault and Nissan will each own 25%, the companies said.
Its first vehicle will be based on a small sport/utility car model that Renault and Nissan already produce jointly. While Nissan has been producing the all-electric Leaf in China, it has yet to design a new-energy vehicle here.
The alliance is a "Golden Triangle," according to Dongfeng chairman Zhu Yanfeng. The actual Golden Triangle, where Thailand, Burma and Laos meet, is better known for another form of production -- heroin. That sells better than electric vehicles, it's true, and has a very loyal customer base, but it isn't nearly so healthy.
Actually, the new team is more of a square. Renault, Nissan and Mitsubishi Motors (MSBHY) have already united as an "alliance," and together have sold more mass-market electric cars than anyone else in the world. Combined, they have shifted 481,000 units of cars such as Nissan's Leaf, Renault's Zoe and Mitsubishi's i-Miev as of the end of June.
China is home to the top six producers of electric vehicles, according to Bloomberg's New Energy Finance unit. BYD (BYDDY) tops the unit's global index of the industry's e-makers, followed by Jiangling Motors SZ:000550 and BAIC Motor (BCCMY) .
The top of the list was filled out by Japanese and European car companies. No U.S. producer made the top 10. Daimler (DDAIY) has a joint electric-car brand in China with BYD and BMW (BMWYY) has set one up with China Automotive Holding.
But last week, Ford Motor (F) said it will study the opportunity to establish a joint venture with Anhui Zotye Automobile to produce electric vehicles. The other U.S. car companies would do well to follow their lead.
Dongfeng produces Nissan X-Trail, Qashquai and Murano SUVs in China. It also has joint ventures with Honda Motor (HMC) and with Citroen, having taken up a 14% stake in the parent of Citroen and Peugeot, PSA (PUGOY) , when it bailed the company out in 2014.
Dongfeng is backed by a bunch of state-owned asset managers, including China Huarong Asset Management HK:2799 and China Chinda Asset Management HK:1359. They bailed out Dongfeng's predecessor, Second Automobile Works, in the wake of the Asian financial crisis.
The eGT New Energy Automotive unit wants to make mass cars that are not only electric, but also smart, networked and highly wired. The production line will initially be Dongfeng's existing factory in Shiyan, a five-hour drive northwest of Wuhan but also in Hubei Province. It has a capacity of 120,000 vehicles per year. Production is due to start in 2019.
Carlos Ghosn, who is chairman of Renault, Nissan and Mitsubishi Motors, revolutionized the Japanese auto industry when he came to Asia to head Nissan. After bringing that company back from the brink of bankruptcy, he became a celebrity CEO in Japan, where he even has his own manga comic book depicting his life story.
Ghosn championed the production of Nissan's Leaf, which became the world's first mass-produced electric vehicle when it went on the market at the end of 2010. But its high cost deterred many prospective buyers.
The right model could capture huge sales in China. Through July, production of new-energy vehicles (both all-electric battery cars and plug-in hybrids) in China hit 272,000 units, according to the China Association of Automobile Manufacturers, up 26% over the prior year.
Sales rose 22% to 251,000 units. That suggests the full-year figures will see almost 500,000 made, and close to that sold in 2017, too.