Is this person going to become the Chinese Elon Musk?

The Chinese billionaire who bought Fisker Automotive Holdings Inc. at the bankruptcy auction, plans to build a new echelon of electric cars in the US, challenging Tesla Motors Inc (TSLA) on its home soil.

Lu Guanqiu, chairman and founder of Wanxiang Group Corp. China plans to produce electric cars in the US and eventually in China, he said in his first extensive interview after prevailing in the February trade war over Fisker's assets.

Lu Guanqiu, chairman of Wanxiang Qianchao Co. Ltd., left, departs after a meeting with US President Barack Obama. Photographer: Noah Berger/Bloomberg

"I will put every cent that Wanxiang earns into making electric cars," he said at Wanxiang's headquarters in Hangzhou, Zhejiang province. "I will burn as much cash as I need to succeed or until Wanxiang goes bankrupt."

Elon Musk, co-founder and CEO of Tesla Motors Inc., speaks during an interview at the company. Photographer: Noah Berger/Bloomberg

Lu's plan pits him against others Elon Musk, Tesla's CEO, who quickly ramped up the workforce to mass-produce the $72,000 Model S. Each tycoon strives to locate his company outside the US in order to sell cars with lower emissions in China - the largest auto market in the world with one of the worst air pollution.

Visitors view Fisker Automotive Inc. Photographer: Noah Berger/Bloomberg

"Fisker brings a unique advantage, and owning the company certainly benefits Wanxiang in terms of gaining access to technologies it would otherwise have spent years developing," said Harry Chen, an automotive analyst at Guotai Junan Securities Co. in Shenzhen. "Following them should ultimately lead to the start of production in China, and production in the US is just a launch pad."

Technical Disadvantages

Lu, 69, made tractor parts during China's Cultural Revolution and dreamed of making cars since the 1980s, he said. Now he has a fortune of $3.1 billion, according to the data collected Bloomberg. Musk, whose fortune is estimated at about $9.2 billion, said earlier this year that he expected China to become Tesla's biggest market.

Lu Guanqiu, chairman of Wanxiang Group Corp., who owns a billion-dollar fortune. Photographer: Noah Berger/Bloomberg

Wanxiang, China's largest auto parts maker, hopes to build on Fisker, whose hybrid sports car, the Karma, won rave reviews for its low-slung design and high-profile criticism from critics for its technical flaws. The $103,000 Karma was made in Finland. Fisker filed for bankruptcy in late 2013 before it could execute its plan to use a Department of Energy loan to produce a second model in the US.

Fisker, however, has unleashed a trade war between Chinese bidders who would receive approximately three dozen current and pending Fisker patents. Wanxiang's $149.2 million bid outbid Hong Kong investor Richard Li's Hybrid Tech Holdings LLC.

Chinese promises

Fisker's property includes an abandoned General Motors Co. plant. (GM) in Wilmington, Delaware, providing Wanxiang with an entry point for U.S. auto sales — a goal that has eluded Chinese automakers such as BYD Co. and Great Wall Motor Co. (2333), Geely Automobile Holdings Ltd. and Chery Automobile Co. made predictions back in 2005 that they would enter the American market, although they still have to sell their first car in America.

Wanxiang strives to produce the Karma model in the United States and later to make other extended-range hybrids, the company announced on May 17. Time schedules or other details have not been announced.

Lu said in an interview last week that he expects Wanxiang to get a license to produce electric cars in China, without offering specifics. The company already has permission granted in October to produce electric buses and trucks for the family.

"It's still a long way to go," Lu said. "We want to concentrate for now on production in the USA. If I don't succeed, my son will continue it. If he doesn't do it, my grandson will continue."

"Loser" Romney

Fisker's collapse, after struggling with battery defects, negative reviews and missed production tasks, ultimately cost the American taxpayer $139 million. American presidential candidate Mitt Romney called the company a "loser" during the 2012 debate in criticism of the principles of President Barack Obama's energy policy.

The US returned nothing to Wanxiang's proposal: as much as $90 million allocated to Hybrid Tech owned by Li, which paid the Department of Energy $25 million last year to accept the Fisker loan.

"While the outcome is not exactly what we had hoped for, the Department has explored every available option and closely followed federal legal processes to obtain the best possible recovery for the taxpayer," said Dawn Selleck, a spokeswoman for the Department of Energy.

U.S. officials said their agreement with Hybrid Tech requires it to manufacture cars in the country. Lu did not specify whether American production will take place in Wilmington.

Peasant parents

Born to a peasant in 1945 in Hangzhou, Lu became an apprentice at the state-owned metalworks at the age of 15, before starting a mill in his village and, later, a bicycle repair shop. In 1969, Lutetsy pooled money with six other farmers to open a tractor repair shop for his commune. Wanxiang got its Chinese name from the universal joints – the part used in cardan shafts – that they produce.

Lou kicked his three-pack-a-day habit by winning a match from a local steel mill boss who provides supplies for the factory's ego, he said, shuddering at the memory. He hasn't smoked since, he said. "I said I would do it, and I did," he said, switching between the local Xiaoshan dialect and a strong Mandarin accent.

Today, Wanxiang's publicly traded units include auto parts maker Wanxiang Qianchao Co. (000559), seeds and fertilizers Wanxiang Doneed Co., beverage manufacturer Hebei Chengde LoLo Co. (000848) and Shunfa Hengye Corp. (000631), developer. Wanxiang also owns a 3.7 percent stake in the Shanghai-listed Guangzhou Automobile Group Co. (601238), production partner of Toyota Motor Corp., Honda Motor Co. and Fiat SpA. (F) The Wanxiang conglomerate earned 7.85 billion yuan ($1.3 billion) in profit last year.

An elusive dream

However, Lou did not fulfill his dream of creating cars.

In the early 1980s, Lu visited the state-owned First and Second Automobile Factories, the predecessors of today's China FAW Group Corp. and Dongfeng Motor Corp. – and saw that Jiefang brand of car appeared every five minutes. He thought that was impressive until he visited the GM plant in Detroit in 1985 and saw that cars were coming off the assembly line at a frequency of less than one minute.

"I felt deep down and doubted that I had the ability to make it in this industry," said Lu, who drives around in a Lexus LS600HL hybrid. "Since then, the technology gap between foreign and Chinese automakers has widened."

Lu said that he made the decision to focus on electric cars because Wanxiang had no advantage in the overcrowded segment of ordinary cars. Wanxiang has invested 5 billion yuan to develop electric cars since 1999, once halting production after realizing its model was not reliable enough to compete, Lu said.

Instead, the company focused on electric buses, he said. Today, 700 of Wanxiang's electric buses are undergoing operational trials in Shanghai, Qingdao and Hangzhou, according to the company.

"Buying Brains"

Wanxiang last year bought most of the assets of Fisker's battery supplier, System A123, which had plummeted in value citing defective power modules. The acquisition gives Wanxiang enough know-how to enter the automotive industry, Lu said, likening the deal to "buying brains."

Meanwhile, foreign automakers such as Tesla and Nissan Motor Co. (7201) are moving to win the fortunes of China's new energy transportation market as the government tries to promote cleaner, greener transportation. Tesla, based in Palo Alto, California, delivered its first Model S cars to Chinese customers last month and is building a network of battery charging stations in China. It is planned to be produced locally "at some point" in the next three or four years, Musk said.

"Tesla is already competing in perhaps one of the most fiercely competitive global industries," said Simon Sproul, a company spokesman. "The only truth in our industry is that the best product combined with the best customer service earns the right to stay in business."

Lu said there are "no shortcuts" to competing against foreign automakers, adding that a successful company builds up its competitive advantage over time.

"Anyone who tells you that a generational leap can be made is simply exaggerating," he said.

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