Bill Russo to Join Future of Mobility Panel at IAA Frankfurt

Frankfurt, Germany, September 15, 2015

Gao Feng’s Managing Director and Auto Practice leader Bill Russo will join a panel discussion to discuss the Future of Mobility from 5:00 – 6:30pm at the Marriott Hotel.

Topic: How to Succeed in Digital Transformation


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An Intelligent Urban Transportation Ecosystem for China

Gao Feng Insights Report, April 2015

We are pleased to share with you a report titled: An Intelligent Urban Transportation Ecosystem for China. This new report is the product of a collaboration between Gao Feng Advisory Company and our partners at the Massachusetts Institute of Technology Media Lab. The core mission of the MIT Media Lab is to design technologies to create a better future.

China’s cities have been the engines powering its rapacious economic growth. Since 1978, China’s urban population has risen from about 18% to over 53% today, and by 2025 about two-thirds of Chinese citizens will live in cities. The 35 largest cities in China recently contributed just under half of China’s overall GDP. However, the wealth accumulated in China’s cities has come at the price of livability. Many cities are struggling with paralyzing gridlock, dangerous air quality, and widening income disparity. There is a growing recognition that the current formula for development is unsustainable, and a more balanced model is being sought.

It is precisely this set of conditions that make China the most likely platform for incubating and commercializing the innovative technologies to serve the “smart cities” of the 21st Century. After several decades of advances in the world of mobile connectivity, big data and social networks, technology is now making the commercialization of smart city transportation solutions feasible. A new “ecosystem approach” must be envisioned to deliver sustainable urban mobility. Such a system should evolve beyond conventional solutions such as private vehicles with electric power trains or bus-rapid transit. This “systems” approach instead focuses on utilizing new technologies, urban strategies, and progressive public policies to create an intermodal and interoperable mobility network that combines existing mobility systems (such as mass transit) with creative new mobility systems.

In this paper, we describe the vision and key elements of an Autonomous Mobility-on-Demand (A-MoD) System, and how a collaborative effort among Academia, Industry and Government can be leveraged to deploy a sustainable urban transportation system in China.

5 Reasons Why Tesla Is Struggling In China

Business Insider, January 15, 2015


Tesla got crushed on Wednesday, partially due to Elon Musk breaking the news that Tesla sales in China were “unexpectedly weak” in the fourth quarter.

Echoing Musk’s explanation, Tesla communications chief Ricardo Reyes told Business Insider that “misperceptions about the ease of charging Model S were the main reason for the dip” in Chinese sales.

“To clear up those misperceptions, we are explaining the ease and convenience of charging and continue expanding the charging network in the country,” he said in an email.

While Reyes said that “overall China constitutes a small percentage of our sales for now,” the stakes for Tesla’s venture into China look large. Already the world’s biggest auto market, over 22 million cars were sold there in 2013 — accounting for over 25% of the global total.

Former Tesla China chief Veronica Wu said in January 2014 that China would account for 30 to 35% of Tesla’s global sales in 2014. She resigned in December.

The number of charging stations is indeed increasing. Quartz reports that the Chinese government has built 19,000 charging sites across China, while Tesla has placed 23 of its Supercharger stations in 10 Chinese cities.

To ramp up that infrastructure, Musk has struck deals with telecom operator China Unicom and real estate developer Soho China to build over 700 charging stations in 70 Chinese cities, reportedly giving China the second-largest charging infrastructure after the US.

In talks with Chinese auto industry analysts, Business Insider has learned that Tesla has a host of commercial and cultural hurdles to overcome if it’s going to succeed in the Chinese auto market.

They include:

The early adopters have already bought their cars. “In any new product intro, you get a lot of buzz early, where early adopters run out and put their money down, and then you have a period where it’s not new anymore” explained analyst Bill Russo, who served as the VP of Northeast Asia for Chrysler before moving into consulting. “The numbers are always skewed — the easy sales are the ones you get early on.”

The early adopter pool is comparatively small. “For the people in China who bought the Model S, it’s not their first car,” argued analyst Jochen Siebert. “It’s their third or fourth car, the same set of people who would buy a Porsche 911 — there’s only a certain percent of people who want to buy this car.”

Early numbers may be inflated by “scalper” intermediaries. In the same way that scalpers re-sell football game tickets at a markup, Russo explained that a scalper economy persists for auto imports in China. “When you have a limited quantity available, scalpers run in an buy a quantity of cars early on, they flip them to end users or buyers,” he said. “You see high numbers in the early stage, but you’re not getting a clear run rate until the market reaches level of maturity.”

There’s still lots of electric car anxiety. Siebert says that with any electric vehicle in China, there’s the anxiety of “when and where will I charge my vehicle.” Plus it’s harder to do personal charging stations in the China. Quartz reported that 74% of urbanized Chinese live in apartments instead of detached homes and “park their cars in shared garages where parking operators have deemed charging stations a fire hazard.”

The consumption isn’t conspicuous enough. While it seems strange, Siebert say that one of the biggest complaints about the Model S is that it’s not sufficiently braggable. “When Chinese rich buy cars, they want to show off,” he said. The Model S is 56.5 inches tall, so it’s a fairly small vehicle. He said that “the car that Chinese love” is the muscular Porsche Cayenne SUV, which stands at 67.4 inches. Porsche sold 37,425 cars in China in 2013, and a full 26,666 of them were the Cayenne SUV — accounting for over 70% of sales.

Tesla needs to learn from that.  “The Tesla is an advertisement, but it’s not tall enough,” Siebert said. “the showoff value is too low.” Tesla has a better shot with the Model X SUV, slated to arrive in China in 2016, he said. With those upward-opening “Falcon” doors and a 64 inch height, it looks like a stronger bid to catch the eye of China’s newly rich.

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Chinese Electric-Car Maker BYD’s Shares Plunge

The Wall Street Journal
A BYD Co. electronic vehicle is charged at an EV charging station at the company’s campus in the Pingshan district of Shenzhen, China, Aug. 5, 2014. Bloomberg News
By Colum Murphy

SHANGHAI—An executive at Warren Buffett -backed BYD Co. defended its business prospects after shares in the Chinese electric-car maker fell as much as 47% on Thursday.

In a conference call late Thursday, company secretary Qian Li said BYD’s operations were normal despite the share plunge and sought to dispel what he called rumors about the company. BYD’s Hong Kong-traded shares regained some ground later Thursday and finished at 25.05 Hong Kong dollars (US$3.23), down 29%.

Mr. Li described rumors circulating in the market about BYD—including suggestions that its founder and chairman had been arrested—as “ridiculous” and urged investors to ignore them.

He also dismissed talk of BYD having large exposure to the troubled Russia market, describing the company’s investment in that country as “very small.”

BYD also produces mobile-phone components and solar panels.

Asked whether the price movement could be related to a selloff in shares by Mr. Buffett’s Berkshire Hathaway investment vehicle, Mr. Li said BYD had been in recent contact with Mr. Buffett but there was no sign that Mr. Buffett was considering a sale. He added BYD didn’t reach Mr. Buffett on Thursday due to the time difference between China and the U.S.

Berkshire Hathaway owns a roughly 9% stake in BYD, according to previous company filings, including about one-quarter of its Hong Kong-traded shares. In the Chinese city of Shenzhen, BYD’s shares fell about 10% on Thursday, the daily limit.

In October, BYD reported a third-quarter profit drop of 26% and said it expects this year’s profit to fall by up to 22%. Auto-sales growth in China has slowed in recent months amid a broader drop in China’s economic momentum.

Overall in the first 11 months of 2014, BYD has sold 384,977 vehicles, down from 458,042 vehicles sold in the same period the year before—a 16% drop, according to data from research firm IHS Automotive.

While the company frequently touts its line of electric vehicles and plug-in hybrids—vehicles that can run on both gasoline and electricity—it relies heavily on sales of traditional gasoline engine cars for the lion’s share of its automotive revenue.

Bill Russo, managing director of consulting firm Gao Feng Advisory, said BYD, like many other Chinese car brands, need to create a brand that appeals to Chinese consumers. “It has to go beyond just being a cheap car,” he said.

Mr. Li said BYD faces “hot competition” and decreasing margins in the traditional car market in China but said it was transforming into a manufacturer of new-energy vehicles.

China has a long-stated goal of reducing its dependency on imported oil by promoting new-energy vehicles, including passenger cars and buses. China wants half a million such vehicles on the road by next year and 10 times that by the end of the decade.

But in the first nine months of this year, fewer than 40,000 electric vehicles were sold in China, according to data from the government-backed China Association of Automobile Manufacturers. Around three quarters of these were passenger cars. By comparison, around 14.2 million conventional passenger cars were sold in the period.

IHS Automotive researcher Namrita Chow said the high cost of replacing batteries, lack of adequate charging infrastructure and range anxiety—where buyers worry about how far they can travel on a single charge—are all obstacles in the path to high sales growth rates.

She said that BYD had doubled sales of its pure electric e6 car to 2,203 vehicles in the first 10 months of this year compared with the same period last year. Sales for the hybrid Qin had so far reached just over 11,000 vehicles in its first year on sale.

Mr. Li dismissed talk that the Chinese government could be reducing its support of new-energy vehicles, including buses, saying BYD continued to see good order flow for them. “We’re confident on the future of electric buses,” Mr. Li said.

A nearly 50% drop in oil prices over the past six months has pressured green stocks in a number of areas.

“With the oil price down, the global outlook for electric vehicles looks very different from just a couple of months ago,” said Jochen Siebert, a Shanghai-based managing director at JSC Automotive Consulting. “BYD’s electric and hybrid car business will likely be impacted,” he added.

Write to Colum Murphy at