Faraday Future Faces Crucial Test With New Electric Car

The Wall Street Journal, January 3, 2017

Electric carmaker Faraday Futures demonstrated its prototype all-electric FF 91 vehicle at CES 2017 on Tuesday. The four-door car can go from zero to 60 miles an hour in 2.39 seconds, executives say.

LAS VEGAS—Time is running out for Faraday Future’s ambitious plan to crack the U.S. auto industry and take on Tesla Motors Inc.

The startup faced a critical test here on Tuesday when it revealed an all-electric car that it says will be ready for production in 2018 and will cast aside doubts about its future.

Faraday made a splash at the CES technology conference last year with futuristic car designs and plans to build a $1 billion factory in Nevada. The buzz soon turned to skepticism amid a steady drip of news about suppliers demanding payments, Faraday executives leaving and its main investor bleeding cash.

At a media event on Tuesday ahead of this week’s CES 2017 conference, the Los Angeles-area company showed a four-door, sports-utility-like vehicle called the FF 91 that executives claim can go from zero to 60 miles an hour in 2.39 seconds, faster than the Tesla Model S.

Faraday’s car has cushy back seats that can recline like a La-Z-Boy chair and an interior cabin loaded with large video screens that can be updated with next-generation gadgets. Faraday hasn’t disclosed a starting price.

“I’m hoping…to convince people that we’re real,” said Nick Sampson, Faraday’s senior vice president of engineering and research and development. “We are doing a real product, it’s not just a vaporware, Batmobile to create attention.”

Mr. Sampson said the company plans to roll out the FF 91 in 2018, but he wouldn’t discuss Faraday’s financial status.

That question arose in November when Faraday’s main investor, Chinese billionaire Jia Yueting, disclosed a cash crunch at LeEco Holdings. Mr. Jia, founder of LeEco, told employees the company had expanded too quickly as part of a multibillion-dollar spending spree to build a conglomerate ranging from smartphones to electric cars and a film studio.

LeEco’s precarious cash situation has had “some impact” on Faraday, Mr. Sampson said, but he stressed the companies are separately run.

In late December, Mr. Sampson spent more than three hours showing reporters around the company’s headquarters, a former Nissan Motors Co. facility in Gardena, Calif. The former Tesla executive led a tour through various departments, including aerodynamics, body engineering and manufacturing, as many executives presented using large LeEco TVs and talked optimistically about being ready to begin production.

Notably absent was Marco Mattiacci, global chief brand and commercial officer, whose name was printed on the agenda. He quit a few days later, according to people familiar with the matter.

Mr. Mattiacci formerly headed Ferrari in North America and was one of eight senior executives who left in the past year, according to one of the people.

Some of Faraday’s Western executives, hired from high-profile auto makers, have disagreed with their Chinese counterparts over the direction of Faraday, according to people familiar with the matter.

Underscoring how important Faraday views the CES reveal, a giant TV screen in the company’s lobby near the boardroom displays a clock counting down the hours until the event. “While getting a PR event right would be a step in the right direction, it’s still not clear whether they can raise the funds needed to finish the journey,” Bill Russo, an automotive consultant for Gao Feng Advisory Co. in Shanghai, said.

Faraday joins a crowded field of startups that aim to follow the same path as Tesla. Silicon Valley automotive startup Lucid Motors last month revealed the production version of its electric sedan that will cost about $160,000 for early versions, with the expected starting price to drop to around $65,000.

The sales pitch for the Lucid car is similar to Faraday’s: promises of sports-car-like abilities, luxurious interiors and eventual self-driving capabilities. The companies also share Mr. Jia as an investor, though he isn’t a majority shareholder in Lucid.

During the recent Faraday tour, an executive demonstrated the car’s self-parking feature. While reporters were allowed rides in prototypes to demonstrate acceleration and handling, they weren’t given up-close demonstrations of the autonomous feature.

Instead, they watched from across the parking lot as the vehicle’s operator kept his left hand hanging out the window as the car approached an open spot and backed into it. Asked if reporters could see up-close how it worked, a spokesman said, “Maybe later.”

At the event Tuesday, after showing a video of the self-parking, Mr. Jia surprised the audience by popping out of the car after driving on stage.

He pushed a button to activate the self-parking feature. But it didn’t work.

“It’s a little bit lazy tonight,” Mr. Sampson said.

Moments later they tried it again with success. The company then said it will begin taking $5,000 deposits.

Write to Tim Higgins at Tim.Higgins@WSJ.com

Click here to read this article at wsj.com

Volkswagen in Talks to Make Electric Cars in China

The Wall Street Journal, September 7, 2016

volkswagen-in-talks-to-make-electric-cars-in-china-wsj-safari-today-at-5-23-42-pm

A VW dealership in Louisville, Ky., in August. PHOTO: BLOOMBERG NEWS

German auto maker plans joint venture with state-run China Anhui Jianghuai Automobile

SHANGHAI— Volkswagen AG is exploring a joint venture to make electric cars in China with a state-run company, part of its aggressive push into electric-vehicle production as the auto maker works to resolve its emissions cheating scandal.

The German car maker signed a memorandum of cooperation with China Anhui Jianghuai Automobile Co. for a potential partnership, the companies said in separate statements. Jianghuai said the two will be equal owners of the joint venture, and hope to reach a formal agreement within five months.

“As we aim to be at the forefront of e-mobility, Volkswagen Group is looking forward to explore all options to set up a close and mutually beneficial partnership with JAC,” said Volkswagen CEO Matthias Müller. The company is targeting sales of a million electric vehicles a year world-wide by 2025.

Volkswagen, which derives more than a third of its global vehicle sales from China after three decades of operations there, currently has two car-making partners in the country: SAIC Motor Corp. in Shanghai and FAW Group Corp. in the northeast. Under government rules, foreign car makers must tie up with local partners to produce cars.

China limits foreign auto companies to two local partners to make gasoline-powered vehicles. While the limit doesn’t apply to electric cars, most foreign companies choose to produce alternative-energy vehicles with their existing partners. Officials at SAIC and FAW didn’t respond to requests for comment. Analysts say Volkswagen may be able to strike a more favorable deal with Jianghuai than its current partners.

“You may get a better agreement from a company who values your technology more. SAIC and FAW may already have [electric-vehicle] technologies and do not need VW as much as JAC,” said Bill Russo, a Shanghai-based managing director at consultancy Gao Feng Advisory Co.

General Motors Co. plans to launch about 10 alternative-energy cars with its Chinese partners, SAIC and Wuling, by 2020. Nissan Motor Co. and its partner, Dongfeng Motor Corp., launched an all-electric car in China in 2014.

Wednesday’s disclosure follows Volkswagen’s purchase of a 16.6% stake in U.S.-based heavy truck maker Navistar International Corp. this week. Jianghuai, of Hefei in east China’s Anhui province, is a major truck maker in China. It also builds conventional and electric cars. Earlier this year, Jianghuai signed a 10 billion yuan ($1.5 billion) agreement with NextEV Inc., an electric-car startup backed by Tencent Holdings Ltd. and Sequoia Capital, to develop electric vehicles.

China is going all in on alternative-energy vehicles, as it seeks to cut dependence on oil imports and reduce air pollution. Beijing also regards electric cars as a shortcut for its companies to reach the forefront of an evolving global auto industry.

Chinese governments at all levels last year spent a total of 90 billion yuan ($14 billion) in the sector, including direct cash subsidies for electric-vehicle makers and construction of public charging stations, says UBS Securities.

Sales of electric and hybrid cars and buses quadrupled in 2015 from the previous year to 331,000 vehicles. In the first seven months of this year, sales of such vehicles rose 23% to 207,000 units.

Volkswagen’s current strategy review calls for accelerating development of electric vehicles. Over the next decade, Volkswagen plans to develop around 30 new battery electric-car models, which could account for as much as 25% of the car maker’s total sales.

The company has said it expects to launch the first fully autonomous vehicles by the end of the decade.

Bill Russo to Chair “Future Cars” Panel at September Automotive Roundtable

Shanghai, China, September 1, 2016

Inbox Microsoft Outlook, Today at 2.33.36 PM

As the development of automotive electronics and telematics is gaining speed, intelligent car applications are gradually and successfully integrated in our daily lives.

The numerous advantages of latest technologies do not only include an improved driving experience or enhanced safety, but also the evolution towards less fuel consumption and more sustainable driving.

Therefore, the September Automotive Roundtable in Shanghai will discuss promising trends of future cars in China and its latest applications in several areas, such as Driver Assistance Systems, Autonomous Driving, Automotive Multimedia & Communication, Connected Vehicles and Online Services in China.

– in cooperation with Autoköpfe –

– Strategic Partner: EU Chamber –

When: Thursday, September 01, 2016, 6 pm

6:00 – 7:00 pm: Registration and Networking Dinner, incl. buffet dinner

7:00 pm: Presentation:

By Mr. Roger Looney, VP of Vehicle Engineering – Vehicle Systems Development, including Electric Drivetrain & Autonomous Driving, Qoros

Roger Looney has 30 Years experience in automotive tooling, engineering and design and over 20 years experience in Asia. Current goals include utilizing that knowledge and experience to develop world class, exciting vehicles of the future.
Specialties: Automotive Product Development and Launch, Electronics, Hybrid & EV development, Asia Mergers and Acquisitions, Six Sigma, Product Development, New Business Development in Asia, Team Building in China, Low Cost Country Sourcing, Contract Development and Negotiation in China, Korea, Japan.
 

7:20 pm: Presentation: Integrated Mobility, Transportation Redefined

By Mr. Bevin Jacob, Head of Biz Dev, APAC, Continental Intelligent Transportation Systems

An ‘Internet of Vehicles’ enthusiast, Bevin Jacob envisions building and incorporating “Mobility Services” to improve Consumer’s digital lifestyle. He has 16 years of active involvement in building “Connected Solutions” for Mobile, Telematics and Multimedia Devices. Bevin enjoys working with highly motivated teams to bring about disruptive innovations in connected vehicles business.

7:40 pm: Panel discussion: Future Cars

Moderator: Mr. Bill Russo, Managing Director, Gao Feng Advisory Company

Bill Russo is the Shanghai-based Managing Director and the Automotive Practice leader at Gao Feng Advisory Company. His over 30 years of experience includes 15 years as an automotive executive, including 12 years of experience in China and Asia. He has also worked nearly 12 years in the electronics and information technology industries.  He has worked as an advisor and consultant for numerous multinational and local Chinese firms in the formulation and implementation of their global market and product strategies. While the Vice President of Chrysler North East Asia, he successfully negotiated agreements with partners and obtained required approvals from the China government to bring six new vehicle programs to the market in a three-year period, while concurrently establishing an infrastructure for local sourcing and sales distribution. Mr. Russo has a Bachelor of Science in Chemical Engineering from Columbia University in New York, and a Master of Science in Manufacturing Systems Engineering from Lehigh University in Bethlehem, Pennsylvania. Mr. Russo is a highly sought after opinion leader on the development of the China market and the automotive industry.

Panel additionally includes:

 Ms. Vanessa Moriel, Managing Director Asia, Liase Group

Vanessa Moriel is Managing Director Asia with the LIASE Group, a global retained executive search firm & talent management consultancy that specializes exclusively in automotive and mobility companies. 

Ms. Moriel has been providing CEO & top management placements and succession expertise for global automotive companies across the Asia-Pacific region for close to 15 years. She previously worked for Schlumberger, the London Consulting Group, Frito-Lay (Pepsico) and Fiducia Management Consultants. 

She holds a Bachelor’s degree in Chemical Engineering for the Institute of Technology and Superior Studies of Monterrey and has completed an Executive Program in Strategy and Organization from the Stanford Graduate School of Business.

Mr. John Shen, Managing Director, Accenture Strategy, Greater China

Mr. Shen Jun has more than 20 years of industry and management consulting experience. He is now Managing Director with Accenture Strategy Greater China. Before he joined Accenture, Mr. Shen was Senior Partner at Roland Berger Strategy Consultants and has been leading the Automotive Competence Center (ACC) in Greater China. Mr. Shen has served many leading MNC/local companies in automotive industry, covering a wide range of topics. Mr. Shen has in-depth knowledge and expertise in the functional areas of corporate strategy, merger and acquisitions, operational benchmark, organizational restructuring and sales and marketing management (especially on branding, channel optimization, pricing and new product launch), etc.

8:10 pm: Q&A

Where: Courtyard by Marriott Shanghai Jiading 上海绿地万怡酒店

            3101 Huyi Highway, Jiading District, Shanghai 201821, P.R.C
上海嘉定区沪宜公路3101号

~~~~~~~~~~~~~~~~~~

Fee: 250 RMB/Person for annual spinsors, incl. buffer dinner, free flow soft drinks and beer

350RMB/Person for non-sponsors, incl. buffet dinner, free flow soft drinks and beer

(Please note only cash or pre-payment via bank transfer is accepted)

Hotel Room Information: The participants of Automotive Roundtable can enjoy the special rate of the hotel room: Superior Room: 550 RMB/night (incl. 1-2 breakfast). To book the room, please email to:

Ms. YILIA JIANG

Assistant Sales Manager

cy.shajd.sales.exe3@courtyard.com

Tel: 86.21.3991.6816,  mobile: 139.1831.2521

and indicate rate code of “Automotive Roundtable”.

Language: English

Seats are limited! If you like to attend, RSVP via email

kathrin@g-i-events.com or lucia@g-i-events.com by August 30, 2016.

In case you register but cannot attend, please cancel your reservation before August 30. Otherwise you will be invoiced for the event.

Thanks to all our sponsors and our media partner!

If you are interested in sponsoring, speaking or participating, please feel free to contact us at: info@g-i-events.com.

 

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

Novi, Michigan, September 13-15, 2016

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

Bill Russo will be a keynote speaker at the plenary session of the Electric & Hybrid Vehicle Technology Expo (Day 1, Track 1) on September 13 in Novi, MI on the topic China Drives the Future of Personal Mobility.

 

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

Topic Outline: 

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

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

Click here to view the Day 1, Track 1 Agenda

Bill Russo to Chair Panel Discussion on the Internet of Vehicles at TechCrunch

Shanghai, China, June 27, 2016

Venue:
West Bund Art Center
2555 Longteng Ave, Xuhu

Time:  11:10-11:40am

The Big Data Behind the Internet of Vehicles

TechCrunch_Shanghai_2016___TechCrunch

The traditional automotive industry, where technology innovation has primarily been focused on powertrain and safety systems, must now contend with new forms of mobility services that are transforming the manner in which we experience the product.   The particular conditions of urbanization, an ever-expanding middle class population, pollution, and congestion are uniquely challenging in China, which may create opportunities for innovative new mobility solutions for China.

The conventional hardware-centric, sales-driven, asset-heavy and ownership-based business model with sporadic customer interactions is now competing with a connected, on-demand, and often personalized mobility experiences.  This new form of “connected mobility” is driving new technologies in the world of navigation, analytics, driver safety, driver assistance and information virtualization.

Innovations such as these, originating from both traditional OEMs and new mobility solutions platforms, many of whom are Chinese, could pave the way to a an entirely new business model for China’s auto industry.

Panel Members:

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

Ms. Celine Le Cotonnec, Head of Connected Services, Digital and Mobility for PSA Peugeot Citroen China

Mr. Bevin Jacob, Head of Business Development, APAC, Continental Intelligent Transportation Systems

Moderated by:

Mr. Bill Russo, Managing Director, Gao Feng Advisory Company

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

China Central Television Global Business Program, April 25, 2016

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

Click here to watch the program at CCTV.com

CCTV News: Bill Russo Discusses China’s Auto Market and New Energy Vehicles

China Central Television China 24 Program,, April 25, 2016

 

China 24 04-26-2016 03:15 - CCTV News - CCTV.com English Safari, Today at 10.38.42 AM

 

A link to Bill Russo’s appearance on CCTV’s China 24 program.  Topics discussed included New Energy Vehicles, China’s auto market outlook, and vehicle exports.  Beijing Auto Show story begins at 8:25, and Mr. Russo’s appearance starts at 11:42.

Click here to watch the program at CCTV.com

 

 

Carmakers seek inside edge in China

The Financial Times, April 24, 2016

 

Carmakers seek inside edge in China — FT Safari, Today at 8.56.04 AM

 

Carmakers are gearing up for a year of intense competition in China as the world’s largest auto market by sales faces both slowing growth and changing tastes in the form of electric cars and sports utility vehicles.

This time last year, global executives were bracing for a potential slowdown and a “new normal” of moderate sales growth to match a slowing mainland economy.

Fears became reality when the stock market rout last summer in China sent consumer sentiment into a nosedive. Sales dropped year on year from June to August, before a tax cut for small-engine vehicles in October propped up sales to finish 2015 with a growth rate of 4.7 per cent year-on-year.

After a bumpy run, global carmakers at the biennial Beijing International Automotive Exhibition, which opens on Monday, are keen to prove they are well positioned in China’s rapidly maturing market.

Shifting consumption patterns have made SUVs one of the country’s most promising growth segments, with sales surging by more than 50 per cent in the first quarter of 2016 compared with the same period last year, in contrast to sedan sales which declined 1 per cent.

That mirrors the growing popularity of gas-guzzling SUVs elsewhere in the world as fuel costs have followed the price of oil lower.

The shift has helped established a beachhead for local automakers, according to Bill Russo, a Shanghai-based consultant.

“For sedans, multinationals had the advantage but for utility vehicles seven out of the top 10 models are Chinese brands” thanks to their lower costs, he says. The trend is here to stay, he adds: “Utility is like a drug — once you have it, you’re hooked”.

The move has put pressure on foreign brands as local carmakers have also improved their quality significantly in recent years, according to analysts.

“Multinationals are in a dilemma over whether to cut costs to compete,” says Yale Zhang, a Shanghai-based consultant.

Domestic automakers are looking to expand on their newly privileged position. IHS Automotive predicts production of 50 new SUV models to be launched in China this year and says that 78 per cent of these will be domestic brands.

Global automakers are already revving up efforts to regain ground by bringing their most successful top-end models from home. Ford, for instance, will use the Beijing Expo to launch its F-150 Raptor in China, a popular pick-up truck in the US, as part of efforts to “inspire a generation of off-road enthusiasts,” says John Lawler, chief executive of Ford Motor China.

But bigger is not the only way carmakers hope to do better in the Chinese market: electric cars also remain a priority for any auto brand looking to get ahead.

While they are still only a small segment of the overall market, greater numbers of “new energy vehicles” are a strategic goal for Beijing even if the demand is not yet there.

The government is aiming for yearly sales to top 3m units by 2025, after growth of nearly 300 per cent in 2015 to 330,000.

Li Keqiang, China’s premier, said in February that the government would step up support for the electric vehicle industry by shifting funds away from subsidies for production to rewarding companies that come up with new technologies and hit sales targets.

“Everyone is under pressure to show their latest NEV [new energy vehicle] models” at the Beijing Expo, says Janet Lewis of Macquarie. But margins will remain low for electric vehicles for a few years to come, she adds. “Right now, selling NEVs is not a profitable proposition.”

A survey from McKinsey suggests that electric vehicles are gaining traction, helped by government policies that make it easier to get a licence plate for electric vehicles in China’s largest cities.

As in the SUV segment, foreign leaders still face local competition. LeEco, a Chinese tech company, became the latest to enter the space, last week announcing a new all-electric concept car christened LeSEE.

“These [technology] companies are almost on par with Silicon Valley,” says Clemens Wasner at EFS, a consultancy. “In a western country their entry into the market would not be economically viable, but in China it might be.”

Click here to read this at FT.com

China a lifeline for EV makers

Automotive News, March 14, 2016

New-energy push bolsters investment

by Alysha Webb

In 2013, Mike McQuary, CEO of Wheego Electric Cars, was in a bind. The maker of small electric vehicles needed expansion funds.

But with high-profile electrified vehicle makers like Fisker and Coda struggling, the appetite in the U.S. for investing in electrified vehicle makers was slight.

Since he was visiting China regularly to work with suppliers, McQuary made an appointment with GSR Ventures, a venture capital company based in Beijing. It was a good move. GSR now helps fund Wheego.

“They have a long-term view of the new-energy sector and EVs in particular,” McQuary says of his Chinese investor.

Despite early optimism in the U.S., the market for EVs and the technology that goes into them never has really taken off. In 2015, U.S. sales of plug-in hybrids and EVs actually dropped 5.2 percent to 116,099 units, according to Inside EVs.

Government support for the sector has remained tepid. That has left companies that bet on steady growth in demand for electrified vehicles struggling to survive.

In China, however, the government remains committed to growing plug-in hybrid and EV production and sales. That has given Chinese investors and Chinese companies the confidence to sink millions of dollars into U.S. companies with electrification technology.

China a lifeline for EV makers Mail, Today at 10.37.31 AM

FDG Electric Vehicles, a Chinese company, built a 2.6 million-square-foot plant in China to produce medium-duty electric vans through its joint venture with Smith Electric Vehicles. The JV, called Prevok, plans to launch the vans in the U.S. this year.

Photo credit: PREVOK PHOTOS

Focus on China
Often, Chinese investors want to focus on the China market.

GSR was “happy to invest in us as long as we turned our eyes to China,” McQuary says.

Though it has dealers and sales in the U.S., the Atlanta-based company now focuses on selling its small EVs — used by municipal governments, at airports and as delivery vehicles — in China.

He can’t discuss sales volume or where the vehicles are manufactured, McQuary says. But the company is still in business, which it might not have been without the Chinese investment.

“China seemed like a much bigger chance for Wheego to be a big success,” he says. “The subsidies they offer over there, and the government support and pressure for EVs to be successful, really trumps what they are doing in the U.S.”

Smith Electric Vehicles also found a savior in China. The Kansas City, Mo.-based company manufactures medium-duty, commercial EVs. It sold around 800 EVs in the United States from 2010 to 2014 to customers including DHL and Coca-Cola, but it couldn’t make money at such low volumes.

It needed cash and a bigger market so it could scale up. That came from Hong Kong-listed FDG Electric Vehicles, a Chinese company with two EV manufacturing plants in China as well as battery production and r&d operations. Smith, whose electric vans have logged millions of miles on U.S. roads, could provide added EV manufacturing expertise.

The Chinese company “had the resources, the money, the engineers [and] the government support, but they had no practical working knowledge” of how to produce an EV, says Bryan Hansel, former CEO of Smith.

China-U.S. joint venture
In 2014, FDG invested some $20 million directly in Smith, says Hansel. Then in May 2015, it invested another $15 million to form a joint venture, named Prevok. Hansel is Prevok’s CEO.

The JV is producing a jointly designed, medium-duty electric van at a 2.6 million-square-foot plant in the east China high-tech hub of Hangzhou. Prevok plans to launch the van in the U.S. this year.

It will be imported initially, moving to local production as volume increases, Hansel says. Demand eventually will be global, he predicts.

Smith likely would not have had the luxury of such an undertaking if it worked with U.S. investors, Hansel says. With FDG, “they said, “Get started guys, and have fun.'”

The Chinese government’s consistent financial support and policy push for development and sale of plug-in EVs underpins Chinese investors’ longer-term view.

China has declared that it will have 5 million “new-energy” vehicles — a category including battery-powered EVs, plug-in hybrids and hydrogen fuel cell EVs — on the road by 2020. In practice, the recent focus has been on battery-powered EVs.

“In China, I went from a period of no interest to one of a lot of interest.”KY Chan
CEO, Protean Electric

China’s central and local governments have combined to offer consumers subsidies that can surpass the equivalent of $16,000 per vehicle.

That is more than half the price of the best-selling plug-in hybrid EV in China, the BYD Qin PHEV, which starts at the equivalent of $31,192. The best-selling pure EV in China, the Kandi Panda, costs $23,139, says Yale Zhang, managing director of consultancy Automotive Foresight in Shanghai.

In the U.S., federal subsidies top off at $7,500. Some states offer additional subsidies.

The Chinese government’s largesse is not bottomless, however. Subsides for electric passenger vehicle purchases are scheduled to decrease, ending in 2021.

And despite subsidies, Chinese drivers have not enthusiastically embraced EVs. The lack of charging stations is one reason.

Sales of EVs did surge in 2015, however, more than quadrupling to 331,092 vehicles.

The growth in sales was largely due to local government purchases, says Zhang.

The central government in Beijing ordered Chinese cities to meet new-energy vehicle purchase targets, he says. That caused a surge in production and sales. The percentage of new-energy vehicle sales accounted for by commercial vehicles rose to 45.5 percent in 2015 from 38.4 percent in 2014, according to Automotive Foresight.

Also, Beijing in February ordered local governments to make 50 percent of all new fleet vehicle purchases new-energy vehicles, up from a 30 percent mandate.

There are other possible policy boosts for passenger EV sales. On-demand ride-hailing companies are growing quickly in China. Didi Kuaidi, China’s largest, completed 1.43 billion rides in 2015.

At some point, Beijing will require those companies to use EVs, predicts Bill Russo, a managing partner at Gao Feng Advisory Co. in Shanghai.

“If you want a higher penetration and market share of electrification, you can require these on-demand companies to electrify their fleets,” he says. “I can see a quick acceleration of electrification.”

47-mpg target
Regardless of demand, automakers in China will need to produce EVs to meet fleet fuel economy mandates, which call for 5 liters of fuel consumed per 100 kilometers driven, or 47 mpg, by 2020.

KY Chan, CEO of Protean Electric Inc., says that is one reason he found a lot of interest in China for his company’s in-wheel electric-drive systems. Protean, which has offices in Troy, Mich., the U.K. and Shanghai, has investors including GSR and Jiangsu New Times Holding Group, located in eastern China.

“No matter what, even if they are losing money [producing EVs], the OEMs will have to produce a number of new-energy vehicles in order to lower the overall [fuel economy] below 5 liters,” Chan says.

The central government’s EV push has made China a fertile market for fundraising. “The amount of resources flowing into [the EV sector] is just unimaginable,” he says. “In China, I went from a period of no interest to one of a lot of interest.”

Chan figures Chinese investors have a stronger stomach for the cash burn rate of a startup like Protean. It has talked to U.S. companies about being acquired, but “we would become a burden to their balance sheet,” he says.

Perhaps the highest-profile Chinese investment in U.S. electrification companies is Wanxiang’s acquisitions of battery-maker A123 Systems and luxury plug-in hybrid manufacturer Fisker Automotive, renamed Karma Automotive.

Privately owned Wanxiang Group Corp., one of China’s largest automotive suppliers, comes from a very traditional background; it got its start producing driveshafts and roller bearings.

Why did it acquire the two U.S. companies?

“China is committed to producing more and more electric vehicles,” says Pin Ni, president of Wanxiang America Corp. “Wanxiang wants to participate in that growth, and we saw an opportunity to do so by acquiring A123 and Fisker.”

If Wanxiang hadn’t acquired Waltham, Mass.-based A123 in 2013, says CEO Jason Forcier, “the technology would have been sold off to the highest bidder.”

Instead, Chinese ownership enabled A123 to double its capacity, and the company is generating positive cash flow, Forcier says.

A123 is focusing on low-voltage batteries and working with all the major European automakers on 48-volt systems. But China still accounts for a big chunk of the battery-maker’s growth.

“That speaks to the focus of the Chinese government to incentivize these vehicles,” says Forcier. “We haven’t seen that in the U.S.”

“A lot of trust’
Wanxiang acquired A123 customer Fisker, whose problems imperiled A123, in 2014, paying $149.2 million. Wanxiang beat out Hong Kong investor Richard Li, who also was bidding for the electric automaker. The now-Karma Automotive is trying to revive itself from a headquarters in Southern California.

Karma sees the most opportunity in China, which is the world’s largest luxury car market. But it will sell cars in the U.S., as well, says Chief Marketing Officer Jim Taylor.

That kind of U.S. presence is important. Chinese consumers know their country’s long history of shoddy and copied products. Plus, China’s early EV efforts often focused on low price rather than high quality.

“You need to bring in technology that has been certified as non-Chinese,” Gao Feng’s Russo says.

Even in luxury-hungry China, Karma could be a tough sell. “Luxury [EVs] do not have strong potential, because rich people need the premium car’s brand first,” Automotive Foresight’s Zhang says.

But Chinese investors don’t mind taking “long bets” on their investments, Taylor says.

Wanxiang Chairman Lu Guanqiu “has put a lot of trust in our executive team,” he says. “If we were American-owned, that rope would be a lot shorter.”

Click here to read this article at Automotive News

Reimagining Mobility in the China Context

Gao Feng Insights Report, February 2016

We are pleased to share with you our paper titled: Reimagining Mobility in the China Context. This article builds on the themes from our previous article titled Digital Disruption in China’s Automotive Industry, and offers a perspective at how the traditional value chain of the automotive industry is being fundamentally transformed by a new wave of “digital disruptors”.

Unlike traditional automotive OEMs and suppliers, these digital disruptors are leveraging mobile internet technology to present new and innovative “Connected Mobility” services to users, and in the process challenging the business model of the automotive industry. The century old hardware-centric business model of individual car ownership and product-based segmentation is transforming into a new form which leverages internet technology to deliver a broader range of services to address mobility needs.  Such changes are happening faster in China than in the rest of the world, where the size and scale of the urban population and the sheer numbers of mobile internet users are much greater than other markets.

In such an environment, China’s Internet giants (Baidu, Alibaba, Tencent) along with mobility disruptors such as LeEco and NextEV are vying to deliver an increasingly connected, electrified, smart and personalized mobility experience.  Coupled with the Chinese government’s regulatory push on new-energy vehicle adoption and sustainable transportation infrastructure, China has demonstrated strong potential to become the breeding ground for the Connected Mobility revolution.   As a result, Automotive OEM and supplier CEOs must learn to reimagine mobility in the China context in order to secure a strong position in this new competitive landscape.

We welcome your comments and feedback on our briefing paper or in general about our firm. We would be glad to meet you in person to share our data and perspectives in a fuller manner. Please let us know if you are interested in meeting and discussing directly how we can help you to operationalize these insights.

Thought leadership is core to what Gao Feng does. We will, from time to time, share with you our latest thinking on business and management, especially as it relates to China and China’s role in the world.

Best Regards,

Bill Russo
Managing Director, Gao Feng Advisory Company
bill.russo@gaofengadv.com

Edward Tse
Chairman and CEO, Gao Feng Advisory Company
edward.tse@gaofengadv.com

Tel: +86 10 5650 0676 (Beijing); +852 2588 3554 (Hong Kong); +86 21 5117 5853 (Shanghai)