Shanghai, China, July 14, 2017
Bill Russo will speak on “Disruptive Trends in Automotive: The Future of Mobility” at the New Tech Auto Summit organized by the Shanghai Jiading Industrial Zone Management Committee.
Ward’s Auto, June 13, 2017
The Lynk & CO startup is leaning heavily on the Volvo brand heritage for legitimacy, but an investment analyst says not having the burden of a parent brand actually may help electric-vehicle startup NIO.
by Alysha Webb
SHANGHAI – Lynk & CO and NIO both launched their first production models at the Shanghai auto show in April. Both tout their unique ownership experience, which includes lots of cool technology.
Cool technology is becoming standard in new cars, however. The automakers arguably have a bigger task before them on the road to success.
“They must go through the painstaking process of building a brand,” Bill Russo, managing director at Gao Feng Advisory, a Shanghai-based consultancy, tells WardsAuto.
Most new brands can rely on predecessor brands from the same company, for example, Lexus and, he says.
Lynk may have a leg up in the brand-building battle. It is the offspring of two automakers, Zhejiang Geely and Volvo, which Geely acquired in 2010. “But I’m not sure that helps Lynk & CO very much,” says Russo.
Meanwhile, the Lynk & CO website proclaims, “Forget what you know about car brands and buying.”
Its first model, a compact luxury CUV called the 01, is scheduled to go on sale in China in fourth-quarter 2017, in Europe in 2019 and the U.S. “some months” later.
Lynk will offer the option of shared ownership of its vehicles, which will include electric and traditional internal-combustion-engine models. The brand, which calls itself “the world’s most connected car,” offers a lifetime warranty and, more important to its desired image, lifetime free connectivity.
The car-sharing feature may be a bonus in trying to attract younger buyers in China, says Namrita Chow, principal automotive analyst with IHS Markit. But, she notes, “The tough part will be brand awareness and gaining traction in a market already saturated by existing brands as well as a throng of newcomers.”
The aim, says Alain Visser, senior vice president-marketing and sales at Lynk, is to create a “hassle-free ownership experience” that clearly will differentiate his company from its competitors.
The startup is leaning heavily on the Volvo brand heritage for legitimacy. The 01 and future models will be “built in China in a Volvo plant according to Volvo standards,” Visser says.
NIO, formerly known as NextEV, also displayed its first production model at the Shanghai show. The ES8, a fullsize SUV, is an all-electric vehicle with a swappable battery.
The startup is leaning on its ownership experience to differentiate it from the crowd, although details aren’t out yet.
“We believe that a better electric automotive product and a better ownership experience will make more and more users willing to own an electric car,” NIO founder and Chairman William Li says at the Shanghai show.
NIO says the ES8 will be on the market in China in 2018, and it will offer an autonomous EV for sale in the U.S. by 2020.
Not having the burden of a parent brand actually may help NIO, says Robin Zhu, senior analyst at investment researcher Sanford C. Bernstein in Hong Kong. “NIO is free to build a brand story consisting of Nurburgring lap times, Formula E and other achievements,” he tells WardsAuto.
The NextEV team has competed in the FIA Formula-E Championship race series since its inception in 2014, winning the series in 2015 with driver Nelson Piquet Jr.
In May, its EP9 electric supercar set an electric-vehicle lap record of 6 minutes, 45.9 seconds at the famous Nurburgring track in Germany. In February, an autonomous version of the EP9 set a new record for an autonomous vehicle with a lap time of 2 minutes, 40.3 seconds at the Circuit of the Americas in Austin, TX.
It won’t be easy for the startups to use customer experience to brand themselves, says Tom Doctoroff, senior partner at global brand and marketing firm Prophet. Most Chinese companies still are much more focused on sales than service, he says.
“When you want to talk about customer experience, you have to look at corporate structure and whether it can provide an integrated holistic experience,” says Doctoroff, who lived in China for decades and is the former Asia Pacific CEO of communications firm J. Walter Thompson. “The ecosystem that is required is a very refined ecosystem.”
Tianjin, China, May 15, 2017
Title: China’s Auto Industry in the Age of Disruption – The Birth of the “Automobility” Business Model
For global automakers and their suppliers, China represents the greatest opportunity for growth in the 21st century. Since 2009, China has been the world’s largest market by volume, and surpassed 28 million units in annual car sales in 2016. Over the coming decades, we believe that China will remain the key battleground for dominance of the global auto industry. However, this battle will not be waged using the conventional automotive technologies which have been refined over the past century. We believe several driving forces, which are particularly evident China, have the potential to disrupt the status quo of the automotive industry:
It is the confluence of these forces, along with rapid innovation to address “pain points” associated with mobility in the China context, are positioning China as the catalyst to drive the transformation of the business model and technological underpinnings of the global auto industry. In this course, we highlight the major disruptions that lie in the path to success in China’s automotive industry, including:
DRIVE: Nissan Intelligent Mobility for your ride
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.
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.”
The Detroit News, January 7, 2017
Baidu Inc. and state-owned Beijing Automotive Group Co.’s collaboration on telematics and autonomous driving is almost ready for its coming-out moment, as industry and government join hands for a self-driving vehicle push within China.
A BAIC-built model equipped with Baidu tech will debut in April at the Shanghai auto show, BAIC Chairman Xu Heyi said in interview Friday at the trade show CES 2017 in Las Vegas. The two companies also plan to conduct road testing of a car that will be autonomous in limited environments by the end of this year.
China has set a goal for 10 percent to 20 percent of vehicles to be highly autonomous by 2025 in the world’s biggest auto market, and for 10 percent of cars to be fully self-driving in 2030. State broadcaster China Central Television began airing a five-part series this month on one of its prime time programs to highlight the country’s efforts in autonomous vehicles and related technology.
“It’s a smart move for both to team up,”said Bill Russo, managing director of Gao Feng Advisory Co. “BAIC can bring manufacturing and Baidu can bring technology capability to solve mobility problems.”
The cooperation with BAIC is Baidu’s most comprehensive, though the internet giant also is working with other automakers on joint development of self-driving cars, Baidu President Zhang Yaqin said Friday. The Beijing-based company is close to setting up a new research center near Seattle that will focus on artificial intelligence and cloud computing and security, he said.
Baidu formed a self-driving car team in Silicon Valley in April that it said would employ more than 100 researchers and engineers by the end of last year. It’s partnered with chip maker Nvidia Corp., has been testing its autonomous vehicles in eastern Chinese cities including Wuhu and Shanghai and earned a permit from California to test in the state last year.
BAIC, owned by the local government of Beijing, has made progress of its own. The automaker whose joint-venture partners include Daimler AG and Hyundai Motor Co. in April let customers ride in self-driving cars on a test track.
China is seeking to shed its image as a cheap manufacturer of products with little value-added content. The government is pushing its technology and manufacturing industries to create more sophisticated products and services in line with the global trend toward digitization and internet connectivity.
To contact Bloomberg News staff for this story: Tian Ying in Beijing at firstname.lastname@example.org.
Shanghai, China, December 1, 2016
Bill Russo, the Managing Director and Automotive Practice leader at Gao Feng Advisory Company will chair the Connected Mobility Roadshow conference in Shanghai – hosted by Messe Frankfurt.
The main players in the mobility industry are currently re-evaluating their positions, for connected mobility promises huge potential: by 2020, the market for interconnected cars is expected to have increased by 45% – ten times the growth of the general automobile market. It is estimated that in five years, three quarters of all new cars will be able to connect, and, from 2025, autonomic driving could be possible outside of protected areas.
Shanghai, China, September 1, 2016
As the development of automotive electronics and telematics is gaining speed, intelligent car applications are gradually and successfully integrated in our daily lives.
The numerous advantages of latest technologies do not only include an improved driving experience or enhanced safety, but also the evolution towards less fuel consumption and more sustainable driving.
Therefore, the September Automotive Roundtable in Shanghai will discuss promising trends of future cars in China and its latest applications in several areas, such as Driver Assistance Systems, Autonomous Driving, Automotive Multimedia & Communication, Connected Vehicles and Online Services in China.
– in cooperation with Autoköpfe –
– Strategic Partner: EU Chamber –
When: Thursday, September 01, 2016, 6 pm
6:00 – 7:00 pm: Registration and Networking Dinner, incl. buffet dinner
7:00 pm: Presentation:
By Mr. Roger Looney, VP of Vehicle Engineering – Vehicle Systems Development, including Electric Drivetrain & Autonomous Driving, Qoros
Roger Looney has 30 Years experience in automotive tooling, engineering and design and over 20 years experience in Asia. Current goals include utilizing that knowledge and experience to develop world class, exciting vehicles of the future.
Specialties: Automotive Product Development and Launch, Electronics, Hybrid & EV development, Asia Mergers and Acquisitions, Six Sigma, Product Development, New Business Development in Asia, Team Building in China, Low Cost Country Sourcing, Contract Development and Negotiation in China, Korea, Japan.
7:20 pm: Presentation: Integrated Mobility, Transportation Redefined
By Mr. Bevin Jacob, Head of Biz Dev, APAC, Continental Intelligent Transportation Systems
An ‘Internet of Vehicles’ enthusiast, Bevin Jacob envisions building and incorporating “Mobility Services” to improve Consumer’s digital lifestyle. He has 16 years of active involvement in building “Connected Solutions” for Mobile, Telematics and Multimedia Devices. Bevin enjoys working with highly motivated teams to bring about disruptive innovations in connected vehicles business.
7:40 pm: Panel discussion: Future Cars
Moderator: Mr. Bill Russo, Managing Director, Gao Feng Advisory Company
Bill Russo is the Shanghai-based Managing Director and the Automotive Practice leader at Gao Feng Advisory Company. His over 30 years of experience includes 15 years as an automotive executive, including 12 years of experience in China and Asia. He has also worked nearly 12 years in the electronics and information technology industries. He has worked as an advisor and consultant for numerous multinational and local Chinese firms in the formulation and implementation of their global market and product strategies. While the Vice President of Chrysler North East Asia, he successfully negotiated agreements with partners and obtained required approvals from the China government to bring six new vehicle programs to the market in a three-year period, while concurrently establishing an infrastructure for local sourcing and sales distribution. Mr. Russo has a Bachelor of Science in Chemical Engineering from Columbia University in New York, and a Master of Science in Manufacturing Systems Engineering from Lehigh University in Bethlehem, Pennsylvania. Mr. Russo is a highly sought after opinion leader on the development of the China market and the automotive industry.
Panel additionally includes:
Ms. Vanessa Moriel, Managing Director Asia, Liase Group
Vanessa Moriel is Managing Director Asia with the LIASE Group, a global retained executive search firm & talent management consultancy that specializes exclusively in automotive and mobility companies.
Ms. Moriel has been providing CEO & top management placements and succession expertise for global automotive companies across the Asia-Pacific region for close to 15 years. She previously worked for Schlumberger, the London Consulting Group, Frito-Lay (Pepsico) and Fiducia Management Consultants.
She holds a Bachelor’s degree in Chemical Engineering for the Institute of Technology and Superior Studies of Monterrey and has completed an Executive Program in Strategy and Organization from the Stanford Graduate School of Business.
Mr. John Shen, Managing Director, Accenture Strategy, Greater China
Mr. Shen Jun has more than 20 years of industry and management consulting experience. He is now Managing Director with Accenture Strategy Greater China. Before he joined Accenture, Mr. Shen was Senior Partner at Roland Berger Strategy Consultants and has been leading the Automotive Competence Center (ACC) in Greater China. Mr. Shen has served many leading MNC/local companies in automotive industry, covering a wide range of topics. Mr. Shen has in-depth knowledge and expertise in the functional areas of corporate strategy, merger and acquisitions, operational benchmark, organizational restructuring and sales and marketing management (especially on branding, channel optimization, pricing and new product launch), etc.
8:10 pm: Q&A
Where: Courtyard by Marriott Shanghai Jiading 上海绿地万怡酒店
3101 Huyi Highway, Jiading District, Shanghai 201821, P.R.C
Fee: 250 RMB/Person for annual spinsors, incl. buffer dinner, free flow soft drinks and beer
350RMB/Person for non-sponsors, incl. buffet dinner, free flow soft drinks and beer
(Please note only cash or pre-payment via bank transfer is accepted)
Hotel Room Information: The participants of Automotive Roundtable can enjoy the special rate of the hotel room: Superior Room: 550 RMB/night (incl. 1-2 breakfast). To book the room, please email to:
Ms. YILIA JIANG
Assistant Sales Manager
Tel: 86.21.3991.6816, mobile: 139.1831.2521
and indicate rate code of “Automotive Roundtable”.
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The Washington Post, July 19, 2016
(LEFT) The 2017 Range Rover Evoque Convertible is debuted during the
Los Angeles Auto Show in Nov. 2015, in Los Angeles (AP Photo/John Locher).
(RIGHT) Jiangling Motor Co.’s Landwind X7 SUV is displayed at the
16th Shanghai International Automobile Industry Exhibition in April 2015
The cars are basically indistinguishable unless you hone in on the exact stitching of the seats or the fine arrangement of the headlights. Even then, changes are so minuscule, it’s nearly impossible to realize one of these vehicles costs $41,000, and the other just $21,700.
British luxury carmaker Jaguar Land Rover and Chinese carmaker Jiangling will go to court this summer in China to settle their dispute over what exactly is fair game in the auto industry. Can Chinese companies continue to get away with “shanzhai” — a Chinese term for prideful counterfeiting — of car designs?
Range Rover’s Evoque and Jiangling’s Landwind X7 are practically the same car to the untrained eye.
It’s a judicial battle that pits Western car companies against the burgeoning Chinese and East Asian market, and one that has captured the attention of economists, auto industry insiders and intellectual property experts.
The Chinese consumer market has grown exponentially since late 1980s economic reform. Some of the largest growth has come from auto companies, both state-owned and foreign joint-ventures. In 2008, when the market was still in its relative infancy, Chinese buyers purchased 9.4 million cars. By 2015, they bought 24.6 million.
And as the industry rapidly expands, Western carmakers, from the United States’ “big three” to German luxury brands to other imports, have rushed to gobble up market share, in the process flooding China and its comparably fledgling car companies with new vehicle models.
The best way Chinese manufacturers could compete was “shanzhai,” reverse engineering foreign products as a way to enter the market without overwhelming research expenditures.
“In the automotive industry, you can copy the look of the the vehicle, but the skills required for the highly complex integrated systems, if you’re a Chinese company, you don’t have engineers with long career histories with that capability,” said Bill Russo, managing director of Shanghai-based Gao Feng Advisory Company.
“So you shorten the life cycle by purchasing or licensing or reverse engineering. And this is not a Chinese-invented cycle.”
Imitation, as the idiom goes, is the sincerest form of flattery. But it’s also a great way to make money, something merchants have realized for hundreds of years.
The United States in the 1800s, for example, lacked authors who could stack up against British literary giants, so American publishers reprinted British works without paying heed to copyright laws, said Mark Bartholomew, a professor of law at the University at Buffalo.
Benjamin Franklin, the Benjamin Franklin, even published pirated works. William Wordsworth and Charles Dickens came to America to complain about it. The United States only stiffened its intellectual property laws once its industries, both mechanical and intellectual, matured by the end of the century.
“It boils down to economics,” Bartholomew said. “The Chinese economy doesn’t have this same tradition of the manufacturers like Ford or Hyundai or any of the folks who are making these cars. So if you don’t have these copyright laws, why pay if you can get away with it?”
China does have intellectual property laws, though, and it’s a signatory to international intellectual property agreements. But China’s laws are applied inconsistently, and even the international rules aren’t always enforced in China and elsewhere around the world.
Some countries recognize certain kind of intellectual property, but not others. For example, special door handles on a car: Are those a decorative creative works, or do they have some functionality? Creative works get copyrights. Objects with usefulness get patents. And states, not companies, are the arbiters of what objects get what protection.
It leaves multinational companies rushing to strategically secure their rights all over the world. In large established markets like the United States and Europe, car companies apply for protection right away. But in a developing market such as China — its auto market was until recently considered “developing” — those applications only became priorities over the last decade.
Smaller Chinese companies without strong market presence used past administrative delays as windows of opportunity. If intellectual property protection hadn’t been filed domestically, it was convenient to reverse engineer the product. And if the protection was filed sloppily, companies reverse engineered cars largely without the risk of prosecution.
Even when U.S. auto makers file their paperwork in the right way, China car companies enjoy remarkable home field advantage in their courts. More mature courts in Beijing or Shanghai might have judges more willing to hear out foreign companies, but rural courts or those in factory-heavy districts often show interest to local industry, including counterfeiters.
And so the copycats started coming. Honda fought a Chinese carmaker for 12 years for copying the CR-V. The Chery QQ riffed off the Chevrolet Spark in 2005. Shuanghuan’s CEO SUV model copied BMW’s X5 in 2007. Shuanghuan’s Noble copied Mercedes Benz’s Smartcar in 2009. The Lifan 320 copied the Mini Cooper Countryman in 2012.
Hummers and Porsches and Rolls Royces have been copied. Even Ferraris have been copied, and were shipped to Spain where they were seized by police.
“Anything known to mankind can be faked, even a Ferrari,” said said Frederick Mostert, past president of the International Trademark Association and a research fellow at University of Oxford and Peking University. To prove a point, he bought one and traveled with it and shows pictures of it at speaking engagements.
Ferraris, though, aren’t the counterfeits major car companies worry about. Any buyer looking for a luxury car is in the market to spend luxury car kind of money. That’s especially true in China, where consumers are extremely brand conscious, experts say. Nobody who wants a Land Rover is going to be fooled by a Landwind.
“People who buy [the Landwind] can’t afford the Land Rover,” said Russo, the Geo Feng consultant. “And of course if you’re the company that’s out there, you’re going to be pissed off about it, but nobody is getting confused.
“Get in that Landwind and drive it. I’ve driven many, many cars in China. It’s not the same car.”
As much as the counterfeits are inconveniences, it may be the lawsuits to stop the practice that may hurt Western automakers more, auto industry experts say. The Chinese public doesn’t like to see its industries get bullied. Plus, if one copycat company gets shut down, others pop back up. Western companies end up playing legal whack-a-mole with money they could use to make newer, better cars, said Kenneth D. Crews, a Los Angeles-based attorney and adjunct professor of law at Columbia University.
That kind of strategy actually trains customers to look for newer models and not settle on older ones that are more easily counterfeited. More mature Chinese car companies have grown up and away from copying other models. Once they made enough money to invest in research and original design, they did.
“These companies have grown to become more than just copycats,” Russo said. “They’re advanced and they’re innovative.”
Novi, Michigan, September 13-15, 2016
Bill Russo will be a keynote speaker at the plenary session of the Electric & Hybrid Vehicle Technology Expo (Day 1, Track 1) on September 13 in Novi, MI on the topic China Drives the Future of Personal Mobility.
Click here to view the conference flyer: TBS&EVT 2016 overview
Click here to view the Day 1, Track 1 Agenda