Bill Russo to Chair Panel Discussion on the Internet of Vehicles at TechCrunch

Shanghai, China, June 27, 2016

Venue:
West Bund Art Center
2555 Longteng Ave, Xuhu

Time:  11:10-11:40am

The Big Data Behind the Internet of Vehicles

TechCrunch_Shanghai_2016___TechCrunch

The traditional automotive industry, where technology innovation has primarily been focused on powertrain and safety systems, must now contend with new forms of mobility services that are transforming the manner in which we experience the product.   The particular conditions of urbanization, an ever-expanding middle class population, pollution, and congestion are uniquely challenging in China, which may create opportunities for innovative new mobility solutions for China.

The conventional hardware-centric, sales-driven, asset-heavy and ownership-based business model with sporadic customer interactions is now competing with a connected, on-demand, and often personalized mobility experiences.  This new form of “connected mobility” is driving new technologies in the world of navigation, analytics, driver safety, driver assistance and information virtualization.

Innovations such as these, originating from both traditional OEMs and new mobility solutions platforms, many of whom are Chinese, could pave the way to a an entirely new business model for China’s auto industry.

Panel Members:

Dr. Markus Seidel, Vice President, BMW Group Technology Office China

Ms. Celine Le Cotonnec, Head of Connected Services, Digital and Mobility for PSA Peugeot Citroen China

Mr. Bevin Jacob, Head of Business Development, APAC, Continental Intelligent Transportation Systems

Moderated by:

Mr. Bill Russo, Managing Director, Gao Feng Advisory Company

CCTV News: Bill Russo Discusses China’s Auto Market and New Energy Vehicles

China Central Television China 24 Program,, April 25, 2016

 

China 24 04-26-2016 03:15 - CCTV News - CCTV.com English Safari, Today at 10.38.42 AM

 

A link to Bill Russo’s appearance on CCTV’s China 24 program.  Topics discussed included New Energy Vehicles, China’s auto market outlook, and vehicle exports.  Beijing Auto Show story begins at 8:25, and Mr. Russo’s appearance starts at 11:42.

Click here to watch the program at CCTV.com

 

 

Carmakers seek inside edge in China

The Financial Times, April 24, 2016

 

Carmakers seek inside edge in China — FT Safari, Today at 8.56.04 AM

 

Carmakers are gearing up for a year of intense competition in China as the world’s largest auto market by sales faces both slowing growth and changing tastes in the form of electric cars and sports utility vehicles.

This time last year, global executives were bracing for a potential slowdown and a “new normal” of moderate sales growth to match a slowing mainland economy.

Fears became reality when the stock market rout last summer in China sent consumer sentiment into a nosedive. Sales dropped year on year from June to August, before a tax cut for small-engine vehicles in October propped up sales to finish 2015 with a growth rate of 4.7 per cent year-on-year.

After a bumpy run, global carmakers at the biennial Beijing International Automotive Exhibition, which opens on Monday, are keen to prove they are well positioned in China’s rapidly maturing market.

Shifting consumption patterns have made SUVs one of the country’s most promising growth segments, with sales surging by more than 50 per cent in the first quarter of 2016 compared with the same period last year, in contrast to sedan sales which declined 1 per cent.

That mirrors the growing popularity of gas-guzzling SUVs elsewhere in the world as fuel costs have followed the price of oil lower.

The shift has helped established a beachhead for local automakers, according to Bill Russo, a Shanghai-based consultant.

“For sedans, multinationals had the advantage but for utility vehicles seven out of the top 10 models are Chinese brands” thanks to their lower costs, he says. The trend is here to stay, he adds: “Utility is like a drug — once you have it, you’re hooked”.

The move has put pressure on foreign brands as local carmakers have also improved their quality significantly in recent years, according to analysts.

“Multinationals are in a dilemma over whether to cut costs to compete,” says Yale Zhang, a Shanghai-based consultant.

Domestic automakers are looking to expand on their newly privileged position. IHS Automotive predicts production of 50 new SUV models to be launched in China this year and says that 78 per cent of these will be domestic brands.

Global automakers are already revving up efforts to regain ground by bringing their most successful top-end models from home. Ford, for instance, will use the Beijing Expo to launch its F-150 Raptor in China, a popular pick-up truck in the US, as part of efforts to “inspire a generation of off-road enthusiasts,” says John Lawler, chief executive of Ford Motor China.

But bigger is not the only way carmakers hope to do better in the Chinese market: electric cars also remain a priority for any auto brand looking to get ahead.

While they are still only a small segment of the overall market, greater numbers of “new energy vehicles” are a strategic goal for Beijing even if the demand is not yet there.

The government is aiming for yearly sales to top 3m units by 2025, after growth of nearly 300 per cent in 2015 to 330,000.

Li Keqiang, China’s premier, said in February that the government would step up support for the electric vehicle industry by shifting funds away from subsidies for production to rewarding companies that come up with new technologies and hit sales targets.

“Everyone is under pressure to show their latest NEV [new energy vehicle] models” at the Beijing Expo, says Janet Lewis of Macquarie. But margins will remain low for electric vehicles for a few years to come, she adds. “Right now, selling NEVs is not a profitable proposition.”

A survey from McKinsey suggests that electric vehicles are gaining traction, helped by government policies that make it easier to get a licence plate for electric vehicles in China’s largest cities.

As in the SUV segment, foreign leaders still face local competition. LeEco, a Chinese tech company, became the latest to enter the space, last week announcing a new all-electric concept car christened LeSEE.

“These [technology] companies are almost on par with Silicon Valley,” says Clemens Wasner at EFS, a consultancy. “In a western country their entry into the market would not be economically viable, but in China it might be.”

Click here to read this at FT.com

CCTV News Interview on Driverless Cars with Bill Russo

China Central Television’s China 24 Program, April 12, 2016

IMG_5560.JPG

On-air interview on the regulatory and infrastructural challenges associated with autonomous driving.

Lead-in story begins at 25:55 and Bill Russo comments start at 30:10

Questions discussed:

Q1:
As driverless cars getting more and more popular in China, is it really a safe and reliable way to travel around? Without drivers being in charge, the vehicles are controlled by an intelligent transportation control network. People may ask: what will happen if the network breaks down?

Q2:
From the perspectives of legal regulation and framework, to reach the ideal goal of autonomous driving in the future, what can we do about it?

View the program: China 24 04/12/2016 03:15 – CCTV News – CCTV.com English

Automakers Expanding in China May Soon Face Weakening Demand

The New York Times, March 28, 2016

by Keith Bradsher

25chinacars1-master675

A Cadillac exhibited under water with goldfish in Guangzhou, China. Automakers have pinned their hopes on China, but its economy is cooling. CreditZhong Zhi/Getty Images 

 

SHANGHAI — The new $1.3 billion Cadillac factory on the outskirts of Shanghai is a shrine to modern manufacturing, the kind of facility that automakers all over the world dream of building but can seldom afford.

Hundreds of robots bend, arch and twist to assemble the body of Cadillac’s new flagship CT6. Lasers seal the car’s lightweight aluminum exterior using techniques that the carmaker, General Motors, has only just introduced in the United States. Yardlong, bright yellow robots like mechanical Alaskan huskies tow five-foot-tall carts of auto parts to the assembly line.

“It’s more along the lines of aircraft technology than traditional, spot-welded steel bodies,” said Paul Buetow, G.M.’s head of manufacturing in China, as he strode along the assembly line.

The factory is part of an aggressive expansion by automakers in China, the world’s largest market for new cars and the industry’s brightest hope for the last 15 years. But the country’s economy is now cooling, which could leave carmakers with too many factories and not enough buyers.

G.M. will open a second, $1 billion factory in Wuhan next year. G.M.’s main rival in the Chinese market, Volkswagen, plans to open large assembly plants next year alongside its existing factories in the cities of Foshan, Ningbo and Yizheng and build one in Qingdao by 2018. Hyundai plans to complete a factory south of Beijing by October and another in Chongqing next year, while Chinese automakers like Great Wall and Changan are aggressively adding capacity.

The research firm Sanford Bernstein estimates that auto manufacturing capacity in China will rise 22 percent over the next two years, bringing it to 28.8 million cars, minivans and sport utility vehicles annually. That is almost equal to the American and European markets combined, and greater than even the most optimistic forecasts: that sales in China will reach about 25 million next year.

Automakers are expanding at a time when China’s economic growth has slowed to its lowest level in more than a quarter-century. China is closing coal mines across the country and plans to shutter steel mills. Exports are falling. Many Chinese cities are dotted with empty apartment buildings. Worried about pollution and traffic jams, China’s wealthiest metropolises have begun limiting the number of new cars that may be registered.

On the surface, auto sales in China seem strong. More Chinese families can afford cars and are flocking to showrooms. Sales of cars, minivans and sport utility vehicles jumped 8 percent last year from 2014.

The buyers are not just China’s college-educated, white-collar elite, but also the beneficiaries of the country’s roughly eightfold growth in blue-collar wages in the last dozen years. Zhou Genkou, a burly truck driver, recently waited in a Volkswagen dealership to pay $12,300 for a new white Santana sedan. He explained that he could not tolerate life without a car.

“It’s so that we don’t have to walk,” he said.

But there are signs that China’s yearslong auto boom is easing.

After car sales fell three months in a row, the Chinese government decided last September to halve the sales tax on cars with engines of 1.6 liters or less, to 5 percent through the end of 2016. The main beneficiaries have been domestic Chinese automakers, mostly affiliated with municipal or provincial governments, that churn out cheap subcompacts with small engines.

A similar tax reduction produced strong sales in 2009 and 2010. But it mainly encouraged consumers to buy sooner. When the tax cut expired, sales essentially leveled off for the next two years.

With the current tax reduction scheduled to end, “2017 will be a very difficult year for the auto industry, probably no growth,” said Yale Zhang, the managing director of Automotive Foresight, a Shanghai consulting firm.

Multinationals are focusing more on higher-profit segments that are growing without help from such incentives. But they are also finishing up a factory-building spree that started three years ago, when the economy was healthier.

“We see China moving to a pace of what I would call moderate growth,” said Matthew Tsien, the G.M. executive vice president who oversees the company’s China business.

Volkswagen forecasts that China’s auto market will grow slightly faster than the overall economy this year and slightly slower than the overall economy for the rest of the decade. G.M. is forecasting that the market will grow a little less than 5 percent a year through the end of the decade, the equivalent of adding the entire auto market of Japan, or five Australias.

Both automakers are planning to meet much of that growth with factories they have already commissioned or will soon finish. But if the economy weakens significantly, the industry could get stuck with a large amount of excess capacity.

“Are manufacturers going to keep the rose-colored glasses or get real? Most of the multinationals are going to get real and slow down the new capacity,” said Bill Russo, former chief executive of Chrysler China and now a consultant. “I’m not sure about the local manufacturers. They have a ‘Field of Dreams’ and ‘build it and they will come’ mentality.”

Chinese auto industry leaders shrug off such concerns. “They see the small-car market as having a lot of potential,” said Cui Dongshu, the secretary general of the China Passenger Car Association.

The Chinese economy needs continued strength in the auto market. The government wants to shift to a new, more sustainable model for growth based on consumer spending.

Since 2009, China has depended heavily on a loan-fed surge in construction of ever more highways, rail lines, factories and other investments. But that has produced a mountain of debt, particularly at state-owned enterprises.

Strong auto sales helped China attain a little-noticed milestone in recent months. Overall retail sales of consumer goods in China surpassed such sales in the United States, according to official data.

If sales do slow sharply, the question is whether multinationals and domestic automakers will try to start exporting more from their Chinese factories. The facilities are among the most advanced in the world, not least because they are also the newest.

G.M. and other automakers could in theory try to export more cars to the United States, which is also a relatively healthy market. One potential obstacle, however, is that China’s surplus capacity is mainly in subcompact cars, for which Americans have little appetite.

G.M. is already preparing to start shipping a new car-based sport utility vehicle, the Buick Envision, from China to the United States, from a factory in northeastern China. The arrival of the Envision, which is being built only in China, Buick’s biggest market by far, will be the mass market debut of Chinese-built cars in Big Three showrooms in the United States.

The preferences of Chinese consumers tend to be different from those of American buyers. Chinese customers, for example, are highly prone to complain if fabrics and other materials in a car’s interior do not smell quite right, according to surveys by J. D. Power & Associates. Many in the auto industry have said they will be watching how American buyers respond to Chinese-built Envisions.

“So will we,” said Mr. Buetow of G.M.

Reimagining Mobility in the China Context

Gao Feng Insights Report, February 2016

We are pleased to share with you our paper titled: Reimagining Mobility in the China Context. This article builds on the themes from our previous article titled Digital Disruption in China’s Automotive Industry, and offers a perspective at how the traditional value chain of the automotive industry is being fundamentally transformed by a new wave of “digital disruptors”.

Unlike traditional automotive OEMs and suppliers, these digital disruptors are leveraging mobile internet technology to present new and innovative “Connected Mobility” services to users, and in the process challenging the business model of the automotive industry. The century old hardware-centric business model of individual car ownership and product-based segmentation is transforming into a new form which leverages internet technology to deliver a broader range of services to address mobility needs.  Such changes are happening faster in China than in the rest of the world, where the size and scale of the urban population and the sheer numbers of mobile internet users are much greater than other markets.

In such an environment, China’s Internet giants (Baidu, Alibaba, Tencent) along with mobility disruptors such as LeEco and NextEV are vying to deliver an increasingly connected, electrified, smart and personalized mobility experience.  Coupled with the Chinese government’s regulatory push on new-energy vehicle adoption and sustainable transportation infrastructure, China has demonstrated strong potential to become the breeding ground for the Connected Mobility revolution.   As a result, Automotive OEM and supplier CEOs must learn to reimagine mobility in the China context in order to secure a strong position in this new competitive landscape.

We welcome your comments and feedback on our briefing paper or in general about our firm. We would be glad to meet you in person to share our data and perspectives in a fuller manner. Please let us know if you are interested in meeting and discussing directly how we can help you to operationalize these insights.

Thought leadership is core to what Gao Feng does. We will, from time to time, share with you our latest thinking on business and management, especially as it relates to China and China’s role in the world.

Best Regards,

Bill Russo
Managing Director, Gao Feng Advisory Company
bill.russo@gaofengadv.com

Edward Tse
Chairman and CEO, Gao Feng Advisory Company
edward.tse@gaofengadv.com

Tel: +86 10 5650 0676 (Beijing); +852 2588 3554 (Hong Kong); +86 21 5117 5853 (Shanghai)

Bill Russo to Speak on “Reimagining Mobility in the China Context”

Click here to sign up for the event at Meetup

Date:  March 17, 2016

Location:  naked Hub  3F, 1237 Fuxing Road (corner of South Xiangyang Road), Shanghai (map)

Price:   $25.00 /per person  Refund policy

ADVANCE ONLINE PAYMENTS AT ONLY RMB 150/US$ 25!
Alipay/UnionPay:  https://yoopay.cn/event/Mobility

Meet people from other professions/sectors, share new ideas on how to run your business in a more challenging environment that is Shanghai today.  

For this new entrepreneurs’ event, we have invited Bill Russo, Managing Director of Gao Feng Advisory Company, who will talk about China’s Automotive Industry.

The traditional value chain of the automotive industry is being fundamentally transformed by a new wave of “digital disruptors”. Unlike traditional automotive OEMs and suppliers, these digital disruptors are leveraging mobile internet technology to deliver a broader range of services to address mobility needs. Such changes are happening faster in China than in the rest of the world, and China’s Internet giants (Baidu, Alibaba, Tencent) along with mobility disruptors such as LeEco and NextEV are vying to deliver an increasingly connected, electrified, smart and personalized mobility experience.  China has demonstrated strong potential to become a breeding ground for Connected Mobility innovation. Automotive OEM and supplier executives CEOs must learn to reimagine mobility in the China context in order to secure a strong position in this new competitive landscape.

About Speaker:  
Bill Russo is the Shanghai-based Managing Director of Gao Feng Advisory Company and Head of the firm’s Automotive Practice.  He has over 30 years of industry experience including 15+ years as an automotive executive, and had been in China since 2004.  In his corporate career, he has worked for IBM, Chrysler and Harman International.  He is a highly sought-after opinion leader on China’s Automotive Industry, with frequent appearances on Bloomberg and China Central Television.

Fee: RMB 150 online in advance – RMB 180 at the door
Includes dinner, unlimited flow of beer and soft drinks.

Reimagining Mobility in the China Context VFF Microsoft PowerPoint, Today at 1.18.39 PM

For a copy of our new paper on this topic please email bill.russo@gaofengadv.com

Digital Disruption in China’s Automotive Industry

Gao Feng Insights Report, January 2016

We are pleased to share with you our paper titled: Digital Disruption in China’s Automotive Industry. Recent advances in mobile connectivity, big data and social networks have infiltrated the traditional automotive industry and are beginning to redraw the competitive landscape among traditional hardware companies and digital “disruptors”.

The traditional automotive industry, where technology innovation has primarily been focused on powertrain and safety systems, must now contend with new forms of mobility services that are transforming the business model of the auto industry. The conventional hardware-centric, sales-driven, asset-heavy, and ownership-based business model with sporadic customer interactions is being superseded by more connected, on-demand, cost-effective, personalized mobility services. This new form of “connected mobility” is driving new technologies in the areas of navigation, analytics, driver safety, driver assistance and information virtualization.

China’s automotive industry is at the forefront of digital disruption as this transformation is happening much faster in China than the rest of the world, and China will leapfrog to a new era of personalized and electrified mobility.  The unique context of China’s urban transportation challenge, the high rate of adoption of mobile device connectivity, combined with the rapid and aggressive introduction of alternative mobility and ownership concepts will compress the time needed to commercialize smart, connected car technology and related services.  These conditions may permit China to “leapfrog” to towards a new era of personalized and electrified mobility.

We welcome your comments and feedback on our briefing paper or in general about our firm. We would be glad to meet you in person to share our data and perspectives in a fuller manner. Please let us know if you are interested in meeting and discussing directly how we can help you to operationalize these insights.

Thought leadership is core to what Gao Feng does. We will, from time to time, share with you our latest thinking on business and management, especially as it relates to China and China’s role in the world.

Best Regards,

Bill Russo
Managing Director, Gao Feng Advisory Company
bill.russo@gaofengadv.com

Edward Tse
Chairman and CEO, Gao Feng Advisory Company
edward.tse@gaofengadv.com

Tel: +86 10 5650 0676 (Beijing); +852 2588 3554 (Hong Kong); +86 21 5117 5853 (Shanghai)

Chinese using carpooling apps to get ride home for holidays

The Associated Press, February 5, 2016

Chinese using carpooling apps to get ride home for holidays Google Chrome, Today at 4.24.12 PM

In this Feb. 2, 2016 photo, real estate agent Chen Xiao, top center in white, poses with passengers from left top, He Shaolei, Han Ajuan, Han’s son Miao Ruijing, Zhang Tao and Li Jin before they start their journey back to their hometown for the upcoming Chinese Lunar New Year, in Shanghai, China. They met on the ride-share app of Didi Chuxing, an Uber-like mobile car-hailing service. Carpooling is still unusual in China, but government officials welcome the idea as a way to alleviate the enormous burden placed on the public transportation system during the Lunar New Year holidays, China’s most important vacation period when hundreds of millions travel to their hometowns. Three others in bottom are another group, from left, Zhang Xiaohui, Yang Chuang and Xu Peng. (AP Photo/Paul Traynor)

 

SHANGHAI (AP) — The hundreds of millions of Chinese heading home for Lunar New Year have a relatively new travel option this year: mobile apps to find carpool partners to share costs in what is a novel concept for most Chinese.

The apps give an alternative to pricey airfares and hard-to-score train tickets. Software developer Li Jin in Shanghai used one after he had to abort his flight plans because of last-minute work demands, and found that the only train tickets left going to his hometown in northwestern Shaanxi province were for expensive business-class seats.

Then he tried using the Didi Chuxing (pronounced “dee dee choo shing”) carpool app and found a driver, real estate agent Chen Xiao, going his way.

“She said she still had a free space, so we agreed and now I’m using this way to get home,” Li said.

Li paid Chen 400 yuan ($60) for his seat home, roughly the same cost for a second-class train ticket for the same journey. He shared the ride in a BMW sedan with three other passengers, including a child.

The road trip through clogged highways was nearly 23 hours, twice the travel time of an express train, but Li said he appreciated the companionship.

“I think I will do the same for my return trip after the new year, because I get to know new friends, and it’s an experience,” he said.

Carpooling is still unusual in China, but government officials welcome the idea as a way to alleviate the enormous burden placed on the public transportation system during the Lunar New Year holidays, China’s most important vacation period when hundreds of millions travel to their hometowns. All told, Chinese will make a total of 2.9 billion trips this holiday season, and 2.5 billion of them will be by road, according to official estimates.

“We encourage car-pooling services that are not intended to make profits,” transportation official Wang Shuiping was quoted as saying by state media outlets. “We also remind that parties to the services must be clear on each side’s rights and obligations to avoid disputes.”

Leading the nascent inter-city carpooling market is Didi Chuxing, an Uber-like mobile car-hailing service that has been most commonly used for hailing city rides, but the company began to offer carpooling services for city commuters over the past year and, by the end of September, introduced car-sharing services for inter-city trips among 343 Chinese cities.

Users can pick the departure city and destination city and enter the desired date of travel to find private drivers with the same itinerary and an empty seat.

“We launched this matchmaking function to help us make this inter-city car sharing service another means of transportation alongside planes, trains and other forms of public transport,” Didi Chuxing spokesman Wang Mingze said.

Wang said 300,000 used the service in the first of week of the holiday travel, which began Jan. 24. As the Feb. 8 start of the holiday drew closer, the usage jumped to 100,000 per day, and nearly half of the orders involved trips longer than 500 kilometers (310 miles), he said.

Wang estimated that the platform would serve more than 1 million people by the end of the 40-day travel period.

Another player in the market is 58 Ganji Group, China’s largest online classified ad service, where users have been for years posting carpooling information and which also now has a mobile app. Huang Wei, a vice president, said the site expects to have more than 1 million posts for carpooling this holiday season, up from last year’s 700,000 posts, although the company does not track the completion rates.

“China does not have a carpooling culture yet, but you see a spike during the holiday season, when the demand goes up because people cannot secure train tickets and seek alternatives,” Huang said.

He said the routes posted in online classified ads conform to the migration patterns in China, where migrant workers flow from inner provinces to the more prosperous coastal provinces for work.

Didi Chuxing says it has purchased insurance for its users.

Bill Russo, an auto industry analyst at Gao Feng Advisory Company in Shanghai, said the app is another example how the technology is empowering the public. “It’s growing even more popular as an alternative to individual car ownership or public transportation.”