Trump Attacks BMW and Mercedes, but Auto Industry Is a Complex Target

The New York Times, January 16, 2017

A BMW at the New York International Auto Show in 2016. After praising German manufacturing prowess in an interview with Bild, President-elect Donald J. Trump threatened to impose a 35 percent tariff on every car that BMW imported to the United States.

BEIJING — In his latest criticism of what he sees as unfair trade, Donald J. Trump has taken aim at German cars. Why, the president-elect asked a German newspaper, do so many well-heeled drivers in New York drive a Mercedes-Benz, while Germans buy so few Chevrolets?

Mr. Trump’s question could set the stage for action by his incoming administration against the likes of Mercedes-Benz and BMW, which he criticized for its plans to build a new plant in Mexico. But the president-elect’s musing shows an incomplete understanding of how globalized the auto industry has become since Ronald Reagan went after Toyota and Honda in the 1980s.

That Mercedes-Benz in New York, for example, may have been made in Tuscaloosa, Ala., depending on the model. BMW has a plant in South Carolina that exports 70 percent of the vehicles made there, it says. And Germans might not buy many Chevrolets, which are no longer sold in Germany, but they buy plenty of Opels, which, like Chevy, is owned by General Motors.

Mr. Trump has criticized other companies and industries for moving production out of the United States at the expense of American jobs, such as appliance makers and pharmaceutical companies. But the vehicle industry in general — and particularly foreign automakers, his new target — illustrate how difficult it can be to parse American from international when criticizing global trade.

BMW and Mercedes-Benz — as well as the Japanese carmakers Honda, Nissan and Toyota — employ thousands of factory workers in Alabama, South Carolina, Texas and other states. G.M. gets more than a quarter of its auto-related sales outside North America, while Ford gets a third. Chrysler was bought by Fiat of Italy. Cars of all types increasingly have Chinese parts.

Nevertheless, Mr. Trump has been making a series of ever-broader demands that the auto industry manufacture in the United States to sell in the United States.

The president-elect’s latest comments came on Sunday in excerpts from an interview with the German tabloid newspaper Bild. After praising German manufacturing prowess, Mr. Trump threatened to impose a 35 percent tariff — he called it a “tax” — on every car that BMW imported to the United States. BMW should build the factory in the United States, Mr. Trump said, where it would benefit from his plans to slash corporate taxes.

Car exports are the lifeblood of the German economy, and the United States is one of the most important markets. New trade barriers would be a serious threat to German growth and could sour relations with one of the United States’ most important allies.

“We take his comments seriously,” Matthias Wissmann, president of the German Association of the Auto Industry, said in a statement. “Restrictions in the Nafta zone would put a real damper on the economy.”

In a post on Twitter on Sunday, Mr. Trump laid out his expectations for the auto industry: “Car companies and others, if they want to do business in our country, have to start making things here again. WIN!”

The main question lies in what Mr. Trump and his trade advisers decide to do once in office, auto industry officials and trade experts said. Measures to force manufacturers to shift assembly to United States factories and to use more American-made parts could drive up prices for American car buyers and make American vehicles less competitive in world markets.

“The people who lose are the core Trump supporters, who end up buying more expensive products,” said Bill Russo, a former chief executive of Chrysler China who is now the managing director for the automotive industry at Gao Feng Advisory Company, a Chinese consulting firm.

The German carmakers are hoping that, once Mr. Trump takes office, they will be able to convince him that tariffs on vehicle imports would hurt the American economy and get him to modify his views.

“We should seek a dialogue with Trump,” Clemens Fuest, president of the Ifo Institute, a research organization in Munich, said in an email. But Mr. Fuest also expressed concern that differences over trade could escalate.

“There is a danger that his policy fails and that he subsequently starts looking for scapegoats,” Mr. Fuest said. “One such scapegoat could be the German economy.”

In some respects, Mr. Trump has a point. The United States has been more open to imports than other large automotive markets, with the result that cars shipped in from abroad represent a considerably larger share of the American market than of markets elsewhere.

European governments have effectively limited imports by putting pressure on vehicle manufacturers not to close high-cost factories or to lay off workers. The Chinese government requires foreign automakers to partner with local manufacturers and sometimes requires them to transfer technology to Chinese companies.

Still, tailoring measures against the auto industry to create jobs in the United States could be difficult. For example, BMW’s Mexico plant would produce 3 Series sedans, which are currently made only in Germany and China. Most likely, the plant in Mexico would take jobs from the factories in Germany and China and create demand for components imported from the United States.

BMW is “very much at home in the U.S.A.,” Glenn Schmidt, a BMW spokesman, said in an email. Mercedes-Benz declined to comment.

The BMW factory site in San Luis Potosí, Mexico, is already swarming with construction workers rushing to make a 2019 deadline to begin production. There is little chance BMW will change its plans and move the assembly lines to the United States.

Mr. Trump’s comments hark back to the 1980s, when the Reagan administration criticized Japan for what it called unfair trade policies in the auto business. That compelled the Japanese government to set annual limits on the number of cars shipped to the United States.

Although President George Bush allowed Japan to drop the limits soon after taking office in 1989, the fights of the 1980s taught the global industry a valuable lesson: Made in America can be a good thing. Japanese and European automakers built assembly plants in the United States, taking the edge off political battles while creating tens of thousands of jobs in the country. Building plants in the United States helped in other areas as well, such as improving the foreign automakers’ logistics and moderating the impact from turbulence in currency markets.

BMW’s largest factory anywhere in the world is in Spartanburg, S.C. It employs nearly 9,000 people and exports 70 percent of the vehicles it makes, BMW says. Daimler makes Mercedes-Benz S.U.V.s and C-Class cars in Tuscaloosa, Ala., and it is building a new factory in Charleston, S.C., to manufacture Sprinter vans, creating more than 1,000 jobs.

Daimler, which also builds Freightliner trucks in the United States, has 22 factories or research and development centers in the United States that employ 22,000 people.

Even Volkswagen has not given up on the United States despite an emissions scandal that has led to $20 billion in civil settlements and criminal penalties. The carmaker, which has long produced cars in Mexico, is expanding a factory in Chattanooga, Tenn., to manufacture a new full-size S.U.V.

G.M. and Ford, meanwhile, saw big opportunities in places like China, where rapid economic development meant more people could afford cars.

A tough stance on autos from Mr. Trump may not have the same impact as that of President Reagan. Since the 1980s, automakers have made fewer of their own parts, buying them instead from hundreds of parts suppliers based all over the globe. That means an American car assembled in the United States could still have large chunks that are manufactured abroad.

Chinese manufacturers dominate the market for replacement parts in the United States, often undercutting prices for parts from the automakers by half or more. Tariffs on Chinese parts would end up being paid by Americans who took their cars in for repairs.

“U.S. consumers are paying a good price for their aftermarket parts,” because of Chinese providers, said Yale Zhang, the managing director of Automotive Foresight, a Shanghai-based consulting firm.

Global automakers’ assembly plants have been rapidly shifting orders from parts factories in the Midwest to plants in China in the last few years. But that trend could stop or reverse if Mr. Trump imposes sizable tariffs on those imports, Mr. Zhang said.

For any move Mr. Trump makes, the devil is in the details. Options include tariffs on imported cars and possibly car parts. He could also prompt a rewrite of the American tax code so that imports — but not exports — are taxed, a move known as border adjustment.

The architect of the Reagan administration’s restrictions on Japanese car imports and of a Reagan-era law that temporarily reduced taxes on exporters was Robert E. Lighthizer. Mr. Lighthizer was deputy United States trade representative at the time. He is now Mr. Trump’s choice to become the United States’ top trade negotiator.

This car company ripped off Land Rover. Here’s why it might get away with it.

The Washington Post, July 19, 2016

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(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
(Tomohiro Ohsumi/Bloomberg).

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 moreauto 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.”

Click here to read this article at washingtonpost.com

Tencent-Backed Company Aims to Launch Smart-Electric Cars Before 2020

 The Wall Street Journal, July 12, 2016

Tencent-Backed Company Aims to Launch Smart-Electric Cars Before 2020 - WSJ Safari, Today at 1.01.49 PM

A BMW electric car at a Beijing car show in April; Future Mobility has hired about 50 engineers from car makers including BMW for its smart-electric-vehicle project. PHOTO: REUTERS

Chinese auto startup Future Mobility seeks eventually to sell several hundred thousand luxury vehicles a year

BEIJING—An auto startup backed by internet giant Tencent Holdings Ltd. plans to start selling premium electric cars globally by 2020, joining other Chinese car makers in taking aim at an increasingly crowded luxury market.

Four month-old Future Mobility Corp. seeks eventually to sell several hundred thousand fully electric, highly automated, China-built vehicles a year. The company is also backed by Chinese luxury-car dealer Harmony New Energy Auto and Foxconn Technology Group, which assembles iPhones for Apple Inc. Apple has been working on its own autonomous electric car.

Deep-pocketed tech companies have backed a wave of new auto companies in China, where a drive to cut fuel consumption and pioneer the auto industry of the future has encouraged startups. Analysts, citing increasing competition and uncertainty over a subsidy-fueled boom in electric vehicles, question how such ambitions can be turned into reality.

“Our target is to create the first Chinese brand which is premium and internationally successful,” Carsten Breitfeld, chief executive of Future Mobility, told The Wall Street Journal in an interview on Tuesday. He said the company aims to sell cars in China, Europe and the U.S. and to compete with Audi AGBMW AG and Daimler AG’s Mercedes-Benz, which combine for three quarters of China’s luxury-car market.

The company will soon complete its first round of fundraising, Mr. Breitfeld said.

Last year China’s industrial regulator amended rules to allow nonautomotive companies to invest in the electric-car industry, which Beijing has subsidized to the tune of tens of billions of dollars.

Internet giants jumped right in. China’s annual motor show in April showcased smart vehicles powered by software from online-shopping company Alibaba Group Holding Ltd. and search provider Baidu Inc. Last month, a Baidu executive said that the company plans to mass produce a driverless car within five years.

Tencent, China’s biggest social-network company, has a research team working on technology that can be used in automated cars, according to a person familiar with the matter. For now, its involvement in Future Mobility—beyond its minority stake as a financial investor—is limited, the person said.

Tencent is an investor in another electric-car maker, NextEV Inc., whose other backers include Sequoia Capital.

The companies are poaching talented engineers from global auto and technology giants, and setting up research centers in the West. Future Mobility has hired 50 engineers from BMW, Mercedes-Benz, Tesla and Google.com. Within 12 months it will have about 600 engineers globally, said Mr. Breitfeld, formerly the project manager for BMW’s i8 plug-in sports car.

He said the company will either build its own plant or partner with an existing auto maker to assemble cars. It has research and development units in Munich and Silicon Valley and is building its headquarters in Shenzhen, where Tencent is based.

Some analysts question how quickly such a new company can achieve its aims. “Several hundred thousand premium cars from an unknown brand sounds like a stretch,” said Bill Russo, managing director at Gao Feng Advisory Co. and former head of Chrysler’s North East Asia business. “Building a brand and competing with the likes of the premium car makers is very difficult. And the competition will not stand still.”

Robin Zhu, a senior analyst at U.S. research company Sanford C. Bernstein, noted that demand for electric vehicles in China is minimal except in big cities where they’re exempt from certain restrictions that apply to their gasoline-fueled counterparts.

The number of electric and hybrid cars and buses sold in 2015 was four times that of a year earlier—but at 331,000 vehicles was a small, subsidy-driven tally in a market where total sales exceeded 24 million.

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

Chinese firms accelerate in race toward driverless future

AFP Newswires, April 23, 2016

 

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Chinese Internet giant LeECO Holdings Ltd unveils its internet electric battery driverless concept car ‘LeSEE’,  during a launch event in Beijing, on April 20, 2016

 

Beijing: Chinese manufacturers and internet giants are in hot pursuit of their US counterparts in the race to design driverless cars, but the route to market is still littered with potholes.

While Google has been working on autonomous vehicles for at least six years, with the likes of BMW, Volvo and Toyota in its wake, more recently Chinese businesses have entered the race, from internet search giant Baidu to manufacturer Changan.

Last week, ahead of the Beijing Auto Show opening on Monday, two self-driving Changan cars made a mountainous 2,000 kilometre (1,200 mile) journey from Chongqing in the southwest to the capital in the country’s first long-distance autonomous vehicle test.

Another Chinese internet giant, LeECO, is also venturing into autonomous technologies, unveiling Wednesday in Beijing an electric car that can park itself and be summoned to its owner’s location via smartphone.

And late last year Baidu tested China’s first locally designed driverless vehicle, a modified BMW, with a 30 kilometre ride through the streets of Beijing.

Despite China’s relatively late entry to the field, analysts believe the country could become a key market for driverless vehicles thanks to a more favourable regulatory and consumer environment.

The Boston Consulting Group (BCG) forecasts that global sales of driverless cars will reach 12 million by 2035, with more than a quarter sold in China.

Vehicles which automatically adjust their routes in response to real-time traffic information could solve chronic gridlock in China’s major cities, BCG’s Xavier Mosquet told AFP.

“If they believe this would ease traffic, Chinese authorities will do all they can to promote the development of this technology and then its use,” he said.

Robot taxis

Public concerns over the safety of driverless cars are far lower than elsewhere, according to a survey by Roland Berger consultants in 2015, which found 96 per cent of Chinese would consider an autonomous vehicle for almost all everyday driving, compared with 58 per cent of Americans and Germans.

In a country notorious for accidents, the promise of better safety through autonomous technologies could also be appealing.

The ultimate prize, say analysts, will be when mass transport firms such as taxi-hailing giant Uber, or its Chinese rival Didi, can deploy huge fleets of robot taxis.

“The real payoff for truly driverless technology will come when cars on the road are no longer owned by people, but are owned by fleet management services,” said Bill Russo, managing director of the consultancy firm Gao Feng.

“That’s where you want to think about taking the driver out of the equation. Mobility on demand is hugely popular here.”

In the Roland Berger survey, 51 per cent of Chinese car owners said they would prefer to use robot taxis rather than buy a new vehicle themselves, compared with 26 per cent of Americans.

With a ready market, China may soon become the top location for companies to refine driverless technology.

Swedish manufacturer Volvo, owned by China’s Geely since 2010, this month announced plans to test drive up to 100 of its vehicles on Chinese roads this year.

Changan, a partner of Ford, is set to roll out commercial autonomous vehicles for motorways from 2018, while mass production of driverless city cars is projected to begin in 2025.

‘Does the car choose?’

Baidu, meanwhile, says it will launch self-driving buses by 2018, which will operate on fixed routes in select cities in China.

Like Google, the internet giant already owns detailed road maps and has experience in electronic security, and a company spokeswoman told AFP it had had “very positive feedback” from the government.

But analysts are more cautious, predicting slow-moving autonomous vehicles will not appear in towns until at least 2020.

Production costs were still too high to make a robot taxi fleet viable, BCG’s Mosquet said.

“There are still many questions to be resolved” before fully autonomous vehicles can be put into public use, said Jeremy Carlson, a senior analyst for IHS.

He pointed to “chaotic traffic situations” on roads shared with cyclists and pedestrians, and less-than-adequate infrastructure.

Technology will be the first to see solutions, he said, but that still left regulation and issues around liability and insurance to be addressed.

For some, there are moral dilemmas as well.

“If you have someone jumping out in front of an autonomous car, does the car have to choose between killing that person, or swerving and crashing and killing the passenger?” asked Robin Zhu, senior analyst at Sanford C. Bernstein.

“If your car could choose to kill you, would you get in it?”

Read more at: http://phys.org/news/2016-04-chinese-firms-driverless-future.html#jCp

Bill Russo Hosts “Building a Disruption-Ready Organization” Event

Shanghai, China, March 31, 2016

Building a Disruption-Ready Organization

2016 Russell Reynolds Associates Auto Show Event

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 revolutionizing mobility needs.  The conventional hardware-centric business model is being superseded by an emerging connected, on-demand, and personalized mobility services business model.  Many Russell Reynolds Associates’ clients are top industry players contending intersection of the Automotive and Internet industries where innovations is rapidly shaping the future of mobility.

This event was a collaboration between Russell Reynolds Associates and  Gao Feng Advisory Company (www.gaofengadv.com), a pre-eminent strategy and management consulting firm with roots in China.  Gao Feng has been helping clients solve their toughest business and management issues — issues that arise in the current fast-changing, complicated and ambiguous operating environment. The topic of this session is one of the most challenging issues facing the automotive industry, and China is rapidly becoming the incubator for disruptive business model innovations focused on mobility.  However, most firms are at a loss about where to find the best talent to drive their disruptive ideas on innovation and transformation.

The discussion was focused on the future of mobility in China, and the implications for leaders who must cope with the disruptions in the China market.  The event was held on 31 March 2016 in Shanghai China.  This event series is designed to bring senior executive representatives of the China Automotive industry together to hear from and interact directly with the leaders in disruptive innovation and mobility transformation.

Topics for discussion:

  • Defining the disruption in the China context – What are the disruptive trends in today’s mobility world?
  • Helicopter view of the competitive ecosystem – What is the chaotic landscape look like and how will it evolve?
  • How should incumbents respond? Disrupting or being disrupted? – What are the internal capabilities to build? How to work with local start-ups?
  • China for the world – Will China lead to world’s development and innovation in Connected Mobility?

 

Mr. John Larsen, Director, Smart Mobility, Ford Motor Company Asia Pacific

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

Ms. Christina Xie, Senior Director, Strategy Department, Didi Chuxing

Mr. Jack Cheng, Co-Founder, Executive VP, NextEV

Mr. Kevin Harris, Co-Founder, Russell Reynolds Associates

 

Moderated by:

Mr. Bill Russo, Managing Director and Automotive Practice Leader, Gao Feng Advisory Company

Building a Disruption Ready Organization vF Microsoft PowerPoint, Today at 10.29.32 AM

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.”