Bloomberg Television, April 10, 2017
Bill Russo, managing director at Gao Feng Advisory, discusses Ford introducing pickup trucks in China and the outlook for the Chinese auto market. He speaks to Bloomberg’s David Ingles on “Bloomberg Markets.”
Bloomberg Television, April 10, 2017
Bill Russo, managing director at Gao Feng Advisory, discusses Ford introducing pickup trucks in China and the outlook for the Chinese auto market. He speaks to Bloomberg’s David Ingles on “Bloomberg Markets.”
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.
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.
DRIVE: Nissan Intelligent Mobility for your ride
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.
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.”
by Bill Russo
I recently attended the Consumer Electronics Show in Las Vegas, where traditional automakers, suppliers and several technology firms were showcasing their vision of the future of mobility. Of particular interest were the many demonstrations and announcements related to autonomous vehicles. Early forms of this technology are finding their way into commercial applications in the form of “assisted driving” features which incorporate cameras and radar/lidar to provide the car an extra set of eyes to sense its surroundings and inform the driver of risks. Rapid advancement of technologies needed to fully automate the driving process is also evident, indicating that robotic forms of transportation will be possible within at least 2 industry product cycles (5-10 years).
The following is a Q&A which offers a perspective on the future of mobility and the design and function of autonomous vehicles.
Autonomous Driving will completely redefine the comfort and convenience of transportation. In our current paradigm, comfort is designed around the driver and occupants in an externally focused manner: with eyes to the road. The space around the front seat occupants – both driver and passenger – is oriented to the information needed to manually drive the car to its destination. Autonomous vehicles will experience fewer accidents, over 95% of which are attributable to human error. Cars can therefore be lighter, with less structure without compromising occupant safety. Traffic jams will be less common since autonomous vehicles will be able to leverage vehicle-to infrastructure and vehicle-to-vehicle connectivity in order to avoid congestion and smooth the flow of traffic.
Convenience always shapes our choices when it comes to transportation. Human beings are inherently explorers and some of history’s greatest inventions – wheels, bicycles, steamships, trains, cars, and airplanes – have allowed us to be mobile over greater and greater distances. Over time, each of these inventions added more and more convenience-oriented features to make the experience of mobility more “painless”. Mobility devices are themselves a convenience which allow us to get where we want to be without walking. All forms of public and privately-owned transportation are solving this basic problem of minimizing our travel time. Each solution became commercially viable by offering a benefit versus other forms of transportation that some people were willing to pay to either use or own. For example, trains reduce travel time across a country from months to days, and commercial aviation reduced this to hours. We can now circle the world by jet in a little more than a day, a journey the first explorers could not complete in several years, if they lived to tell the tale. In recent history, owing to the invention of the internal combustion engine powered car (Carl Benz in 1886), and the moving assembly line (Henry Ford in 1908) the car became the primary means for the average person to satisfy their daily commuting needs. In the increasingly urbanized world of the 21st century, we will experience the next evolution in convenient human mobility: personalized, autonomous mobility on-demand.
Such technologies act as “support” systems for drivers which allow more tasks to be “delegated” to the car. For example, cruise control allows a driver to focus less on maintaining a constant speed and thereby improves the driving experience. Routine or mundane tasks like parking or adjusting speeds while driving on highways are already becoming mainstream. Lane departure warning, parking assistance, and cruise control are features that allow the driver to focus less on routine tasks and focus on the actual experience of driving. Over time, the number of tasks that can be handled by the “smart car” will increase in order to reduce “pain points” of driving and making the overall experience more convenient, safer and therefore more enjoyable for the occupant.
With Autonomous driving, a new paradigm can be established to re-focus the passenger on how to productively use their transportation time. Observing the outside of the car moves from a requirement to a choice – especially for the user of a mobility service. Space that is allocated to providing driver information can be repurposed from a driver-passenger perspective to a “connected user” perspective. Beyond mobility, a fully autonomous vehicle’s key benefit will be the experience it gives to the user, and the primary benefit which comes from delegating the task of driving to the car is PRODUCTIVE TIME. As such, while the purpose of the car as a transportation device has not changed, the very concept of how to treat and offer convenience-oriented features to the occupant is different: the autonomous vehicle is built with a “user-centric” mindset, as opposed to a “driver-centric” mindset.
An autonomous car, especially one used in longer-distance (>10km) commuting distances will need to be able to transform travel time into productive time through convenient services which may include infotainment (watching news/video, gaming), online communication (social networking, e-mail, conference calls), or online-to-offline services (discounts or promotions based on mobility patterns). In the world of personalized, autonomous mobility on-demand, the car essentially becomes a connected rolling space that transports us between the places we live, work, and play.
For people born in the late 20th century, it will be difficult to reimagine this new form of mobility. Most of us from this period see a car through a nostalgic lens: our most prized possession outside of our home, and the one that we can take with us to showcase our lifestyle and aspirations. For many, this will never change.
However, mobility is being revolutionized by digital technology. The rapid emergence of ride-hailing services such as Uber, Lyft, Ola, and Didi Chuxing are transforming the car into a transportation service device. It is in this mode that we can see a great fit for autonomous forms of mobility – as the operators of such services will benefit from not having to incur the cost of a driver, along with the lower maintenance and repair cost of autonomous vehicles. Users of such services expect to be driven and are not seeking the driving experience in any case.
The most surprising aspect of this type of vehicle will be that it affords its users the opportunity to turn inward and use their time productively. Future cars used for short commuting will be smaller and occupy less physical space: they simply pick people up and drop them off and do this with minimal “extras”. These will be summoned by an app on a mobile device. Longer commuting will be done in autonomous vehicles which have spaces designed to address the productivity needs of the occupants: with connectivity and consumption of content at the core. Such cars may be booked or offered through a “subscription model” to give the users some flexibility in the service offering. The shift in this paradigm will surprise people the most since these vehicles will be designed from a pure passenger experience perspective which will include how to entertain or delight the user during the journey.
The commercialization path for more complex and fully autonomous driving will be very different than what we seen so far. In the current owner/driver-centric business paradigm, new features have to be sold to customers who accept the value proposition of the technology and are willing to pay for it. Early-stage technologies typically come with a heavy price premium and are typically introduced to “premium” brands where customers are less price sensitive. However, barring regulatory intervention, this will likely limit adoption of technologies including electric and autonomous vehicles as there are cheaper alternatives (conventional engines and human drivers).
The game-changer for both electric and autonomous vehicles comes from the convergence of On-Demand Mobility (ODM) with electric and autonomous vehicles. ODM players, such as Uber and Lyft are highly investing in autonomous vehicles as a means of lowering their operating costs and unlocking the potential to participate in the Digital ecosystem through offering the users of its services access to content and O2O services. This will create a new pathway to commercializing and scaling up the autonomous driving technology in a way that has not been seen before: as we have seen with other “smart devices”, hardware innovation is backed by the digital ecosystem and thereby eventually becomes mainstream for everyone.
Comfort and convenience are solutions to mobility “pain points”, and the degree to which people experience these pain points varies greatly based on where we live.
Mobility pain is much higher in densely populated urban cities like New York, London, Paris, New Delhi, Mexico City and virtually all major cities in China. The driving experience in highly urbanized countries like China can be horrific. Cities like Beijing experience gridlock conditions at several times during a day, and suffer from severe environmental impact from the tailpipe and other emissions. Electric and autonomous mobility on demand would be a welcome solution to address these mobility pain points.
Adoption of autonomous driving technology will improve flow of traffic, reduce accidents and improve the quality of life in an increasingly urbanized world. Scaling up this technology through the convergence of ODM with electric and autonomous vehicles in these cities will accelerate a transition from a transportation model where we own an under-utilized asset that is used 1-2 hours per day to a model where autonomous cars, directed by a smart-city transportation grid, are deployed on demand to where they are needed. This is a far more efficient system where we will witness a shift from ownership of hardware toward paying for the utility that is derived from the hardware.
Autonomous vehicles deployed by on-demand mobility services fleets will be able to communicate with each other, and will be directed to and from users and their destinations by a Smart City transportation network. These cars will be highly utilized assets, which minimizes the amount of city space which needs to be allocated for parking lots for cars which sit idle for more than 22 hours a day. Cars can be routed around the traffic, minimizing the traffic jams that define the life of residents of cities like Los Angeles and Shanghai. Smart, connected, and autonomous mobility devices backed by advanced algorithms used to govern the mobility patterns will improve the livability of cities in an increasingly urbanized world.
Autonomous driving will have a tremendous impact on our environmental footprint. The technologies required to power and govern a network of personalized, electric and autonomous mobility on demand (A-MOD) have the potential to transform the lives of people all over the world. For example, these increasingly electric-powered vehicles will be also be part of the energy storage grid, we could very well moderate energy consumption and potentially shrink our carbon footprint. Transportation innovation has reshaped the history of mankind, and the transportation revolution of the next decade will set the course and has the potential to improve the lives of all generations to follow.
Bill Russo is the Managing Director and Automotive Practice Leader at Gao Feng Advisory Company, based in Shanghai. He has 30 years of automotive industry experience and has lives and worked in China since 2004. He was formerly the leader of Chrysler Group’s business in North East Asia.
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.
The Detroit News, January 7, 2017
Baidu Inc. and state-owned Beijing Automotive Group Co.’s collaboration on telematics and autonomous driving is almost ready for its coming-out moment, as industry and government join hands for a self-driving vehicle push within China.
A BAIC-built model equipped with Baidu tech will debut in April at the Shanghai auto show, BAIC Chairman Xu Heyi said in interview Friday at the trade show CES 2017 in Las Vegas. The two companies also plan to conduct road testing of a car that will be autonomous in limited environments by the end of this year.
China has set a goal for 10 percent to 20 percent of vehicles to be highly autonomous by 2025 in the world’s biggest auto market, and for 10 percent of cars to be fully self-driving in 2030. State broadcaster China Central Television began airing a five-part series this month on one of its prime time programs to highlight the country’s efforts in autonomous vehicles and related technology.
“It’s a smart move for both to team up,”said Bill Russo, managing director of Gao Feng Advisory Co. “BAIC can bring manufacturing and Baidu can bring technology capability to solve mobility problems.”
The cooperation with BAIC is Baidu’s most comprehensive, though the internet giant also is working with other automakers on joint development of self-driving cars, Baidu President Zhang Yaqin said Friday. The Beijing-based company is close to setting up a new research center near Seattle that will focus on artificial intelligence and cloud computing and security, he said.
Baidu formed a self-driving car team in Silicon Valley in April that it said would employ more than 100 researchers and engineers by the end of last year. It’s partnered with chip maker Nvidia Corp., has been testing its autonomous vehicles in eastern Chinese cities including Wuhu and Shanghai and earned a permit from California to test in the state last year.
BAIC, owned by the local government of Beijing, has made progress of its own. The automaker whose joint-venture partners include Daimler AG and Hyundai Motor Co. in April let customers ride in self-driving cars on a test track.
China is seeking to shed its image as a cheap manufacturer of products with little value-added content. The government is pushing its technology and manufacturing industries to create more sophisticated products and services in line with the global trend toward digitization and internet connectivity.
To contact Bloomberg News staff for this story: Tian Ying in Beijing at firstname.lastname@example.org.
Tech Wire Asia, September 20, 2016
With a population of over 20 million, Beijing citizens face traffic congestion on a regular basis despite the government’s efforts to maintain a smooth traffic flow, such as tolls, car usage limitations, and public transport subsidies.
But top scientists believe that artificial intelligence (AI) could – and in the near future, will – solve this problem.
According to Sixth Tone, on Saturday, scientists said at a lecture at New York University’s Shanghai campus that autonomous vehicles will aide smoother traffic flow in less than a decade.
AI scientists are attempting to design self-driving cars that are able to drive smoothly and avoid sudden slowdowns and collisions that cause traffic congestion.
According to Tsinghua University Professor Li Keqiang, the Ministry of Industry and Information Technology has outlined a plan that allows autonomous vehicles to access highways within three to five years, and city centers by 2025.
With today’s advancements in science and technology, this five-year prediction is certainly not impossible.
Bill Russo, automobile consultant from Gao Feng Advisory Company, said as it stands, full optimization of self-driving automotive technology is more a matter of regulation than science.
“Unlike other countries, China has the capacity to drive the market from the top down and create the right circumstances for self-driving cars,” Russo was quoted saying.
Therefore, the government needs to open more doors for self-driven and human-driven vehicles to operate side-by-side on roads, he said.
Currently, self-driving cars are banned on public roads in China. Automobile players, however, view this restriction as a slowdown for the industry. Tech giants around the world like Google, Baidu and Alibaba, are already tapping into the automobile industry as their next business target.
As Forbes said last month, China “will be reluctant to forbid semi-autonomous cars completely.”
“The country has too much at stake, it has invested heavily in autonomous technology and urges its automakers and tech companies to develop autonomous cars,” it pointed out.
But after a number of fatal incidents, a ministry official in China recently said drivers could be held liable for accidents with advanced driver-assistance systems, a China Daily report said.
The report quoting China’s deputy head of Bureau of Work Safety Jin Xin said when fully autonomous vehicles hit the road, the manufacturer would become legally responsible for accidents.
But according to Yu Kai, founder of the Institute of Deep Learning – China’s first AI research and development center – the country’s automobile industry is anticipating the commercialization of autonomous vehicles as Chinese consumers are beginning to expect cars to be connected devices.
Yu also believes that self-driving cars could go on roads within 10 years.
“My focus is creating innovative technology to put in the car, to make the car independently intelligent.
“We are working with car manufacturers on how give their vehicles the ability to plan and make decisions, using a combination of sensors, processors, and algorithms,” Yu said, as quoted by Sixth Tone.