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Red light, green light

Red light, green light

Enviromental pollution has become a major problem, which is nature’s red-light warning.” Those green-tinged words do not come from an activist. Rather, they come from China’s leaders, who gathered this week in Beijing for a big annual meeting. On March 5th Li Keqiang, the prime minister, vowed to declare war on pollution. The timing could not have been better, then, for the launch of a firm devoted to the manufacture of greener engines. The same day EcoMotors, a startup backed by Bill Gates and Khosla Ventures (supported by Vinod Khosla, a Californian venture capitalist), unveiled its joint venture with a division of China FAW Group, a local carmaker. The Chinese partner vowed to spend more than $200m on a factory in Shanxi, a northern province, that will produce 100,000 of the new engines a year.

The venture’s “OPOC” two-stroke engine, a novel twist on a century-old idea, consists of a pair of cylinders, each containing two opposing pistons. Its backers claim its fuel-efficiency will be up to 45% better than the four-stroke engines commonly used in cars. The technology was developed with financial help from the Defence Advanced Research Projects Agency, an arm of the Pentagon with a record of promoting breakthroughs (robot legs and self-driving cars are two others).

The engine can run on a variety of fuels. The plan is first to make diesel engines for use in lorries, and only later to consider petrol versions for cars. However, local boosters in Shanxi also want future configurations to burn methanol, which can be made from abundant local coal supplies.

Another noteworthy aspect of this deal, argues Andrew Chung of Khosla Ventures, is that it suggests the best way for inventive energy startups to achieve scale: make a big push in China. Despite the downturn in the solar business there (see article), Bloomberg New Energy Finance, a research firm, estimates that the clean-technology market in China exceeded $60 billion last year, whereas America’s was less than $50 billion.

Commercialising new technologies is not easy in rich countries, says Amit Soman, the president of EcoMotors, since slow growth and legacy assets make incumbent manufacturers reluctant to take a punt on unproven new kit. But in China his firm has already reached two non-exclusive deals. In one of these, EcoMotors signed a $200m licensing agreement last April to let Zhongding Power make a version of its engines for diesel generators.

“The innovation cycle is being completed in China and other emerging economies, not America,” says Mr Chung. Maybe so, but there are two caveats. The first is that Chinese firms will not pay much for intellectual property, and will copy it as soon they figure out how. The second, observes Jonathan Woetzel of McKinsey, a consulting firm, is that only technology firms that “fit conveniently into the Chinese ecosystem”, to the benefit of local companies, will be allowed to prosper.

Consider the much-trumpeted recent arrival of Tesla Motors in China. The American electric-car firm unarguably has cutting-edge clean technology, but its business model of importing all its vehicles does not enrich powerful Chinese firms or transfer intellectual property to local joint ventures. So the subsidies and tax breaks lavished by China’s central and local governments on buyers of even the most wretched “new energy vehicles” made there will not be offered to purchasers of Tesla’s gorgeous green machines.


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