Bill Russo to Deliver Keynote Speech at Electric & Hybrid Vehicle Technology Conference

Novi, Michigan, September 13-15, 2016

TBS&EVT 2016 overview.pdf (page 1 of 3) Preview, Today at 3.32.03 PM

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.

 

China’s Path to Electrification vDraft6 Microsoft PowerPoint, Today at 3.38.27 PM

Topic Outline: 

  • China has emerged as the world’s largest automotive market since 2009 and remains the growth engine of the global automotive industry.
  • The world has entered a new era since 2008, with over half of the world population now living in cities, and this increasingly urbanized world challenges the established set of paradigms for personal and commercial transportation, especially in the densely populated urban centers in China.
  • 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 new and innovative solutions and business models for personal urban  mobility
  • Shaped by several forces, China is already the largest EV market in the world and will continue to grow exponentially.  Several scenarios will be described that are shaping the market dynamicsgovernment policies, and competitive landscape.

Click here to view the conference flyer:  TBS&EVT 2016 overview

Click here to view the Day 1, Track 1 Agenda

CCTV Global Business: Bill Russo Interview on Electric Vehicles and Urban Mobility

China Central Television Global Business Program, April 25, 2016

A link to Bill Russo’s appearance on CCTV’s Global Business program.  Topics discussed were New Energy Vehicles and Urban Mobility.  Auto show news starts at 18:50. Mr. Russo’s interview starts at 27:55.

Click here to watch the program at CCTV.com

James Bond’s Favorite Car Goes Electric

NBC News, February 18, 2016

Aston Martin is going electric.

The very British car manufacturer — best known for its association with that other perfectly proportioned British export, James Bond — just inked a deal with China’s LeEco to make an electric version of the luxury car by 2018.

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Aston Martin made the announcement Thursday at a press conference in Frankfurt, adding that the cars would be manufactured at the company’s flagship plant in Gaydon, England.

LeEco, a Beijing-based tech company, said in a statement, “We have been targeting the highest standard in the auto industry in terms of design, R&D and manufacturing of our electric cars.”

China is proving to be a driving force in the creation of electric vehicles, not just providing the parts but also the innovative technology. Analysts predict that “China will be the epicenter for electrification of the auto industry globally,” said Bill Russo of Gao Feng Advisory Co., who estimates that China will invest 100 billion yuan ($15.5 billion) on new-energy vehicles by 2020.

The new RapidE car will be based on the Rapide S model, which currently retails at around $200,000. No details were disclosed as to the projected price point for the RapidE. No word either on whether it will include revolving license plates, front-wing machine guns, or an ejector seat.

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)

China Seen Laying Down $15 Billion Bet on Electric Vehicles

Bloomberg News, December 16, 2015

China to be `epicenter of electrification,’ analyst says

BYD, Zotye among biggest sellers of electric cars in China

China has found electric cars a tough sell even after lavishing consumers with subsidies and privileges. After almost certainly failing to meet a target to have half a million of such vehicles on its roads by year end, its next act is to achieve a 10-fold increase by the end of the decade.

The electric vehicles in service will fall about 26 percent short of its year-end target, according to estimates from the science ministry and state-backed auto association. To meet its 2020 goal of five million EVs, the government will speed up the construction of charging stations, reducing a major inconvenience for urban residents who don’t have personal garages to charge their cars.

“China will be the epicenter for electrification of the auto industry globally,” said Bill Russo, Shanghai-based managing director at Gao Feng Advisory Co., who estimates that China would have invested 100 billion yuan ($15.5 billion) by 2020 on new-energy vehicles.

President Xi Jinping has designated electric vehicles as a strategic initiative in a bid to upgrade the auto industry and create challengers to Toyota Motor Corp. and General Motors Co. The government is increasing spending after signs that the combination of research grants, consumer subsidies and infrastructure investments is starting to yield results. New-energy vehicle production surged fourfold to 279,200 units in the first 11 months, even as oil traded near levels last seen during the global financial crisis.

Local Winners

That has benefited automakers like BYD Co., Zoyte Auto and BAIC Motor Corp., which have led sales of electric cars. BYD, backed by Warren Buffett’s Berkshire Hathaway Inc., would have turned a loss in 2014 and this year if not for EV subsidies from the central government, according to Barclays Plc. Geely Automobile Holdings Ltd. said last month that it would target new-energy vehicles to make up 90 percent of sales by 2020.

The government incentives have lured consumers like Zhang Peng, 30, who decided to buy BAIC’s EV200 electric car after trying without success for two years to win a license plate in the bimonthly lottery held by the Beijing government. EVs are exempt from the ballot, which has worse odds than roulette.

Zhang also received 90,000 yuan in matching grants from the central and local governments, or almost half of the 208,922 yuan sticker price for BAIC’s EV200 electric car. The model costs about 7.5 yuan to run every 100 kilometers (62 miles), compared with an estimated 39 yuan for an equivalent gasoline-powered 1.6-liter Toyota Corolla, according to calculations based on the published fuel-economy rating and Beijing pump prices.

Battery Suppliers

The burgeoning demand has also helped battery suppliers such as South Korea’s Samsung SDI Co. and LG Chem Ltd., which supplies SAIC Motor Corp. and Chongqing Changan Automobile Co. Panasonic Corp. said it is considering building a car-battery factory in China to supply lithium-ion batteries.

Among local component makers, Wanxiang Qianchao Co. and Hunan Corun New Energy Co. have more than doubled in Shanghai trading this year as investors bet the surge in electric vehicle demand will boost demand. BYD has climbed 34 percent this year and Geely Automobile has surged 79 percent in Hong Kong trading, compared with the 8.4 percent decline in the benchmark Hang Seng Index.

Global automakers are beginning to get into the act. Volkswagen AG, the largest foreign carmaker by sales, has said it will introduce 15 locally produced new-energy vehicles in the next three to five years in the country. Ford Motor Co. said this month it’s investing $4.5 billion globally in electrified vehicles.

‘Foreigners Coming’

“In the initial stage it was mainly local automakers competing with each other in the electric-car segment, but now the foreign players are coming,” said Ouyang Minggao, director of the Tsinghua New Energy Vehicle Center. “All kinds of electric cars will be here soon, including plug-in hybrids, which will lead to very big challenges to local automakers.”

The Chinese government is not alone in setting aggressive targets for alternative-energy transportation. President Barack Obama in 2011 called for one million electrified vehicles in the U.S. by 2015, a target that the administration scaled back in March after low gasoline prices reduced the cost advantage of plug-in and hybrid vehicles.

China, though, has stood out in terms of the scale of the state’s financial support. The country has invested about 37 billion yuan into the new-energy vehicle segment over the past five years, according to Gao Feng’s Russo, who estimates the government will devote another 63 billion yuan by 2020.

Funding Plan

The central government released a plan on Wednesday detailing funding for local governments to construct charging facilities, tied to the number of new-energy vehicles they sell.

Automakers will have to play by China’s rules if they want a piece of the market, even if they don’t believe in electric cars. The government has mandated the lowering of average fuel consumption to 5 liters by 2020, from 6.9 liters per 100 km this year.

“There is really no choice for the automakers, if they are required to meet the more stringent emission standards by 2020,” said Steve Man, an analyst with Bloomberg Intelligence. “Other technologies with the stringent emission standards won’t get you all the way to target.”

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

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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.

Click here to read this article at businessinsider.com

 

Chinese Electric-Car Maker BYD’s Shares Plunge

The Wall Street Journal
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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 colum.murphy@wsj.com