When I lived in China in the early '90s, going into business for oneself was known as "xia hai," or jumping in to the sea.

These days, many Chinese companies are jumping into the sea of electric vehicle manufacturing, and some of them are going to drown. That's the way the market works.

A few weeks ago, I saw a lot of these companies in Shenzhen at the 25th World Battery, Hybrid, and Fuel Cell Electric Vehicle Exhibition.

 


Jiangsu Aoxin Special New Energy Automobile Co. makes electric trucks, but decided to introduce a mini electric car because the government is promoting that sector.

There were several dozen companies showing mini-EVs. Some were already manufacturing the tiny cars, while some were hunting for partners. All saw the sector as a good business opportunity.

The show drew people such as 24-year old Zhang Biao, assistant general manager of Dongyuan Three New Electric Vehicle Technology Co. Ltd. The company is affiliated with the Sun Yat-sen University Research Institute in south China's Guangdong province.

 


Shandong Bidewen Power Technology Co. is one of many producers of electric bikes that figures it can make mini-cars, too. It isn't known whether car purchasers get a stuffed bear, too.

The university has developed its own electric drive train and battery management system, he says. Now, it's looking for someone to produce an EV using that technology. "We think there are many opportunities in the EV sector now," says Zhang.

Then there was the Shandong Bidewan Power Technology Co. Ltd., which gets my vote for the cutest mini EV, mostly because the car was pink and had a stuffed monkey hanging on the side mirror.

 


Jin Zhou Wonder Alternative Energy Auto Tech Co., called Wonder EV for short, sells this snub-nosed beauty for only 29,800 yuan ($4,500). The company was founded in 2009.

Byvin, as the company is called, started selling low-speed mini-electric cars last year for 29,800 yuan ($4,500). That's more expensive than an electric bike, but cheaper than an entry-level Chery QQ, which starts at 31,000 yuan.

Meanwhile, privately-owned Shandong Baoya New Energy Vehicle Co. Ltd. started making mini-electric cars three years ago, piggy-backing on its electric bike technology.

Clearly not all of these companies are going to make it. Private ventures face big hurdles because bank loans are hard to come by.

So, is Beijing wrong to encourage investment in the sector?

No, I don't think so. What the government should do is set high technical standards for these mini-cars, to push companies to innovate.

These companies already have generated a flurry of research and development.

But there is a downside. Will some companies fail? Yes. China may end up with a bunch of tiny EV makers on local government payrolls. That would be bad. And the roads could be clogged with slow-moving electric cars. That's the biggest hazard.