US-China Energy Cooperation: The Case of CODA Automotive

Coda Automotives Kevin Czinger (left) discusses electric-car batteries in Tianjin, China, with U.S. Commerce Secretary Gary Locke (middle).

Coda Automotive's Kevin Czinger (left) discusses electric-car batteries in Tianjin, China, with U.S. Commerce Secretary Gary Locke (middle).

Much of the dialogue surrounding Chinese President Hu’s visit this week, at least from a media reporting perspective, has centered around Sino-U.S. energy deals—including players like Boeing, GE, Duke Energy, who launched China partnership announcements timed to coincide with Hu’s visit and the Brookings U.S.-China Strategic Forum on Clean Energy Cooperation. While there is much to cheer in these agreements, especially when it comes to job creation, there is also much to question as we move forward.

These energy agreements pose some rather obvious risks, in that U.S. companies will be sharing intellectual property with Chinese firms—and that any collaboration with China in an industry integral to U.S. national security presents some level of risk. But the deals also represent a laudable, long-awaited step forward in the Sino-U.S. relationship, affording market access and substantive China learning opportunities to U.S. firms.

While welcoming the collaboration that these announcements represent, it is perhaps important to recognize that the US-China narrative is multilayered—that these well-trumpeted corporate announcements come in the midst of some thought-provoking setbacks for some notable US-based energy companies which extended China operations over the past few months.

One of these companies is CODA Automotive, a US electric car company based in Santa Monica. CODA has been an intriguing story for journalists. The company was formed in 2009; that fall, CODA representatives came to Beijing to participate in the U.S. Department of Energy’s first US-China Electric Vehicles Forum, spearheaded by DOE Assistant Secretary for Policy and International Affairs, David Sandalow.

As you might imagine, CODA’s vision seemed especially apropos to Americans in Beijing in late 2009: China’s Chery Automobile was producing new models left and right, and China’s BYD (which has since experienced some notable setbacks) had announced its investment from Warren Buffet’s Berkshire Hathaway a little over 6 months prior. At that time, Americans in the region were left looking for a leader on the other side of the Pacific.

What struck many then was the innovative, forward-thinking, collaborative nature of the company. CODA is a US-based EV startup, but has a seemingly extraordinarily functional joint venture with Lishen Battery (a Chinese lithium ion battery company, the largest holder of which is China’s National Offshore Oil Company [CNOOC]). CODA’s batteries and vehicle chasses are made in China, yet 35% of the CODA car is made in the US, and the US end does the final inspections.

CODA explicitly recognizes this vision in its corporate materials: “Our heart is in America and our family of partners is global,” says CODA. A lofty goal, backed up by a pragmatic, disciplined model and a management team thought capable of delivering quickly made CODA a media darling. More recently, CODA’s goal of opening factories in Ohio, a manufacturing-dependent state hurt by the financial crisis, resonated well with commentators and journalists.

Yet despite its position as a role model for cross-national cooperation, CODA recently pushed back its initial sales date for its EV sedan to the third quarter of 2011, presumably as a result of executive-level shufflings, including losing the well-regarded Kevin Czinger as Chief Executive in November 2010. Earlier this month, CODA announced that it had closed a round of venture funding valued at USD76 million.  For CODA, a volatile few months make this funding, which brings Coda’s total invested capital to over USD200 million, much-needed good news.

The steep competitive landscape for EVs has become something of an issue for CODA, especially given CODA’s late 2010 pricing for its new sedan, whose initial tag is higher than competitors’ by a few thousand dollars (before factoring in tax rebates). These developments, plus manufacturing setbacks and the management shakeup, make the additional round of venture funding a welcome development.

It’s unclear what the impact of the pipeline setbacks, new funding, and executive changes will ultimately mean for CODA at a functional level. But, especially in the wake of Evergreen Solar’s move to China, it would be unfortunate to see CODA, a company which has demonstrated such exceptional and timely leadership of thought—and navigated the well-recognized complexities of a China joint venture so productively and ably—be beset by significant roadblocks now.

CODA’s setbacks are by no means the fault of China—nor a reason not to cheer this week’s Sino-U.S. cooperation agreements. Yet they are a reminder that, even for the most well-planned and seemingly functional of Sino-U.S. ventures, uncertainties are all but certain.

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Elizabeth Campbell is a Policy Fellow in AEL’s New Energy Leaders Project and will be a regular contributor to the website. The views expressed are those of the author and do not necessarily reflect the position of AEL.

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4 Responses to “US-China Energy Cooperation: The Case of CODA Automotive”

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