Automakers see promise in China car-sharing

The Nation, April 19, 2017

This picture taken on April 18, 2017 shows EV Card share cars parked at a station in Shanghai. / AFP PHOTO

SHANGHAI- Unable to afford a car, Shanghai university student Long Yi endured an expensive taxi commute across his vast city until he started using one of the car-sharing schemes quickly gaining momentum in China.

Essentially an Internet Age twist on car rentals, car-sharing is attracting Chinese millennials who increasingly demand mobility but shun the burden of auto ownership.

Long, 20, drives himself to school for around 50 yuan ($7) using EVCARD, a service launched by state-owned automaker SAIC Motor that has compact electric vehicles sprinkled around the city, slashing his travel time and costing one-quarter the taxi fare.

“It is cheaper and more convenient and very flexible. I’ll choose EVCARD as my primary mode of transport almost every time,” said Long.

After years of skyrocketing China sales, the global auto industry is contemplating slower growth as it convenes this week for the Shanghai Auto Show, putting alternative sales channels like car-sharing in focus.

Long-established in Western countries, such services only began appearing in China in the past two years, but are part of an ongoing Chinese personal-mobility revolution.

Already bike-sharing businesses have exploded across China, flooding major cities with bicycles that are unlocked by GPS using an app, can be left anywhere and have become critical to countless commutes.

Similarly, drivers typically use a smartphone app to find and unlock shared cars, later parking them anywhere or at set locations.

Dozens of Chinese and foreign companies have now either launched or invested in car-sharing operations, with some making purpose-built cars.

Germany-based consultancy Roland Berger forecasts annual market growth of at least 45 percent.

“That is a significant growth opportunity (for manufacturers). There are only a few hundred thousand cars now, but it’s growing and it’s growing very quickly,” said Johan Karlberg, a Shanghai-based partner with Roland Berger.

– Driving new sales –

German giant Daimler launched a car-sharing service last year that has since expanded to seven cities, gaining more than 250,000 registered users, the company said.

Jochem Heizmann, China CEO for Volkswagen, the country’s top car brand, told reporters in Shanghai VW would partner with Chinese car-sharing operator Shouqi in multiple cities, partly to boost electric-vehicle sales.

“You have to see the development of such fleets as sales channels,” he stressed.

Lynk & Co — a new unit of Chinese automaker Geely, which owns Volvo — unveiled in Shanghai two SUVs with built-in touch-screen sharing software developed with Microsoft and Sweden’s Ericsson.

“Communities”, such as companies or residential developments, can jointly purchase vehicles to share, or owners can share their car for a fee with other drivers who join Lynk & Co’s network, said Alain Visser, the company’s senior vice president.

“It becomes an interesting concept because sharing can reduce the cost of ownership,” he told AFP.

Lynk & Co also is partnering with TripAdvisor and Tujia — China’s Airbnb — on a proposed system combining shared accommodation and cars.

“Instead of entering the (car-sharing) market once it becomes big, we want to make it big,” Visser said.

Bill Russo, head of Shanghai-based auto consultancy Gao Feng, said such services will guide auto manufacturing in future.

“You may build them to entertain people in the backseat, or to provide more connectivity so people can be productive. We’ll see this segment influence specifications,” he said.

China’s central government and many local authorities are keen to reduce congestion and air pollution and have dangled various incentives for car-sharing, such as eased licensing requirements and guaranteed parking.

Further supporting car-sharing’s potential, countless Chinese face significant car-ownership hurdles, including cost, scarce parking and limits on car use in several major cities.

By 2020, China will have just 195 million cars for 355 million licensed drivers, Roland Berger estimates.

“Many middle-class families that can afford a second car are opting not to. It’s a real hassle,” said Karlberg.

High start-up costs and other hurdles in the fledgling car-share industry mean no one is making money yet, analysts say.

But they expect the growing numbers of industry entrants soon to consolidate into a solid few able to run sustainable businesses, perhaps in partnership with government.

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Ford to Make Electric Cars in China Amid Green Drive

The Wall Street Journal, April 7, 2017

The U.S. auto maker plans to build the Mondeo Energi plug-in hybrid and a new all-electric SUV in China

Ford Motor will start manufacturing electric vehicles in China next year.
PHOTO: ANDREY RUDAKOV/BLOOMBERG NEWS

By TREFOR MOSS

SHANGHAI— Ford Motor Co. F -0.35% said Thursday that it would start building electric cars in China to tap into a state-sponsored boom in green-energy vehicles.

In doing so, the Detroit-based company signaled that it had swallowed industry concerns about bringing proprietary electric-car technology to China, despite misgivings among foreign auto makers about intellectual-property protection in the world’s largest auto market.

“It’s manifest destiny” for foreign car makers to get past those fears and start building electric cars in China, said Bill Russo, managing director of Gao Feng Advisory, a Shanghai consulting firm.

Mass uptake of electric vehicles is set to happen in China first, he said, “and none of those companies can afford not to be relevant to the future of their industry.”

Ford’s local joint venture Changan Ford Automobile Co. will start building the Mondeo Energi plug-in hybrid vehicle in China next year, with a new all-electric sport-utility vehicle set to follow within five years, the company said in a statement.

Electric powertrains will be manufactured locally by 2020, and by 2025 all of Changan Ford’s vehicles will come in electrified versions, it said.

“The time is right for Ford to expand our EV lineup and investments in China,” said Chief Executive Mark Fields.

China is already the world’s largest market for electric vehicles, with over half a million electric or hybrid cars sold there last year, according to the China Association of Automobile Manufacturers.

The government is encouraging their uptake by heavily subsidizing electric cars through payments to manufacturers, which are then able to sell EVs more cheaply. It is also far easier to obtain a license plate for an EV than for a traditional gasoline car in congested cities like Beijing and Shanghai.

Local authorities have also set ambitious targets for electrifying bus and taxi fleets over the next few years, and for the rollout of EV charging facilities.

There could be as many as 32 million new energy vehicles in China by 2025, according to Gao Feng Advisory—a total that is likely to be a substantial share of the global fleet, with uptake of EVs in the U.S. and Europe happening more slowly.

Yet while most gasoline cars sold in China are built by foreign auto makers operating through local joint ventures, almost all of the electric cars sold in China last year were made by Chinese companies operating without foreign input.

Silicon Valley electric-car maker Tesla Inc. was the one notable exception: Without disclosing how many cars it had sold, the company said in a March 1 filing that its 2016 revenue topped $1 billion in China for the first time last year, leading auto-industry analysts to estimate China sales of around 11,000 imported vehicles. Chinese tech company Tencent Holdings Ltd. last week revealed it had taken a 5% stake in Tesla.

Imported cars incur a 25% tariff, making them less competitive, and so auto makers naturally want to build in China, said Michael Dunne of Hong Kong-based Dunne Automotive. But they have been holding out for some relaxation of China’s strict joint-venture rules before committing to large-scale EV manufacturing in China, he said.

Foreign car makers and the Chinese authorities have been “sitting around the poker table”, said Mr. Dunne.

It’s the foreign car makers who appear to have blinked.

In March, Buick, a unit of General Motors Co. , announced plans to start building plug-in hybrid and electric vehicles in China. Last year, GM said it wanted to have 10 new energy vehicles in China by 2020, though it has yet to reveal any plans to start manufacturing its highest-profile EV, the Chevrolet Bolt, in the country.

Last year, Volkswagen AG said it was in talks with local car maker China Anhui Jianghuai Automobile Co. about setting up a joint venture to build EVs.

Write to Trefor Moss at Trefor.Moss@wsj.com

Appeared in the Apr. 07, 2017, print edition as ‘Ford Plans Electric Vehicles In China.’

Trump Threats Push Top China SUV Maker to Review Mexico Site

Bloomberg News, March 10, 2017

China’s biggest SUV maker is reconsidering its plan to build an auto plant in Mexico that would have made its best-selling vehicles for the U.S. market, joining a growing list of global automakers reviewing investment plans after tax threats by President Donald Trump.

Great Wall Motor Co., led by billionaire Chairman Wei Jianjun, may choose the U.S. instead for its first North American plant, General Manager Wang Fengying said in an interview. The company has a research center in Los Angeles and will accelerate preparations to develop U.S.-certified versions of its Haval SUVs for sale by 2020, Wang said.

“Your decisions should always adapt to the dynamic changes,” said Wang, a delegate at this week’s National People’s Congress in Beijing. There used to be many carmakers building plants in Mexico but Trump’s changes have affected their decision making, Wang said.

Trump has promised to renegotiate the North American Free Trade Agreement and criticized auto companies including General Motors Co. and Toyota Motor Corp. for shifting production south of the border. Under threats of punitive import duties, Ford Motor Co. and Japanese auto-parts maker Nisshinbo Holdings Inc. said they’ll scrap or reconsider new plants in Mexico.

Great Wall, based in Baoding, Hebei province, is one of several Chinese automakers hoping to break into the U.S. with their own brands. Guangzhou Automobile Group Co. plans to start exporting its Trumpchi models to the U.S. from next year, while Warren Buffett-backed BYD Co. and Volvo Cars owner Zhejiang Geely Holding Group Co. have also declared American ambitions.

Lowering Risks

“Building in the U.S. is a hedge against a potential future trade barrier with Mexico,” said Bill Russo, managing director of Gao Feng Advisory Co. and a former head of Fiat Chrysler Automobiles NV’s Chrysler unit in China. “It would add cost to producing the vehicles but it reduces the potential tax risk.”

For more than 20 years, China has asked foreign carmakers wanting to set up manufacturing plants in its country to do so through joint ventures with domestic auto companies, a move that allowed many Chinese manufacturers to gain technology and eventually set up their own brands. Local marques like Geely, Trumpchi and Haval now account for almost half the Chinese market.

The Chinese carmakers are trying to reverse the tide and sell their own models to Europe and the U.S., just as the Republican-led House of Representatives is considering implementing a border-adjustment tax on companies’ imports but not their exports.

The proposals by Trump and lawmakers would raise the average cost of a car in the U.S. by about $3,300 and could even cost American jobs because carmakers source parts from around the world, Munich-based consultant Roland Berger GmbH. said in a presentation on March 8. The price increases would lead to about $34.6 billion in higher costs to consumers, assuming U.S. sales at the 17.5 million level recorded in 2016, the Center for Automotive Research said in a report Thursday.

Local Sales

In China, Great Wall is enjoying a sales surge as Chinese drivers embrace SUVs, despite government efforts to curb fuel consumption and emissions. The company’s domestic sales rose 26 percent last year to 1.1 million units, putting it ahead of Japan’s Mitsubishi Motors Corp. in global vehicle production. Abroad, though, it’s had less success, selling only 17,379 units last year, mainly in countries such as Russia, South Africa, Bulgaria and Australia.

The company is exploring opportunities in developed markets and wants to make the Haval brand global by 2020, said Wang. The company markets its SUVs in China as offering good value for money and prints ads with the title “See. Drive. Believe.” While overseas it also uses pictures of its vehicles driving in the off-road Dakar rally competition.

More than four out of every five vehicles Great Wall sells is an SUV and the company is under pressure at home as China tries to clean up the choking air in its biggest cities. The government has proposed rules that would require automakers to improve fuel economy and produce a higher proportion of so-called new-energy vehicles such as battery-powered cars. Wang said Great Wall plans to invest at least 60 billion yuan ($8.7 billion) in developing new-energy vehicles by 2025, without giving details on how the investment would be funded.

Click here to read the article at bloomberg.com

China approves Geely subsidiary’s EV production plan

Bloomberg News | March 7, 2017

China approved the electric vehicle production plan of a company owned by Zhejiang Geely Holding Group Co., under a special program originally conceived to encourage technology startups to develop EVs.

Ninghai Zhidou Electric Vehicles Co. received permission from the National Development and Reform Commission to invest in a new assembly plant to produce 40,000 electric cars a year, according to the agency’s website.

A total of 880 million yuan ($128 million) will be invested in the plant in Lanzhou in northwestern China, part of parent Geely’s plan to develop EVs, said spokesman Yang Sumi.

“It’s an experiment and Chinese companies use such investments to learn from the market,” said Bill Russo, managing director of Gao Feng Advisory Co. “In an era of disruption, it’s best to move quickly and learn rather than try to make a perfect plan and never actually get it done.”

The Geely subsidiary is the 11th company to get approval to produce EVs under a program started in 2015 to encourage new participants in the EV industry.

Geely, of Hangzhou, owns Volvo Car Corp. and is introducing an upscale brand called Lynk & CO. The company has said it wants 90 percent of its deliveries by 2020 to be generated by sales of conventional hybrids, plug-in hybrids and battery-electric vehicles.

All companies that have received permission under the National Development and Reform Commission program so far are owned by automakers, parts manufacturers and companies in auto-related fields. Technology firms such as LeEco, NextEV Inc. and Singulato Motors have yet to make the list, despite raising billions from investors with ambitions to become China’s next Tesla Inc.

China’s thriving SUV-only automaker looks to global growth

ASSOCIATED PRESS  / Feb 22, 2017, 03:06 AM

By JOE McDONALD AP Business Writer

In this photo, taken, Feb. 19, 2017, a worker assembles a Haval SUV H3 model at the Great Wall Motors assembly plant in Baoding in north China’s Hebei province. Great Wall Motors became China’s most profitable automaker by making almost nothing but low-priced SUVs. Now it wants to expand into global markets. (Photo by ANDY WONG/AP)

BAODING, China (AP) — Wei Jianjun is the chief matchmaker in China’s love affair with the SUV.

A decade ago, the chairman of Great Wall Motors Ltd. saw opportunity as the bulky vehicles began shedding their image in China as a farm tool. Wei cut back on making sedans and poured resources into its fledgling line of Havals.

That gamble paid off as SUVs caught on with drivers who saw them as the safest ride on bumpy, chaotic streets. By 2013, with demand surging, Great Wall had become China’s most profitable automaker and Wei was a billionaire.

Now, Wei wants to make the Haval a global brand. It’s an ambitious goal that requires advances in safety and features for a company known until now mainly for low prices. Great Wall sells Havals in Australia, Italy and Russia, but exports were less than 5 percent of last year’s output of just under 1.1 million units.

“By 2020, we hope Haval can become the world’s biggest specialty SUV brand,” Wei said at a reception at Great Wall headquarters in this city southwest of Beijing to celebrate sales passing the 1 million mark.

That “globalization strategy” includes working toward meeting American safety standards, Wei said. But he gave no indication when Haval might export to the United States or major European markets such as Germany.

Great Wall is part of a cadre of small but ambitious independent Chinese automakers that grew in the shadow of state-owned giants such as Shanghai Automotive Industries Corp., which assembles vehicles for General Motors Co. and Volkswagen AG.

Without foreign joint-venture partners, the independents created their own brands and started exporting to Africa and Latin America.

Geely Holding Ltd., which owns Sweden’s Volvo Cars, plans to start U.S. and European sales of its new Lynk & Co. brand in 2019. BYD Auto, the world’s biggest-selling electric car maker, supplies battery-powered buses and taxis in the United States and Europe. Great Wall opened a European assembly plant in Bulgaria in 2012. It has similar facilities with local partners in Russia, Indonesia, Iran, Egypt and Ecuador.

SUVs have an outsized role in China, where their popularity has helped offset sagging demand for sedans and other vehicles.

Sales of domestic brand SUVs soared 58 percent last year to 5.3 million units out of total sales of 24.4 million in the world’s biggest auto market. They are growing fastest in the lowest price ranges, dominated by Haval and Chinese rivals. That has helped Chinese brands to claw back market share they were losing to global competitors.

The top seller was Haval’s flagship H6, starting at 89,000 yuan ($12,900), which has become China’s most popular vehicle to date. H6 sales surged 55 percent last year to 580,000 units while the overall market grew 15 percent.

“They are definitely one of the most successful car companies in China,” said Yale Zhang, managing director of Automotive Foresight, a research firm.

“This company has some very special strengths,” Zhang said. “Of course, it also has weaknesses, because their products are focused on one model. But they are correcting that. They have tried very hard to cultivate another star product.”

Great Wall’s 2016 profit rose 31 percent to 10.5 billion yuan ($1.5 billion) on revenue of 98.6 billion yuan ($14.4 billion). Wei, 52, ranked No. 36 on the year’s Hurun List of China’s richest entrepreneurs, with a fortune estimated at $5.9 billion.

Begun in the 1980s as a collective that repaired and modified vehicles, Great Wall was bleeding cash when Wei, then 26, left his father’s business making industrial machinery and signed a deal in 1990 to take it over and share profits with the collective’s members.

The company launched a sedan in 1993. Its popular Deer brand pickup trucks were its first hit, in the late ’90s.

Its CEO, Wang Fengying, is a former saleswoman who worked her way up the ranks, becoming the first woman to lead an automaker a decade before GM Chairman and CEO Mary Barra.

Wei has a reputation for military-style discipline.

“He wants a quick decision and a thorough execution,” Zhang said. “This style is very different from large automotive companies, which can be a huge bureaucracy. This company definitely doesn’t have that weakness.”

Most of Great Wall’s 60,000 employees work at its Baoding factory complex, a 13-square-kilometer (5-square-mile) mini-city of assembly lines and workshops in long, pale yellow two- and three-story buildings.

A test track that wraps around the complex is banked to allow drivers to push vehicles to over 200 kph (125 mph).

“It’s an orderly, organized, very disciplined operation,” said Bill Russo, managing director of research firm Gao Feng Advisory. “You think, this isn’t China; this is what I would expect to see in Switzerland or Germany.”

Wei has emphasized product quality, in one case hiring Korean auto industry veterans to show Great Wall how to make better body panels, according to Russo, a former Chrysler executive. That has paid off by raising Haval’s image from entry-level to a mass-market brand that can charge higher prices.

“They have cracked that glass ceiling,” said Russo. “Their quality level is better than the basic Chinese car companies.”

Still, Great Wall’s market is increasingly crowded as Chinese rivals roll out dozens of new SUVs. Global brands including VW and GM are preparing to invade Haval’s segment with their own low-cost models.

Competitive pressures have reached a “deep red level,” Wei said.

The company is responding by trying to move up-market.

Haval opened a Shanghai design studio in 2013 and a Technology Center in Baoding, housed in a sleek glass tower with reflecting pools and a 23-story lobby. It includes engineering workshops, a wind tunnel and a low-pressure chamber that can mimic operating conditions up to 5,000 meters (16,500 feet) in altitude.

In November, Great Wall unveiled a premium brand, Wey, an alternate spelling of Wei’s name. It has yet to say how it will attract buyers to models expected to be priced above 200,000 yuan ($29,000).

Haval has struggled to lure drivers to its higher-priced models, such as its top-of-the-line H9, a seven-seater starting at 210,000 yuan ($30,600), that sold just 11,500 units last year. The H8, another full-size model, sold only 7,500 units.

In November, the company rolled out an updated H6, designed by a 50-member team led by Pierre Leclercq, a Belgian-born BMW veteran.

“The H6 is an extremely important product for us,” said Leclercq, the company’s senior vice president for design.

The company’s next rising star is the H2, a four-seat compact SUV that sold 197,000 units last year. But it starts at 87,000 yuan ($12,700), a step down in price instead of toward a higher market segment.

Great Wall also faces pressure from Chinese government rules that require improved fuel efficiency by 2020. That will hurt brands such as Haval that lack smaller models to improve the average of their product lineup.

In response, Great Wall has developed an electric car, the C30 EV, a compact sedan it says can go 200 kilometers (120 miles) on one charge. The company has yet to say when it might go on sale.

Your future driving experience: Q&A with auto expert, Bill Russo

DRIVE:  Nissan Intelligent Mobility for your ride

Click here to view the original DRIVE publication

Few observers of the evolution of the automotive scene have had a better vantage point than Bill Russo. With more than 30 years in the industry — half of that time as an auto executive with experience in China and Asia — Russo nowadays heads up the Automotive practice for Gao Feng Greater China, working as the company’s senior representative in Shanghai. We spoke with Bill recently for our third installment of our Q&A series to get his take on the impact of autonomous driving and the emergence of smart vehicles on the roads.

Q: How will the driving experience change in the Autonomous Age?

A: The potential is there for a complete redefinition of what we mean by transportation, both in terms of comfort and convenience. With the advent of autonomous driving, we’re talking about a transition from a device where we really had to focus on the road — because we were the brains of the car — to where we can focus on other things. That is time given back to us that will allow us to do other things because we won’t have to monitor what’s going on with the vehicle itself.


Q: Thinking back to how the public reacted to other major technology shifts in transportation, such as trains or commercial aviation – To what extent were these shifts driven by the user-convenience factor?

A: When you look back in history, the greatest inventions by humans — the wheel, the bicycle, the steam ship, the train, the airplane — they all exist to give us the ability to travel over increasingly greater distances. Over time, each invention added more convenience and more new features to make the experience of mobility much more enjoyable and less painless. And as each of these solutions became commercially viable and affordable, they did so by offering users a benefit versus whatever preceding form of transportation they had favored up to that point―a benefit for which they were willing to pay.


Q: How important was the pace of technological progress?

A: It’s not about creating a technology for the sake of having the technology; it’s about providing a more comfortable and convenient way for people to travel the distances that we travel each day. They have to provide a tangible benefit for people to be willing to pay and use the new mode of transport. For example, trains reduced the amount of time that it took to travel across the country from months to days. The commercial airplane reduces that same time to a matter of hours. We can circle the world in a jet in little more than a day. Not so long ago, in historical terms, that journey took people years in a boat and they may not even have lived to tell the story.


Q: Where do cars fit in the historical narrative?

A: The car became a primary means for the average person to satisfy their daily needs for mobility. We’ve designed city and transportation networks that were basically designed for vehicular transportation. In the 21st century, we’re seeing a phenomenon — particularly in emerging markets in Asia — where there are now very densely populated urban centers. That urbanized context is not really well suited for the car that we know today. Today’s cars are designed really for highway transportation. So in an increasingly urbanized world, we’re going to experience the next evolution of convenience and mobility which I think will be an autonomous mobility solution.


Q: Will perceptions of autonomous driving vary by country due to local conditions?

A: Absolutely. First of all, comfort and convenience are solutions to mobility “pain points” and the degree to which people experience pain points varies greatly based upon where they live. Mobility pain is much higher in densely populated cities, like New York or Paris or Delhi — and virtually all major cities in China. A city like Beijing experiences gridlock several times a day. And the driving experience in a highly urbanized country like China can be horrific. You can spend an hour going less than 10 miles in a car. So the joy of being behind the wheel and driving is not really there. It’s a big difference from the driving experience of getting out on the open highway. New forms of electric and autonomous mobility―like the advent of on-demand mobility where a user pays only for the time they are in the car, rather than owning it 24/7 and using it only seldom — will be a common solution to address the mobility pain points in many places.


Q: What does it mean when we have autonomous vehicles on the road that are designed from a user-centric perspective
 as opposed to the current driver-centric mindset?

A: With autonomous cars, we will be able to transform travel time into productive time — especially for longer distance commutes. There’s the potential to participate in the digital ecosystem, offering users in autonomous cars access to services and content that they can consume while mobile. Convenience services could include infotainment or watching news or doing emails and conference calls. The car thus becomes a connected rolling space that transports us to places where we live, work, and play.


Q: As autonomous technology removes the drudgery of mundane tasks associated with driving, how does that reshape how we relate to vehicles?

A: Vehicles will have the intelligence to diagnose the situations that they’re in and make the more complex decisions that human beings today make. That not only reduces the pain points of driving, it also is going to make the overall experience more convenient, safer, and enjoyable for the occupants.


With autonomous driving, we’re arriving at a point where we can define a new paradigm that refocuses how the passenger conducts and uses their transportation time. Observing what happens outside of the car, for instance, moves from being a requirement to a choice. You don’t have to look outside the window any longer. You can — if that’s what you want to do. But you really don’t have to concern yourself with what you see outside. It’s like being an airline passenger looking out the window. You can look out the window but do you really need to?


Think about the “cockpit” space that’s now allocated in vehicles for the purpose of giving drivers information they need to make decisions. You can repurpose all of that from a driver-passenger perspective to a connected user perspective. You will be able to provide people display space that allows them a more productive use of information that they may need to go about their day. While the purpose of the car doesn’t change — it’s still a transportation system — this new concept of how to offer a convenience-oriented autonomous vehicle to the occupant(s) is different.

For more stories, please visit our page on Medium.com, https://medium.com/drive-publication

About Nissan Motor Co., Ltd. 
Nissan is a global full-line vehicle manufacturer that sells more than 60 models under the Nissan, Infiniti and Datsun brands. In fiscal year 2015, the company sold more than 5.4 million vehicles globally, generating revenue of 12.2 trillion yen. Nissan engineers, manufactures and markets the world’s best-selling all-electric vehicle in history, the Nissan LEAF. Nissan’s global headquarters in Yokohama, Japan manages operations in six regions: ASEAN & Oceania; Africa, Middle East & India; China; Europe; Latin America and North America. Nissan has been partnered with French manufacturer Renault since 1999 and Mitsubishi Motors since 2016 under the Renault-Nissan Alliance.

China’s Answer to Tesla Is Hopeful Entrant to Global Car Market

The New York Times, January 26, 2017

Lu Qun, chairman of Qiantu Motor, in Beijing in December.

by Michael Schuman

BEIJING — On a windswept lot near Beijing’s main airport, Lu Qun talks up the electric sports car he hopes will transform him into China’s Elon Musk.

“This is a real performance car,” the entrepreneur boasted of his sleek, gray-and-black Qiantu K50. “It’s fun. You can feel the quality. You’ll love driving this car.”

For Mr. Lu, 48, the roadster is his best chance to make it big. After a lifetime of obscurity creating vehicles for other companies, the bespectacled engineer is betting that the rise of electric cars will propel his company — and his country — into the automotive spotlight.

“Traditional auto manufacturers are constrained by their old models,” he said. “We can see things with fresh eyes.”

Across China, government officials, corporate executives, private investors and newcomers like Mr. Lu are in a headlong rush to develop a domestic electric car industry. The country’s goal, like Mr. Lu’s, is to capitalize on the transition to electric to turbocharge the country’s lagging automobile sector to become a major competitor to the United States, Japan and Germany.

That has been a goal of China’s industrial planners for decades, as the government has lavished resources on building homegrown automakers and discriminated against foreign players.

But so far, that effort has failed.

Local manufacturers have lacked the brands, technology and managerial heft to outmaneuver their established rivals, either at home or abroad. Chinese consumers have preferred more reliable Buicks, Volkswagens and Toyotas to the often substandard offerings from domestic manufacturers, while little-known Chinese models have struggled to gain traction overseas.

Electric vehicles could offer a second chance — one China’s policy makers do not intend to miss.

They targeted electric cars for special support in an industrial policy called “Made in China 2025,” which aims to foster upgraded, technologically advanced manufacturing. By 2020, Beijing expects its automakers to be able to churn out two million electric and hybrid vehicles annually — six times the number produced in 2015.

This time, China’s carmakers may be better positioned. Since electric vehicles are a relatively new business for all players, Chinese manufacturers and international rivals are largely starting from the same point.

“There is a smaller gap between where China is today and the rest of the world” in electric cars, said Bill Russo, managing director at Gao Feng Advisory, a Shanghai consultancy, and a former Chrysler executive. “There is room for newer start-up companies to dream big in China.”

Mr. Lu is one of those dreamers.

Fascinated by cars since he was a boy, he studied automotive engineering at Beijing’s prestigious Tsinghua University. Upon graduating in 1990, he joined the research and development team at the China-based joint venture of Jeep, then a division of Chrysler.

During his time there, which included two years in Detroit, Mr. Lu came to feel such overseas operations had limited prospects in China — the ventures’ partners would try to balance their interests, and so were slow to develop strategies and make decisions.

So in 2003, he and nine colleagues started CH-Auto Technology Corporation as a specialty research and design shop for the local car industry. Since then, the firm has designed vehicles for some of China’s biggest automakers.

Mr. Lu decided to start manufacturing his own vehicles because of the shift to electric. Since producing electric cars requires new parts and technologies, he believed a small entrant could better compete with these new vehicles than traditional automakers.

“Electric vehicles won’t just replace cars with conventional engines, but they will bring a huge change to the entire car industry,” Mr. Lu said. “We wanted to be part of this revolution.”

The result is the K50. Designed at his research center, the two-seater has a light, carbon fiber exterior and a console stuffed with touch screens. Rows of batteries propel the roadster to a top speed of about 120 miles per hour and carry it as far as 200 miles on a single charge.

No longer content to watch others produce his designs, Mr. Lu is currently constructing a $300 million factory in Suzhou, a city near Shanghai, to manufacture 50,000 cars a year. In all, he expects to invest as much as $1.4 billion into his venture over five years.

He did not specify what the car would sell for, but Mr. Lu intends to price the K50 at the top of the market when it goes on sale this year.

That sets CH-Auto on a collision course with the industry’s flagship: Tesla.

Elon Musk’s company already has an edge. While Mr. Lu is building his business from scratch, Tesla has been established in China since 2013. CH-Auto will have to persuade wealthy customers to plunk down a large sum on an unfamiliar brand — Qiantu — over Mr. Musk’s recognizable models.

Mr. Lu nevertheless remains confident. He argues the sporty K50 will appeal to a more leisure-oriented driver than Tesla’s cars. As a logo, the company has chosen the dragonfly, because its managers believe the speedy, nimble insect has similar attributes to his electric car. To market it, Mr. Lu is considering opening showrooms in major Chinese cities, backed by a platform to sell online.

Elon Musk “is someone I can learn from,” he said. “Tesla has huge symbolic significance because it is the first company to make people believe a business model solely around electric vehicles is possible.”

But, he added, “we are not looking to create the Chinese Tesla.”

When it comes to competing with Tesla, Mr. Lu can count on ample help from the Chinese government.

To bring down costs and spur demand, the state has unleashed a torrent of cash. It has offered subsidies to manufacturers and tax breaks for buyers, and plowed investments into charging stations to make electric cars more practical.

In all, UBS Securities estimates that the government spent $13 billion promoting electric vehicles in 2015 alone. So far, Mr. Lu has financed the K50 through loans and injections of fresh capital, but says he “won’t refuse” government subsidies if they become available.

Some analysts fear the state’s largess could prove as much bane as boon.

China may be recreating the waste and excess in electric cars that has plagued other state-targeted sectors, like steel and renewable energy, without spurring the technological innovation the economy needs to compete. And even though China’s car market is the world’s biggest, it is still unlikely to absorb all of the electric vehicle projects underway today.

“They are fueling overcapacity, with a lot of wasted money, and I’m doubtful that in the end you’ll have a successful electric car industry,” says Crystal Chang, a lecturer at the University of California, Berkeley who studies China’s auto industry policies.

Significant sums have already been squandered. In September, the Finance Ministry fined five companies for defrauding the government of $150 million by fabricating sales of electric vehicles to obtain more subsidies, and several companies have failed to make an impression.

Mr. Lu is certain, however, that the K50 stands out in a crowded field. The car has already gotten some advance buzz; a review on one popular Chinese website praised its design as “beautiful” and “avant-garde” and its body as “very muscular.”

“A big advantage they have is their knowledge of what it takes to build a quality vehicle,” said Jack Perkowski, managing partner of the Beijing-based consulting firm JFP Holdings and a veteran of China’s car sector. “They have a better chance than many others because of that.”

Mr. Lu is counting on it.

“There are a lot of electric vehicle companies and hot projects attracting a lot of money,” he said. “Not every company and not every car will be successful.”

Perspectives on the Future of Mobility and Autonomous Driving

by Bill Russo

I recently attended the Consumer Electronics Show in Las Vegas, where traditional automakers, suppliers and several technology firms were showcasing their vision of the future of mobility.  Of particular interest were the many demonstrations and announcements related to autonomous vehicles.  Early forms of this technology are finding their way into commercial applications in the form of “assisted driving” features which incorporate cameras and radar/lidar to provide the car an extra set of eyes to sense its surroundings and inform the driver of risks.  Rapid advancement of technologies needed to fully automate the driving process is also evident, indicating that robotic forms of transportation will be possible within at least 2 industry product cycles (5-10 years).

The following is a Q&A which offers a perspective on the future of mobility and the design and function of autonomous vehicles.

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  1. The Autonomous Driving (AD) era will allow for an entirely new driving experience for drivers and passengers.  How much of an impact will AD technology have on the comfort and convenience of driving?

Autonomous Driving will completely redefine the comfort and convenience of transportation.  In our current paradigm, comfort is designed around the driver and occupants in an externally focused manner:  with eyes to the road.  The space around the front seat occupants – both driver and passenger – is oriented to the information needed to manually drive the car to its destination. Autonomous vehicles will experience fewer accidents, over 95% of which are attributable to human error.  Cars can therefore be lighter, with less structure without compromising occupant safety.  Traffic jams will be less common since autonomous vehicles will be able to leverage vehicle-to infrastructure and vehicle-to-vehicle connectivity in order to avoid congestion and smooth the flow of traffic.

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  1. When you look back at the public’s embrace of big technology shifts – trains or commercial aviation for instance – to what extent was that shift motivated by the convenience of the new mode of transportation?

Convenience always shapes our choices when it comes to transportation.  Human beings are inherently explorers and some of history’s greatest inventions – wheels, bicycles, steamships, trains, cars, and airplanes – have allowed us to be mobile over greater and greater distances.  Over time, each of these inventions added more and more convenience-oriented features to make the experience of mobility more “painless”.  Mobility devices are themselves a convenience which allow us to get where we want to be without walking.  All forms of public and privately-owned transportation are solving this basic problem of minimizing our travel time.  Each solution became commercially viable by offering a benefit versus other forms of transportation that some people were willing to pay to either use or own.  For example, trains reduce travel time across a country from months to days, and commercial aviation reduced this to hours.  We can now circle the world by jet in a little more than a day, a journey the first explorers could not complete in several years, if they lived to tell the tale.   In recent history, owing to the invention of the internal combustion engine powered car (Carl Benz in 1886), and the moving assembly line (Henry Ford in 1908) the car became the primary means for the average person to satisfy their daily commuting needs.  In the increasingly urbanized world of the 21st century, we will experience the next evolution in convenient human mobility:  personalized, autonomous mobility on-demand.

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  1. What are some ways in which the Advanced Driver Assistance Systems (ADAS) technology already in the market, like cruise control, is increasing comfort and convenience for drivers and passengers?

Such technologies act as “support” systems for drivers which allow more tasks to be “delegated” to the car.  For example,  cruise control allows a driver to focus less on maintaining a constant speed and thereby improves the driving experience.  Routine or mundane tasks like parking or adjusting speeds while driving on highways are already becoming mainstream.  Lane departure warning, parking assistance, and cruise control are features that allow the driver to focus less on routine tasks and focus on the actual experience of driving.  Over time, the number of tasks that can be handled by the “smart car” will increase in order to reduce “pain points” of driving and making the overall experience more convenient, safer and therefore more enjoyable for the occupant.

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  1. In addition to the advantages of existing ADAS and autonomous driving technologies, what are consumers most focused on when it comes to comfort and convenience of fully autonomous vehicles?

With Autonomous driving, a new paradigm can be established to re-focus the passenger on how to productively use their transportation time.  Observing the outside of the car moves from a requirement to a choice – especially for the user of a mobility service.  Space that is allocated to providing driver information can be repurposed from a driver-passenger perspective to a “connected user” perspective.  Beyond mobility, a fully autonomous vehicle’s key benefit will be the experience it gives to the user, and the primary benefit which comes from delegating the task of driving to the car is PRODUCTIVE TIME.  As such, while the purpose of the car as a transportation device has not changed, the very concept of how to treat and offer convenience-oriented features to the occupant is different:  the autonomous vehicle is built with a “user-centric” mindset, as opposed to a “driver-centric” mindset.

An autonomous car, especially one used in longer-distance (>10km) commuting distances will need to be able to transform travel time into productive time through convenient services which may include infotainment (watching news/video, gaming), online communication (social networking, e-mail, conference calls), or online-to-offline services (discounts or promotions based on mobility patterns).  In the world of personalized, autonomous mobility on-demand, the car essentially becomes a connected rolling space that transports us between the places we live, work, and play.

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  1. What Autonomous Driving feature will consumers be most surprised by and also what core functionally will they gravitate to most?

For people born in the late 20th century, it will be difficult to reimagine this new form of mobility.  Most of us from this period see a car through a nostalgic lens:  our most prized possession outside of our home, and the one that we can take with us to showcase our lifestyle and aspirations.  For many, this will never change.

However, mobility is being revolutionized by digital technology.  The rapid emergence of ride-hailing services such as Uber, Lyft, Ola, and Didi Chuxing are transforming the car into a transportation service device.  It is in this mode that we can see a great fit for autonomous forms of mobility – as the operators of such services will benefit from not having to incur the cost of a driver, along with the lower maintenance and repair cost of autonomous vehicles.  Users of such services expect to be driven and are not seeking the driving experience in any case.

The most surprising aspect of this type of vehicle will be that it affords its users the opportunity to turn inward and use their time productively.  Future cars used for short commuting will be smaller and occupy less physical space:  they simply pick people up and drop them off and do this with minimal “extras”.  These will be summoned by an app on a mobile device.  Longer commuting will be done in autonomous vehicles which have spaces designed to address the productivity needs of the occupants:  with connectivity and consumption of content at the core.  Such cars may be booked or offered through a “subscription model” to give the users some flexibility in the service offering.  The shift in this paradigm will surprise people the most since these vehicles will be designed from a pure passenger experience perspective which will include how to entertain or delight the user during the journey.

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  1. Self-parking, one of the earlier semiautonomous features, is now found on many mainstream models and widely used by drivers. Do you think the public will adopt more complex autonomous features or a fully autonomous vehicle in the same manner?

The commercialization path for more complex and fully autonomous driving will be very different than what we seen so far.  In the current owner/driver-centric business paradigm, new features have to be sold to customers who accept the value proposition of the technology and are willing to pay for it.  Early-stage technologies typically come with a heavy price premium and are typically introduced to “premium” brands where customers are less price sensitive.  However, barring regulatory intervention, this will likely limit adoption of technologies including electric and autonomous vehicles as there are cheaper alternatives (conventional engines and human drivers).

The game-changer for both electric and autonomous vehicles comes from the convergence of On-Demand Mobility (ODM) with electric and autonomous vehicles.  ODM players, such as Uber and Lyft are highly investing in autonomous vehicles as a means of lowering their operating costs and unlocking the potential to participate in the Digital ecosystem through offering the users of its services access to content and O2O services.  This will create a new pathway to commercializing and scaling up the autonomous driving technology in a way that has not been seen before:  as we have seen with other “smart devices”, hardware innovation is backed by the digital ecosystem and thereby eventually becomes mainstream for everyone.

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  1. Since road conditions vary globally, will perceptions of comfort and convenience vary by country? For example, will it permeate places like Amsterdam where many travel by bicycle or public transportation already?

Comfort and convenience are solutions to mobility “pain points”, and the degree to which people experience these pain points varies greatly based on where we live.

Mobility pain is much higher in densely populated urban cities like New York, London, Paris, New Delhi, Mexico City and virtually all major cities in China.  The driving experience in highly urbanized countries like China can be horrific.  Cities like Beijing experience gridlock conditions at several times during a day, and suffer from severe environmental impact from the tailpipe and other emissions.  Electric and autonomous mobility on demand would be a welcome solution to address these mobility pain points.

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  1. From a societal perspective, how will AD technology change the way individuals get to and from their various destinations?

Adoption of autonomous driving technology will improve flow of traffic, reduce accidents and improve the quality of life in an increasingly urbanized world.  Scaling up this technology through the convergence of ODM with electric and autonomous vehicles in these cities will accelerate a transition from a transportation model where we own an under-utilized asset that is used 1-2 hours per day to a model where autonomous cars, directed by a smart-city transportation grid, are deployed on demand to where they are needed.  This is a far more efficient system where we will witness a shift from ownership of hardware toward paying for the utility that is derived from the hardware.

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  1. When it comes to commuting, how will AD technology ease the problem of extensive traffic jams in cities like Beijing or Los Angeles?

Autonomous vehicles deployed by on-demand mobility services fleets will be able to communicate with each other, and will be directed to and from users and their destinations by a Smart City transportation network.  These cars will be highly utilized assets, which minimizes the amount of city space which needs to be allocated for parking lots for cars which sit idle for more than 22 hours a day.  Cars can be routed around the traffic, minimizing the traffic jams that define the life of residents of cities like Los Angeles and Shanghai.  Smart, connected, and autonomous mobility devices backed by advanced algorithms used to govern the mobility patterns will improve the livability of cities in an increasingly urbanized world.

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  1. Besides the impact AD will have on productivity, how else will it improve lives for people outside of transportation?

Autonomous driving will have a tremendous impact on our environmental footprint.  The technologies required to power and govern a network of personalized, electric and autonomous mobility on demand (A-MOD) have the potential to transform the lives of people all over the world.  For example, these increasingly electric-powered vehicles will be also be part of the energy storage grid, we could very well moderate energy consumption and potentially shrink our carbon footprint.  Transportation innovation has reshaped the history of mankind, and the transportation revolution of the next decade will set the course and has the potential to improve the lives of all generations to follow.

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Bill Russo is the Managing Director and Automotive Practice Leader at Gao Feng Advisory Company, based in Shanghai.  He has 30 years of automotive industry experience and has lives and worked in China since 2004.  He was formerly the leader of Chrysler Group’s business in North East Asia.

Faraday Future Faces Crucial Test With New Electric Car

The Wall Street Journal, January 3, 2017

Electric carmaker Faraday Futures demonstrated its prototype all-electric FF 91 vehicle at CES 2017 on Tuesday. The four-door car can go from zero to 60 miles an hour in 2.39 seconds, executives say.

LAS VEGAS—Time is running out for Faraday Future’s ambitious plan to crack the U.S. auto industry and take on Tesla Motors Inc.

The startup faced a critical test here on Tuesday when it revealed an all-electric car that it says will be ready for production in 2018 and will cast aside doubts about its future.

Faraday made a splash at the CES technology conference last year with futuristic car designs and plans to build a $1 billion factory in Nevada. The buzz soon turned to skepticism amid a steady drip of news about suppliers demanding payments, Faraday executives leaving and its main investor bleeding cash.

At a media event on Tuesday ahead of this week’s CES 2017 conference, the Los Angeles-area company showed a four-door, sports-utility-like vehicle called the FF 91 that executives claim can go from zero to 60 miles an hour in 2.39 seconds, faster than the Tesla Model S.

Faraday’s car has cushy back seats that can recline like a La-Z-Boy chair and an interior cabin loaded with large video screens that can be updated with next-generation gadgets. Faraday hasn’t disclosed a starting price.

“I’m hoping…to convince people that we’re real,” said Nick Sampson, Faraday’s senior vice president of engineering and research and development. “We are doing a real product, it’s not just a vaporware, Batmobile to create attention.”

Mr. Sampson said the company plans to roll out the FF 91 in 2018, but he wouldn’t discuss Faraday’s financial status.

That question arose in November when Faraday’s main investor, Chinese billionaire Jia Yueting, disclosed a cash crunch at LeEco Holdings. Mr. Jia, founder of LeEco, told employees the company had expanded too quickly as part of a multibillion-dollar spending spree to build a conglomerate ranging from smartphones to electric cars and a film studio.

LeEco’s precarious cash situation has had “some impact” on Faraday, Mr. Sampson said, but he stressed the companies are separately run.

In late December, Mr. Sampson spent more than three hours showing reporters around the company’s headquarters, a former Nissan Motors Co. facility in Gardena, Calif. The former Tesla executive led a tour through various departments, including aerodynamics, body engineering and manufacturing, as many executives presented using large LeEco TVs and talked optimistically about being ready to begin production.

Notably absent was Marco Mattiacci, global chief brand and commercial officer, whose name was printed on the agenda. He quit a few days later, according to people familiar with the matter.

Mr. Mattiacci formerly headed Ferrari in North America and was one of eight senior executives who left in the past year, according to one of the people.

Some of Faraday’s Western executives, hired from high-profile auto makers, have disagreed with their Chinese counterparts over the direction of Faraday, according to people familiar with the matter.

Underscoring how important Faraday views the CES reveal, a giant TV screen in the company’s lobby near the boardroom displays a clock counting down the hours until the event. “While getting a PR event right would be a step in the right direction, it’s still not clear whether they can raise the funds needed to finish the journey,” Bill Russo, an automotive consultant for Gao Feng Advisory Co. in Shanghai, said.

Faraday joins a crowded field of startups that aim to follow the same path as Tesla. Silicon Valley automotive startup Lucid Motors last month revealed the production version of its electric sedan that will cost about $160,000 for early versions, with the expected starting price to drop to around $65,000.

The sales pitch for the Lucid car is similar to Faraday’s: promises of sports-car-like abilities, luxurious interiors and eventual self-driving capabilities. The companies also share Mr. Jia as an investor, though he isn’t a majority shareholder in Lucid.

During the recent Faraday tour, an executive demonstrated the car’s self-parking feature. While reporters were allowed rides in prototypes to demonstrate acceleration and handling, they weren’t given up-close demonstrations of the autonomous feature.

Instead, they watched from across the parking lot as the vehicle’s operator kept his left hand hanging out the window as the car approached an open spot and backed into it. Asked if reporters could see up-close how it worked, a spokesman said, “Maybe later.”

At the event Tuesday, after showing a video of the self-parking, Mr. Jia surprised the audience by popping out of the car after driving on stage.

He pushed a button to activate the self-parking feature. But it didn’t work.

“It’s a little bit lazy tonight,” Mr. Sampson said.

Moments later they tried it again with success. The company then said it will begin taking $5,000 deposits.

Write to Tim Higgins at Tim.Higgins@WSJ.com

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