Bill Russo Speaks at 22nd CLSA China Forum

Tianjin, China, May 15, 2017

Title: China’s Auto Industry in the Age of Disruption  – The Birth of the “Automobility” Business Model


For global automakers and their suppliers, China represents the greatest opportunity for growth in the 21st century.  Since 2009, China has been the world’s largest market by volume, and surpassed 28 million units in annual car sales in 2016.  Over the coming decades, we believe that China will remain the key battleground for dominance of the global auto industry.  However, this battle will not be waged using the conventional automotive technologies which have been refined over the past century.  We believe several driving forces, which are particularly evident China, have the potential to disrupt the status quo of the automotive industry:

Bill Russo, managing director of Gao Feng Advisory Company, presents on Day 1 of the 22nd CLSA China Forum at The Ritz-Carlton, Tianjin on Monday 15 May.
  • The unique context of China’s urban transportation challenge, the high penetrationrate of mobile internet, combined with the rapid and aggressive introduction of alternative mobility and ownership concepts, are compressing the time needed to commercialize smart, connected car technology and related services.
  • The automotive value chain is being disruptedby non-traditional players as they enter and compete to deliver mobility solutions.  Disruptive new entrants are utilizing big data to draw insights about customers’ mobility patterns in order to address their “pain points” and offer new solutions for their mobility needs.  Such mobility needs are increasingly being met through on-demand and shared services versus individual ownership.

It is the confluence of these forces, along with rapid innovation to address “pain points” associated with mobility in the China context, are positioning China as the catalyst to drive the transformation of the business model and technological underpinnings of the global auto industry.  In this course, we highlight the major disruptions that lie in the path to success in China’s automotive industry, including:

  1. The rapid rise of on-demand mobility and the digital mobility ecosystem
  2. The link between hardware innovation and the economics of the digital ecosystem
  3. The explosive growth of aftermarket services and the emergence of the Independent Aftermarket (IAM) and online-to-offline (O2O) channel

Bill Russo Commentary on Automotive Industry Mid to Long Term Development Plan

China Global Television Network, April 25, 2017

China’s automotive industry is entering a period where discontinuities and disruptions are likely to change the competitive landscape – and this represents an opportune time to guide the development in alignment with China’s overall industrial development.  With the issuance in April 2017 of the Automotive Industry Mid to Long Term Development Plan, the Ministry for Industry and Information Technology (MIIT) provides “guiding principles” for the development of China’s auto industry for next decade.

Bill Russo was a guest on CGTN’s China 24 program to discuss these developments.  His interview appears at the 28th minute of the program.

Click here to view the China 24 program

Chinese Billionaire Adopts English Name in Bid to Sell More SUVs

Bloomberg News, April 18, 2017

Most auto executives have reasons to feel at ease after hitting the one-million annual sales mark in China, an exclusive club that includes General Motors Co. and Volkswagen AG. For Great Wall Motor Co.’s Wei Jianjun, the feat stoked fears that the SUV maker may be doomed.

Wei Jianjun

That’s because history is littered with companies that grew big but eventually failed because their products became a commodity and lacked the star power to create clamor among customers, according to the chairman of the manufacturer that has kept a 14-year streak as China’s top SUV seller.

“Moving up is testimony of a company’s strength; if you can’t, you’ll disappear the way Nokia did after Apple muscled in on their turf,” Wei said during a recent interview in Hong Kong, as he recalled how the iPhone maker upended the mobile-phone industry and eventually toppled the erstwhile Finnish leader.

Wei’s paranoia signals the maturing of the world’s largest auto market, where an increasingly sophisticated middle class is no longer satisfied with cheap, me-too products. China’s more successful homegrown automakers, also including Zhejiang Geely Holding Group Co. — the owner of Volvo Cars — and BYD Co., have embarked on efforts to burnish their nameplates in the belief that with more than 100 brands competing for buyers, the fight will be won by those who look beyond price competition to create income streams from products with higher profit margins.

Premium Nameplate

For Great Wall’s Wei, it turns out, the effort also involves adopting the English name “Jack Wey” and creating the premium nameplate “WEY.” Sales of the brand’s first model that has features such as a warning system for lane changes are set to begin at the Shanghai auto show this week, and another three models will be added this year, Wei said.

Wei, a native of Baoding born in 1964, has built Great Wall into China’s top seller of SUVs without leaning on any foreign partners, and by offering consumers spacious models at cheaper prices than sedans such as Volkswagen’s Passat and GM’s Buick. That strategy helped boost deliveries to a record 1.07 million units last year, outpacing industrywide growth.

At 26 — and after several factory jobs — Wei took over a small car-modification business and turned it into a van maker. He later shifted focus to pickup trucks after witnessing their popularity in Thailand. Small business owners and farmers turned Great Wall’s Deer into China’s most popular pickup brand by 1998. And in 2002, he rolled out the first Haval SUV model. The popular Haval H6 accounted for more than half of the company’s deliveries last year.

The idea for going upscale came just over four years ago when branding guru Al Ries, chairman of the Atlanta-based market-strategy firm Ries & Ries that counts Microsoft Corp. and Ford Motor Co. among its clients, advised Wei to create a separate brand. “Jack Wey” would help foreigners get around the difficulty of pronouncing Wei’s name in Chinese, Wei was told.

Staying Competitive

“A new idea requires a new brand name. To keep a company competitive in the future requires a constant launch of new concepts,” said Ries. “The future belongs to multiple brand companies, not single-brand companies.”

As Chinese consumers shift their tastes away from sedans, demand for roomier SUVs is surging, with such vehicles accounting for 37 percent of the total sales last year, up from 5.7 percent a decade ago. Still, the introduction of WEY comes at a time when new models are flooding the market. PSA Group to Hyundai Motor Co. are boosting their lineup in the segment. Geely, owned by billionaire Li Shufu, will start selling the first SUV model under its new upscale Lynk & Co. from the fourth quarter, using the same platform adopted by affiliate Volvo Cars.

“We added WEY brand to prepare for the SUV market to enter the price competition era,” said Wei, who has a net worth of $5.3 billion, according to the Bloomberg Billionaires Index. “Sales of WEY brand cars will bring us higher profit margins and with the rising sales volume, it will make bigger contribution to Great Wall’s bottom line.”

Shares of Great Wall fell 2.2 percent to HK$8.91 as of 3:19 p.m. in Hong Kong. The benchmark Hang Seng Index declined 1.1 percent.

Target Buyers

WEY carries features usually found in more-expensive foreign models, such as a cruise control that maintains a safe distance from the car ahead. The marque targets buyers who patronize brands such as Kate Spade, Calvin Klein and DKNY, according to Wei.

Wei estimates the new brand will have a gross profit margin of about 27 percent. Great Wall is more profitable than some of its peers including General Motors and Volkswagen.

“Even successful mass-market players like Hyundai have struggled to add brands above their mainstream brand,” said Bill Russo, managing director of Gao Feng Advisory Co. and a former head of Fiat Chrysler Automobiles NV’s Chrysler unit in China. “In the age of hardware commoditization, he will need a key feature to attract upscale consumers or a unique selling proposition. The odds are against him, but he’s beaten the odds so far.”

Great Wall is targeting to sell 56,000 units of WEY brand vehicles this year, competing with Toyota Motor Corp.’s RAV-4, Honda Motor Co.’s CRV and Volkswagen’s Tiguan SUVs. The first model will be priced in the 150,000 yuan to 200,000 yuan ($22,000 to $29,000) range, according to Wei. That would put the vehicle in the same bracket as Great Wall’s H8 and H9 models.

Wei, who rues the fact that his company didn’t change its strategy quickly enough to focus only on SUVs, isn’t satisfied with being leader in the segment just at home. Great Wall is in the process of selecting a site in the U.S. to assemble Haval vehicles after reviewing an earlier plan for Mexico. Wei wants Haval to surpass Jeep and Land Rover becoming the world’s biggest SUV brand by 2020 and Haval H6 to become the global No. 1 by then.

“By counting on a strong domestic market, we will develop our global business and build our brands into global ones,” Wei said. “It’s a huge challenge and a golden opportunity as well.”

— With assistance by Tian Ying

 

Feeling Pressed by Beijing, Auto Makers Set Plans to Build Electric Cars in China

The Wall Street Journal, April 21, 2017

Consumer demand, availability of batteries are some of the manufacturers’ concern

SHANGHAI—The world’s top auto makers are gearing up to build electric cars in China, despite concerns about market demand and the potential their technology could be compromised in a market with weak safeguards for intellectual property.

Companies including Volkswagen AG , General Motors Co. and Toyota Motor Corp. set out plans for electric-car production in China at this week’s Auto Shanghai vehicle expo, bowing to pressure from Beijing.

China is the world’s largest market for electric vehicles, or EVs, and auto makers who don’t set up production here could find themselves shut out of it.

Even so, some admit privately to being anxious about opaque regulations governing battery production and technology transfer, and misgivings about near-term demand for battery-powered cars.

GM, for example, confirmed it would build a Buick version of the plug-in hybrid Chevrolet Volt in China with its local partner, SAIC Motor. But Mark Reuss, GM’s product-development chief, sounded less than bullish when asked if there was genuine demand for EVs in China.

“I think there could be,” Mr. Reuss said.

Ultimately, the indispensability of China’s auto market meant it was “manifest destiny” that foreign auto makers would agree to set up electric-car plants in China sooner or later, said Bill Russo, Shanghai-based managing director at consultancy Gao Feng Advisory.

Tesla Inc., which didn’t attend Auto Shanghai, is now almost alone in having not yet lined up to confirm plans to manufacture electric cars in China. Even Toyota, which previously rejected the EV technology in favor of hybrids and fuel-cell vehicles, said it would ramp up EV development.

An estimated 350,000 EVs were sold here last year, roughly half the global total. Most analysts expect the market to grow especially quickly as China moves to reduce air pollution from gas-powered vehicles and offers incentives for consumers to buy EVs.

Auto makers are unsure about demand, however, fueling concerns that they may need to offer big discounts to move inventory. Automotive Foresight, a Shanghai-based research company, estimates 650,000 to 2 million electric and plug-in hybrid vehicles will be sold in China in 2020, out of an estimated 26 million car sales over all that year.

At the auto show, Toyota’s senior managing officer, Hiroji Onishi, told reporters he felt “skepticism [about] whether the consumers would still want to buy EVs” once subsidies disappear, which is expected to occur about 2020.

Building cars locally makes it far easier to generate sales, since China slaps a 25% tariff on imported cars. But, profits from locally built cars must be shared with a Chinese joint venture partner.

Last month the European Chamber of Commerce in Beijing attacked Chinese industrial policies, questioning a new EV manufacturing law that calls for foreign auto makers to demonstrate their green-car technology before they can build them in China.

The law could just be a ploy to get foreign car makers to reveal technology secrets to their local Chinese partners, the chamber warned. China’s industry and information technology minister Miao Wei rejected that interpretation, and assured foreign manufacturers last month that they would not be compelled to hand over intellectual property.

Volkswagen China Chief Executive Jochem Heizmann said he was sufficiently reassured by Mr. Miao’s remarks to push ahead with an EV “offensive” involving the local production of eight plug-in hybrid or pure electric models, including a mass-market vehicle set to enter production next year through a new joint venture with Anhui Jianghuai Automobile Co. Mr. Heizmann said Volkswagen aims to sell 1.5 million green cars in China by 2025.

GM’s target is more modest, at 500,000 by 2025. Even so, GM’s commitment now contrasts with the reluctance voiced by then-chief executive Dan Akerson back in 2011. Mr. Akerson said “technology risks” meant GM would hold back from building the then-new Volt in China, even if it meant missing out on government incentives.

Batteries are among the technology risks that some auto makers say still remain in China. Chinese regulations require that EVs built here use batteries made in China, but as yet no foreign maker of EV batteries has received certification.

Earlier this month Ford Motor Co. said it, too, would start building EVs in China. The company aims to use batteries produced by Panasonic Corp. , said Trevor Worthington, Ford’s vice president for product development in Asia. He dismissed concerns expressed privately by some auto makers that China might shut out foreign battery makers, saying that would contravene World Trade Organization rules.

Write to Trefor Moss at Trefor.Moss@wsj.com and Mike Colias at Mike.Colias@wsj.com

Click here to read this article at WSJ.com

Ford to Make Electric Cars in China Amid Green Drive

The Wall Street Journal, April 7, 2017

The U.S. auto maker plans to build the Mondeo Energi plug-in hybrid and a new all-electric SUV in China

Ford Motor will start manufacturing electric vehicles in China next year.
PHOTO: ANDREY RUDAKOV/BLOOMBERG NEWS

By TREFOR MOSS

SHANGHAI— Ford Motor Co. F -0.35% said Thursday that it would start building electric cars in China to tap into a state-sponsored boom in green-energy vehicles.

In doing so, the Detroit-based company signaled that it had swallowed industry concerns about bringing proprietary electric-car technology to China, despite misgivings among foreign auto makers about intellectual-property protection in the world’s largest auto market.

“It’s manifest destiny” for foreign car makers to get past those fears and start building electric cars in China, said Bill Russo, managing director of Gao Feng Advisory, a Shanghai consulting firm.

Mass uptake of electric vehicles is set to happen in China first, he said, “and none of those companies can afford not to be relevant to the future of their industry.”

Ford’s local joint venture Changan Ford Automobile Co. will start building the Mondeo Energi plug-in hybrid vehicle in China next year, with a new all-electric sport-utility vehicle set to follow within five years, the company said in a statement.

Electric powertrains will be manufactured locally by 2020, and by 2025 all of Changan Ford’s vehicles will come in electrified versions, it said.

“The time is right for Ford to expand our EV lineup and investments in China,” said Chief Executive Mark Fields.

China is already the world’s largest market for electric vehicles, with over half a million electric or hybrid cars sold there last year, according to the China Association of Automobile Manufacturers.

The government is encouraging their uptake by heavily subsidizing electric cars through payments to manufacturers, which are then able to sell EVs more cheaply. It is also far easier to obtain a license plate for an EV than for a traditional gasoline car in congested cities like Beijing and Shanghai.

Local authorities have also set ambitious targets for electrifying bus and taxi fleets over the next few years, and for the rollout of EV charging facilities.

There could be as many as 32 million new energy vehicles in China by 2025, according to Gao Feng Advisory—a total that is likely to be a substantial share of the global fleet, with uptake of EVs in the U.S. and Europe happening more slowly.

Yet while most gasoline cars sold in China are built by foreign auto makers operating through local joint ventures, almost all of the electric cars sold in China last year were made by Chinese companies operating without foreign input.

Silicon Valley electric-car maker Tesla Inc. was the one notable exception: Without disclosing how many cars it had sold, the company said in a March 1 filing that its 2016 revenue topped $1 billion in China for the first time last year, leading auto-industry analysts to estimate China sales of around 11,000 imported vehicles. Chinese tech company Tencent Holdings Ltd. last week revealed it had taken a 5% stake in Tesla.

Imported cars incur a 25% tariff, making them less competitive, and so auto makers naturally want to build in China, said Michael Dunne of Hong Kong-based Dunne Automotive. But they have been holding out for some relaxation of China’s strict joint-venture rules before committing to large-scale EV manufacturing in China, he said.

Foreign car makers and the Chinese authorities have been “sitting around the poker table”, said Mr. Dunne.

It’s the foreign car makers who appear to have blinked.

In March, Buick, a unit of General Motors Co. , announced plans to start building plug-in hybrid and electric vehicles in China. Last year, GM said it wanted to have 10 new energy vehicles in China by 2020, though it has yet to reveal any plans to start manufacturing its highest-profile EV, the Chevrolet Bolt, in the country.

Last year, Volkswagen AG said it was in talks with local car maker China Anhui Jianghuai Automobile Co. about setting up a joint venture to build EVs.

Write to Trefor Moss at Trefor.Moss@wsj.com

Appeared in the Apr. 07, 2017, print edition as ‘Ford Plans Electric Vehicles In China.’

China approves Geely subsidiary’s EV production plan

Bloomberg News | March 7, 2017

China approved the electric vehicle production plan of a company owned by Zhejiang Geely Holding Group Co., under a special program originally conceived to encourage technology startups to develop EVs.

Ninghai Zhidou Electric Vehicles Co. received permission from the National Development and Reform Commission to invest in a new assembly plant to produce 40,000 electric cars a year, according to the agency’s website.

A total of 880 million yuan ($128 million) will be invested in the plant in Lanzhou in northwestern China, part of parent Geely’s plan to develop EVs, said spokesman Yang Sumi.

“It’s an experiment and Chinese companies use such investments to learn from the market,” said Bill Russo, managing director of Gao Feng Advisory Co. “In an era of disruption, it’s best to move quickly and learn rather than try to make a perfect plan and never actually get it done.”

The Geely subsidiary is the 11th company to get approval to produce EVs under a program started in 2015 to encourage new participants in the EV industry.

Geely, of Hangzhou, owns Volvo Car Corp. and is introducing an upscale brand called Lynk & CO. The company has said it wants 90 percent of its deliveries by 2020 to be generated by sales of conventional hybrids, plug-in hybrids and battery-electric vehicles.

All companies that have received permission under the National Development and Reform Commission program so far are owned by automakers, parts manufacturers and companies in auto-related fields. Technology firms such as LeEco, NextEV Inc. and Singulato Motors have yet to make the list, despite raising billions from investors with ambitions to become China’s next Tesla Inc.

China’s thriving SUV-only automaker looks to global growth

ASSOCIATED PRESS  / Feb 22, 2017, 03:06 AM

By JOE McDONALD AP Business Writer

In this photo, taken, Feb. 19, 2017, a worker assembles a Haval SUV H3 model at the Great Wall Motors assembly plant in Baoding in north China’s Hebei province. Great Wall Motors became China’s most profitable automaker by making almost nothing but low-priced SUVs. Now it wants to expand into global markets. (Photo by ANDY WONG/AP)

BAODING, China (AP) — Wei Jianjun is the chief matchmaker in China’s love affair with the SUV.

A decade ago, the chairman of Great Wall Motors Ltd. saw opportunity as the bulky vehicles began shedding their image in China as a farm tool. Wei cut back on making sedans and poured resources into its fledgling line of Havals.

That gamble paid off as SUVs caught on with drivers who saw them as the safest ride on bumpy, chaotic streets. By 2013, with demand surging, Great Wall had become China’s most profitable automaker and Wei was a billionaire.

Now, Wei wants to make the Haval a global brand. It’s an ambitious goal that requires advances in safety and features for a company known until now mainly for low prices. Great Wall sells Havals in Australia, Italy and Russia, but exports were less than 5 percent of last year’s output of just under 1.1 million units.

“By 2020, we hope Haval can become the world’s biggest specialty SUV brand,” Wei said at a reception at Great Wall headquarters in this city southwest of Beijing to celebrate sales passing the 1 million mark.

That “globalization strategy” includes working toward meeting American safety standards, Wei said. But he gave no indication when Haval might export to the United States or major European markets such as Germany.

Great Wall is part of a cadre of small but ambitious independent Chinese automakers that grew in the shadow of state-owned giants such as Shanghai Automotive Industries Corp., which assembles vehicles for General Motors Co. and Volkswagen AG.

Without foreign joint-venture partners, the independents created their own brands and started exporting to Africa and Latin America.

Geely Holding Ltd., which owns Sweden’s Volvo Cars, plans to start U.S. and European sales of its new Lynk & Co. brand in 2019. BYD Auto, the world’s biggest-selling electric car maker, supplies battery-powered buses and taxis in the United States and Europe. Great Wall opened a European assembly plant in Bulgaria in 2012. It has similar facilities with local partners in Russia, Indonesia, Iran, Egypt and Ecuador.

SUVs have an outsized role in China, where their popularity has helped offset sagging demand for sedans and other vehicles.

Sales of domestic brand SUVs soared 58 percent last year to 5.3 million units out of total sales of 24.4 million in the world’s biggest auto market. They are growing fastest in the lowest price ranges, dominated by Haval and Chinese rivals. That has helped Chinese brands to claw back market share they were losing to global competitors.

The top seller was Haval’s flagship H6, starting at 89,000 yuan ($12,900), which has become China’s most popular vehicle to date. H6 sales surged 55 percent last year to 580,000 units while the overall market grew 15 percent.

“They are definitely one of the most successful car companies in China,” said Yale Zhang, managing director of Automotive Foresight, a research firm.

“This company has some very special strengths,” Zhang said. “Of course, it also has weaknesses, because their products are focused on one model. But they are correcting that. They have tried very hard to cultivate another star product.”

Great Wall’s 2016 profit rose 31 percent to 10.5 billion yuan ($1.5 billion) on revenue of 98.6 billion yuan ($14.4 billion). Wei, 52, ranked No. 36 on the year’s Hurun List of China’s richest entrepreneurs, with a fortune estimated at $5.9 billion.

Begun in the 1980s as a collective that repaired and modified vehicles, Great Wall was bleeding cash when Wei, then 26, left his father’s business making industrial machinery and signed a deal in 1990 to take it over and share profits with the collective’s members.

The company launched a sedan in 1993. Its popular Deer brand pickup trucks were its first hit, in the late ’90s.

Its CEO, Wang Fengying, is a former saleswoman who worked her way up the ranks, becoming the first woman to lead an automaker a decade before GM Chairman and CEO Mary Barra.

Wei has a reputation for military-style discipline.

“He wants a quick decision and a thorough execution,” Zhang said. “This style is very different from large automotive companies, which can be a huge bureaucracy. This company definitely doesn’t have that weakness.”

Most of Great Wall’s 60,000 employees work at its Baoding factory complex, a 13-square-kilometer (5-square-mile) mini-city of assembly lines and workshops in long, pale yellow two- and three-story buildings.

A test track that wraps around the complex is banked to allow drivers to push vehicles to over 200 kph (125 mph).

“It’s an orderly, organized, very disciplined operation,” said Bill Russo, managing director of research firm Gao Feng Advisory. “You think, this isn’t China; this is what I would expect to see in Switzerland or Germany.”

Wei has emphasized product quality, in one case hiring Korean auto industry veterans to show Great Wall how to make better body panels, according to Russo, a former Chrysler executive. That has paid off by raising Haval’s image from entry-level to a mass-market brand that can charge higher prices.

“They have cracked that glass ceiling,” said Russo. “Their quality level is better than the basic Chinese car companies.”

Still, Great Wall’s market is increasingly crowded as Chinese rivals roll out dozens of new SUVs. Global brands including VW and GM are preparing to invade Haval’s segment with their own low-cost models.

Competitive pressures have reached a “deep red level,” Wei said.

The company is responding by trying to move up-market.

Haval opened a Shanghai design studio in 2013 and a Technology Center in Baoding, housed in a sleek glass tower with reflecting pools and a 23-story lobby. It includes engineering workshops, a wind tunnel and a low-pressure chamber that can mimic operating conditions up to 5,000 meters (16,500 feet) in altitude.

In November, Great Wall unveiled a premium brand, Wey, an alternate spelling of Wei’s name. It has yet to say how it will attract buyers to models expected to be priced above 200,000 yuan ($29,000).

Haval has struggled to lure drivers to its higher-priced models, such as its top-of-the-line H9, a seven-seater starting at 210,000 yuan ($30,600), that sold just 11,500 units last year. The H8, another full-size model, sold only 7,500 units.

In November, the company rolled out an updated H6, designed by a 50-member team led by Pierre Leclercq, a Belgian-born BMW veteran.

“The H6 is an extremely important product for us,” said Leclercq, the company’s senior vice president for design.

The company’s next rising star is the H2, a four-seat compact SUV that sold 197,000 units last year. But it starts at 87,000 yuan ($12,700), a step down in price instead of toward a higher market segment.

Great Wall also faces pressure from Chinese government rules that require improved fuel efficiency by 2020. That will hurt brands such as Haval that lack smaller models to improve the average of their product lineup.

In response, Great Wall has developed an electric car, the C30 EV, a compact sedan it says can go 200 kilometers (120 miles) on one charge. The company has yet to say when it might go on sale.

Your future driving experience: Q&A with auto expert, Bill Russo

DRIVE:  Nissan Intelligent Mobility for your ride

Click here to view the original DRIVE publication

Few observers of the evolution of the automotive scene have had a better vantage point than Bill Russo. With more than 30 years in the industry — half of that time as an auto executive with experience in China and Asia — Russo nowadays heads up the Automotive practice for Gao Feng Greater China, working as the company’s senior representative in Shanghai. We spoke with Bill recently for our third installment of our Q&A series to get his take on the impact of autonomous driving and the emergence of smart vehicles on the roads.

Q: How will the driving experience change in the Autonomous Age?

A: The potential is there for a complete redefinition of what we mean by transportation, both in terms of comfort and convenience. With the advent of autonomous driving, we’re talking about a transition from a device where we really had to focus on the road — because we were the brains of the car — to where we can focus on other things. That is time given back to us that will allow us to do other things because we won’t have to monitor what’s going on with the vehicle itself.


Q: Thinking back to how the public reacted to other major technology shifts in transportation, such as trains or commercial aviation – To what extent were these shifts driven by the user-convenience factor?

A: When you look back in history, the greatest inventions by humans — the wheel, the bicycle, the steam ship, the train, the airplane — they all exist to give us the ability to travel over increasingly greater distances. Over time, each invention added more convenience and more new features to make the experience of mobility much more enjoyable and less painless. And as each of these solutions became commercially viable and affordable, they did so by offering users a benefit versus whatever preceding form of transportation they had favored up to that point―a benefit for which they were willing to pay.


Q: How important was the pace of technological progress?

A: It’s not about creating a technology for the sake of having the technology; it’s about providing a more comfortable and convenient way for people to travel the distances that we travel each day. They have to provide a tangible benefit for people to be willing to pay and use the new mode of transport. For example, trains reduced the amount of time that it took to travel across the country from months to days. The commercial airplane reduces that same time to a matter of hours. We can circle the world in a jet in little more than a day. Not so long ago, in historical terms, that journey took people years in a boat and they may not even have lived to tell the story.


Q: Where do cars fit in the historical narrative?

A: The car became a primary means for the average person to satisfy their daily needs for mobility. We’ve designed city and transportation networks that were basically designed for vehicular transportation. In the 21st century, we’re seeing a phenomenon — particularly in emerging markets in Asia — where there are now very densely populated urban centers. That urbanized context is not really well suited for the car that we know today. Today’s cars are designed really for highway transportation. So in an increasingly urbanized world, we’re going to experience the next evolution of convenience and mobility which I think will be an autonomous mobility solution.


Q: Will perceptions of autonomous driving vary by country due to local conditions?

A: Absolutely. First of all, comfort and convenience are solutions to mobility “pain points” and the degree to which people experience pain points varies greatly based upon where they live. Mobility pain is much higher in densely populated cities, like New York or Paris or Delhi — and virtually all major cities in China. A city like Beijing experiences gridlock several times a day. And the driving experience in a highly urbanized country like China can be horrific. You can spend an hour going less than 10 miles in a car. So the joy of being behind the wheel and driving is not really there. It’s a big difference from the driving experience of getting out on the open highway. New forms of electric and autonomous mobility―like the advent of on-demand mobility where a user pays only for the time they are in the car, rather than owning it 24/7 and using it only seldom — will be a common solution to address the mobility pain points in many places.


Q: What does it mean when we have autonomous vehicles on the road that are designed from a user-centric perspective
 as opposed to the current driver-centric mindset?

A: With autonomous cars, we will be able to transform travel time into productive time — especially for longer distance commutes. There’s the potential to participate in the digital ecosystem, offering users in autonomous cars access to services and content that they can consume while mobile. Convenience services could include infotainment or watching news or doing emails and conference calls. The car thus becomes a connected rolling space that transports us to places where we live, work, and play.


Q: As autonomous technology removes the drudgery of mundane tasks associated with driving, how does that reshape how we relate to vehicles?

A: Vehicles will have the intelligence to diagnose the situations that they’re in and make the more complex decisions that human beings today make. That not only reduces the pain points of driving, it also is going to make the overall experience more convenient, safer, and enjoyable for the occupants.


With autonomous driving, we’re arriving at a point where we can define a new paradigm that refocuses how the passenger conducts and uses their transportation time. Observing what happens outside of the car, for instance, moves from being a requirement to a choice. You don’t have to look outside the window any longer. You can — if that’s what you want to do. But you really don’t have to concern yourself with what you see outside. It’s like being an airline passenger looking out the window. You can look out the window but do you really need to?


Think about the “cockpit” space that’s now allocated in vehicles for the purpose of giving drivers information they need to make decisions. You can repurpose all of that from a driver-passenger perspective to a connected user perspective. You will be able to provide people display space that allows them a more productive use of information that they may need to go about their day. While the purpose of the car doesn’t change — it’s still a transportation system — this new concept of how to offer a convenience-oriented autonomous vehicle to the occupant(s) is different.

For more stories, please visit our page on Medium.com, https://medium.com/drive-publication

About Nissan Motor Co., Ltd. 
Nissan is a global full-line vehicle manufacturer that sells more than 60 models under the Nissan, Infiniti and Datsun brands. In fiscal year 2015, the company sold more than 5.4 million vehicles globally, generating revenue of 12.2 trillion yen. Nissan engineers, manufactures and markets the world’s best-selling all-electric vehicle in history, the Nissan LEAF. Nissan’s global headquarters in Yokohama, Japan manages operations in six regions: ASEAN & Oceania; Africa, Middle East & India; China; Europe; Latin America and North America. Nissan has been partnered with French manufacturer Renault since 1999 and Mitsubishi Motors since 2016 under the Renault-Nissan Alliance.

China’s Answer to Tesla Is Hopeful Entrant to Global Car Market

The New York Times, January 26, 2017

Lu Qun, chairman of Qiantu Motor, in Beijing in December.

by Michael Schuman

BEIJING — On a windswept lot near Beijing’s main airport, Lu Qun talks up the electric sports car he hopes will transform him into China’s Elon Musk.

“This is a real performance car,” the entrepreneur boasted of his sleek, gray-and-black Qiantu K50. “It’s fun. You can feel the quality. You’ll love driving this car.”

For Mr. Lu, 48, the roadster is his best chance to make it big. After a lifetime of obscurity creating vehicles for other companies, the bespectacled engineer is betting that the rise of electric cars will propel his company — and his country — into the automotive spotlight.

“Traditional auto manufacturers are constrained by their old models,” he said. “We can see things with fresh eyes.”

Across China, government officials, corporate executives, private investors and newcomers like Mr. Lu are in a headlong rush to develop a domestic electric car industry. The country’s goal, like Mr. Lu’s, is to capitalize on the transition to electric to turbocharge the country’s lagging automobile sector to become a major competitor to the United States, Japan and Germany.

That has been a goal of China’s industrial planners for decades, as the government has lavished resources on building homegrown automakers and discriminated against foreign players.

But so far, that effort has failed.

Local manufacturers have lacked the brands, technology and managerial heft to outmaneuver their established rivals, either at home or abroad. Chinese consumers have preferred more reliable Buicks, Volkswagens and Toyotas to the often substandard offerings from domestic manufacturers, while little-known Chinese models have struggled to gain traction overseas.

Electric vehicles could offer a second chance — one China’s policy makers do not intend to miss.

They targeted electric cars for special support in an industrial policy called “Made in China 2025,” which aims to foster upgraded, technologically advanced manufacturing. By 2020, Beijing expects its automakers to be able to churn out two million electric and hybrid vehicles annually — six times the number produced in 2015.

This time, China’s carmakers may be better positioned. Since electric vehicles are a relatively new business for all players, Chinese manufacturers and international rivals are largely starting from the same point.

“There is a smaller gap between where China is today and the rest of the world” in electric cars, said Bill Russo, managing director at Gao Feng Advisory, a Shanghai consultancy, and a former Chrysler executive. “There is room for newer start-up companies to dream big in China.”

Mr. Lu is one of those dreamers.

Fascinated by cars since he was a boy, he studied automotive engineering at Beijing’s prestigious Tsinghua University. Upon graduating in 1990, he joined the research and development team at the China-based joint venture of Jeep, then a division of Chrysler.

During his time there, which included two years in Detroit, Mr. Lu came to feel such overseas operations had limited prospects in China — the ventures’ partners would try to balance their interests, and so were slow to develop strategies and make decisions.

So in 2003, he and nine colleagues started CH-Auto Technology Corporation as a specialty research and design shop for the local car industry. Since then, the firm has designed vehicles for some of China’s biggest automakers.

Mr. Lu decided to start manufacturing his own vehicles because of the shift to electric. Since producing electric cars requires new parts and technologies, he believed a small entrant could better compete with these new vehicles than traditional automakers.

“Electric vehicles won’t just replace cars with conventional engines, but they will bring a huge change to the entire car industry,” Mr. Lu said. “We wanted to be part of this revolution.”

The result is the K50. Designed at his research center, the two-seater has a light, carbon fiber exterior and a console stuffed with touch screens. Rows of batteries propel the roadster to a top speed of about 120 miles per hour and carry it as far as 200 miles on a single charge.

No longer content to watch others produce his designs, Mr. Lu is currently constructing a $300 million factory in Suzhou, a city near Shanghai, to manufacture 50,000 cars a year. In all, he expects to invest as much as $1.4 billion into his venture over five years.

He did not specify what the car would sell for, but Mr. Lu intends to price the K50 at the top of the market when it goes on sale this year.

That sets CH-Auto on a collision course with the industry’s flagship: Tesla.

Elon Musk’s company already has an edge. While Mr. Lu is building his business from scratch, Tesla has been established in China since 2013. CH-Auto will have to persuade wealthy customers to plunk down a large sum on an unfamiliar brand — Qiantu — over Mr. Musk’s recognizable models.

Mr. Lu nevertheless remains confident. He argues the sporty K50 will appeal to a more leisure-oriented driver than Tesla’s cars. As a logo, the company has chosen the dragonfly, because its managers believe the speedy, nimble insect has similar attributes to his electric car. To market it, Mr. Lu is considering opening showrooms in major Chinese cities, backed by a platform to sell online.

Elon Musk “is someone I can learn from,” he said. “Tesla has huge symbolic significance because it is the first company to make people believe a business model solely around electric vehicles is possible.”

But, he added, “we are not looking to create the Chinese Tesla.”

When it comes to competing with Tesla, Mr. Lu can count on ample help from the Chinese government.

To bring down costs and spur demand, the state has unleashed a torrent of cash. It has offered subsidies to manufacturers and tax breaks for buyers, and plowed investments into charging stations to make electric cars more practical.

In all, UBS Securities estimates that the government spent $13 billion promoting electric vehicles in 2015 alone. So far, Mr. Lu has financed the K50 through loans and injections of fresh capital, but says he “won’t refuse” government subsidies if they become available.

Some analysts fear the state’s largess could prove as much bane as boon.

China may be recreating the waste and excess in electric cars that has plagued other state-targeted sectors, like steel and renewable energy, without spurring the technological innovation the economy needs to compete. And even though China’s car market is the world’s biggest, it is still unlikely to absorb all of the electric vehicle projects underway today.

“They are fueling overcapacity, with a lot of wasted money, and I’m doubtful that in the end you’ll have a successful electric car industry,” says Crystal Chang, a lecturer at the University of California, Berkeley who studies China’s auto industry policies.

Significant sums have already been squandered. In September, the Finance Ministry fined five companies for defrauding the government of $150 million by fabricating sales of electric vehicles to obtain more subsidies, and several companies have failed to make an impression.

Mr. Lu is certain, however, that the K50 stands out in a crowded field. The car has already gotten some advance buzz; a review on one popular Chinese website praised its design as “beautiful” and “avant-garde” and its body as “very muscular.”

“A big advantage they have is their knowledge of what it takes to build a quality vehicle,” said Jack Perkowski, managing partner of the Beijing-based consulting firm JFP Holdings and a veteran of China’s car sector. “They have a better chance than many others because of that.”

Mr. Lu is counting on it.

“There are a lot of electric vehicle companies and hot projects attracting a lot of money,” he said. “Not every company and not every car will be successful.”