Tesla Takes Off in China

Fortune, June 7, 2017

Vanessa Zhu exits her Model X in front of a Tesla showroom in Beijing. Strong demand for SUVs and their perceived safety advantages have fueled Tesla’s surge in China. Photograph by Adam Dean—Panos Pictures for Fortune

When you climb into a Tesla (tsla, +2.83%) as a first-time passenger, drivers turn giddy at the chance for show-and-tell—especially in China, where Vanessa Zhu is playing host on this sunny spring day in Beijing.

“It’s huge, isn’t it?” she says, pressing the double-size, iPad-like control screen in the center console until the stereo blasts Adele’s “Send My Love.” Then comes the ceremonial closing of the gull-wing doors on Zhu’s Model X. We peer through an expansive glass roof. Zhu, the assistant to the chairman of a major marketing agency, likes SUVs for their safety on China’s chaotic roads—she and her husband upgraded from a BMW X5. One of the first Model X owners in China, Zhu paid a deposit before Tesla had even calculated how much a deposit should be.

“Now put your head back against the seat,” she advises.

The two-lane road we’re on is missing traffic lines, not to mention levelness, but as a section clears ahead, Vanessa floors it. We whir past a small black Hyundai so fast that the car seems to turn stationary. For a second, driver and passenger feel the same head rush. Then Vanessa slams on the brakes to respect a stop sign, chuckles, and changes Adele songs.

The sight of Teslas whizzing down roads in China’s biggest cities is becoming as common as—well, the sight of Teslas whizzing down roads in Silicon Valley.

In 2016, Tesla tripled its sales in China over the previous year’s, to 10,400 vehicles, according to research firm JL Warren Capital, or about 13% of the nearly 80,000 cars it delivered worldwide. The company reported in March that it earned $1.1 billion in revenue in China last year—a boost that helped Tesla join the ranks of the Fortune 500 for the first time, with just over $7 billion in revenue worldwide. And Tesla’s China news has only gotten better since then: Its imports in the first three months of 2017 have put it on pace to easily double sales this year. Wealthy drivers are crowding showrooms in China’s major cities, and Chinese buyers have put down $1,200 to preorder the company’s Model 3 sedan in numbers second only to those in the U.S.

The sales rush is the clearest sign yet that Tesla has turned a corner in the world’s largest auto market. And it has caught almost everyone by surprise. As recently as last summer, the narrative had been that Tesla just didn’t get China. The automaker was on track for its third consecutive year of weak sales. The few consumers who knew about Teslas didn’t know how to recharge one; those who preordered had faced delivery delays and iffy service. What’s more, Tesla lacked the joint-venture partners that helped other foreign carmakers break into China’s market. Michael Dunne, who runs independent advisory Dunne Automotive in Hong Kong, wrote a column in September predicting Elon Musk would reach Mars before cracking China.

Today, Dunne is cheerfully sheepish about that column, and other naysayers are equally befuddled. There’s no single explanation for Tesla’s breakthrough. Sales got a lift from the introduction of the Model X, a luxury SUV for an SUV-mad country. The company also benefited from a critical mass of charging stations; from its direct-sales model, in a country where buyers feel fleeced by dealerships; and from CEO Elon Musk’s celebrity among the technorati.

But chummy government relations also matter in a country where the state exerts enormous economic control, and Tesla’s technology just happens to align perfectly with government priorities. Cofounder Martin Eberhard has said Tesla was started to fight climate change. Nowhere is the climate fight more important than in China, the world’s largest spewer of greenhouse gases, which is in the midst of an unprecedented promotion of electric cars: Last year, sales of electric and plug-in hybrid vehicles in China rose 50% to 507,000, more than three times the U.S. figure.

The government estimates that as many as 7 million electric cars could be sold in China annually by 2025. It sees them as a way not only to clear smoggy skies, but to hack into the top rankings of the global auto industry. In electric, Chinese companies don’t have to match the quality of a Ford or Mercedes-Benz; they think they can quickly build a whole new car. “For electric vehicles in China, we have a new technology model every two years,” says Dong Yang, a high-ranking Communist Party official at the China Association of Automotive Manufacturers, the auto lobby.

Still, virtually all Chinese electric cars are low-cost, relatively low-performance ones, without the luxury trimmings and lightning-fast acceleration that Tesla owners fetishize. Government officials consider Tesla a role model for these Chinese brands, and they’ve cheered the company from the sidelines. Today, a handful of Chinese companies and cities are feverishly courting Tesla for a joint venture, Fortune has learned, and Musk has said his company could begin building cars in China before the end of 2018.

A joint venture could turn Tesla’s China growth stratospheric, because its current model of importing cars from California is costly. Chinese tariffs and taxes boost the price of Tesla’s sedans and SUVs in the country by 50% compared with the U.S.; the Model S sedan starts at the equivalent of $105,000, and the Model X at $130,000. So even as Tesla woos middle-class buyers in the U.S. (the Model 3, due to arrive this fall, will start at about $35,000) buyers in China have mostly resembled Vanessa Zhu: wealthy drivers who view Teslas as luxury vehicles, or at least as the coolest new piece of tech since the iPhone. Most of Tesla’s 2016 sales were concentrated in Beijing, Shanghai, and Shenzhen, China’s centers of capital and affluence.

Even if Tesla doesn’t become a mass-market brand, sales in China alone could soon climb to 100,000 a year, impacting Tesla as intensely as a new, 1.4-billion-person market would Coca-Cola. “I could see a future where Tesla is displacing a lot of those Audis and Mercedes-Benz that are everywhere on Chinese roads,” says Dunne.

Not bad for a company that, until recently, was digging out from under past mistakes.

Tesla began taking preorders in China for the Model S in August 2013. The company didn’t know exactly how much each car would cost, and deliveries were eight months away. But anticipation ran high. The combination of Musk’s renown, stories comparing Tesla’s acceleration to a Ferrari’s, and intrigue over the new technology sent preorders above 5,000 by the end of the year.

The hype was there, but the sales and support were not. The original head of Tesla’s China business was Kingston Chang, formerly of luxury automaker Bentley. Chang wanted to broadly expand Tesla’s operations, including customer service centers, public relations, and car-charging networks, according to tech news site PingWest. But Tesla headquarters told him to build a sales team first, betting that good marketing could bring in more revenue before more stores and charging stations were finished being built. Tesla opened just a single showroom in Beijing, opposite an American Apparel store in one of the city’s glitziest malls.

Tesla’s strategy shifted again after Veronica Wu came aboard in December 2013, after a successful stint in big enterprise and education sales for Apple in China. At Tesla, she discussed adding traditional outlets like dealerships to the mix, similar to the way Apple had added retail channels in China. Though headquarters balked, Tesla in China was soon encouraging fleet sales orders of 100 or more cars from car-rental agencies and institutions, to jump-start demand. Staff, especially salespeople, soared from 10 employees to more than 100, and later to 600.

At the same time, Tesla imposed rules that frustrated individual buyers. Before customers could order a car, Tesla required that they prove they had a parking spot and a home charger, to ensure a good experience. The company also required that buyers live in a city that had a Tesla service center—even though, as of mid-2014, only Beijing and Shanghai had such centers. Some high-rise apartment managers, meanwhile, balked at having chargers installed in their buildings.

The mismatch between Tesla’s approach and customer demand created a big opportunity for gray-market resellers—who bought in bulk and catered to buyers who didn’t meet Tesla’s criteria. The company had no official resellers, but the cars made their way to many, who sold in dealerships, car centers, and even on Alibaba’s TMall for more than the same models cost on Tesla’s website. “There were a lot more scalpers than we expected,” Wu now says. Others questioned whether the company was really in the dark: “Most ‘fleet’ sales were just a flimsy cover for sales to resellers,” concluded Bertel Schmitt of Dailykanban.com, an auto industry site. It was all legal, but also a sign that Tesla had strayed from the high-touch sales approach it used elsewhere.

Tesla’s first China deliveries arrived in spring 2014; Wu later told Reuters that China sales could drive 35% of the company’s growth. But that was already sounding fanciful. Tesla was hurriedly building customer-service centers, and customers outside of Beijing and Shanghai were told they wouldn’t get their cars until those centers were finished. One buyer made national news when he smashed the windshield of his own Tesla, after it arrived months later than expected. Meanwhile, the Chinese press didn’t shower Tesla with as much coverage as the West’s did. As a result, most potential customers didn’t know much about Tesla’s product. Consumers didn’t know they could charge their car at home every night like a cell phone; most thought they had to rely on the still-small Supercharger network.

By the end of 2014, Tesla’s business was a mess. About 4,700 cars had been shipped to China, but only 2,500 were sold and registered to drivers. (The company delivered 18,500 cars in the U.S. that year.) Publicly, Tesla blamed the gap on speculators who entered orders, then didn’t buy the Teslas once they shipped. But several former employees say the real problem was the lack of customer support. Says Ricardo Reyes, Tesla’s former communications chief: “I think Tesla took for granted that they were just going to succeed in China.”

By December 2014, both Chang and Wu had left Tesla. Tesla executives in California griped privately that China wasn’t so unique that it demanded a different strategy. But not long afterward, the company began an apology tour that marked a turning point. On a frigid evening in January 2015, during the Detroit International Auto Show, Musk admitted China sales were “unexpectedly weak.” That spring, he traveled to China to meet with President Xi Jinping and other leaders, tweeting that he remained “very optimistic” despite “earlier mistakes.” Reyes offered a mea culpa at the Shanghai auto show in spring 2015, the first Chinese motor show that Tesla bothered attending: “I think we have been a little bit too impatient in the Chinese market.” It was as contrite as the company would get—and the news it was generating was about to get better.

In 2015, Tom Zhu, a respected engineer responsible for China’s Supercharger network, became the top executive in the country. The company ended that year with a disappointing 3,700 cars sold, but there were slivers of optimism. For one thing, Tesla was building Supercharger locations in China at a faster pace than anywhere in the world, addressing consumers’ “charge anxiety.” About 120 Supercharger locations exist in China today, compared with 370 in the U.S., and Tesla says China will have more than 800 charging stations by the end of 2017.

Just as important: Word was getting out that buying a Tesla was easier than buying other luxury cars. In China, dealerships known as “4S stores” (for “service, spare parts, sale, and survey”) largely corner the market for popular luxury brands like BMW, Jaguar Land Rover, and Mercedes-Benz. The stores inflate costs for consumers by tens of thousands of dollars with various vague fees. Tesla’s direct-sales showrooms eschew that system. And while import tariffs increase their overall cost, Tesla otherwise prices its cars in China at the same level that it does in the U.S. after currency adjustments.

Vanessa Zhu visited three other brands before she settled on her Model X. The Range Rover dealership asked for an additional 300,000 yuan ($45,000) as its standard fee, she says; Porsche told her she had to wait three months for its Cayenne SUV and required a 100,000-yuan delivery fee. Tesla in contrast, put her on a one-size-fits-all waiting list and didn’t impose fees. “In China, a car is a symbol of your status, so most people don’t care what you pay in terms of those extra fees,” Zhu says. “But I do care. I don’t like it.”

Tesla owners also found out they could beat China’s bureaucracy in the license-plate game. China’s local governments restrict the number of drivers on their clogged, polluted streets by controlling the number of plates issued. Drivers have to wait years to get one through a lottery system. (In early 2015, 6.2 million people applied for just 36,757 available Beijing plates.) And once drivers get a plate, they are barred from driving one day a week.

But plates for electric cars now fall under different rules, thanks to the government’s push for electric vehicles. Beginning in 2014, Shanghai allowed electric-car drivers to get a license plate without facing a wait, a $12,000 plate fee, or driving restrictions. Other cities followed suit, and such policies became a boon for China’s electric-car makers. Without them, “there’s no possibility that private consumers would buy these vehicles,” says Zhang Yong, deputy general manager at the electric-car offshoot of state-owned Beijing Automotive Industry Holding Co.

The policies were game changers for Tesla too. The first six cities in China to have exempted electric vehicles from license plate restrictions: Shanghai, Beijing, Shenzhen, Hangzhou, Guangzhou, and Tianjin. The cities with the highest Tesla sales, according to Junheng Li of JL Warren Capital: Shanghai, Beijing, Shenzhen, Hangzhou, Guangzhou, and Tianjin.

While the policies helped sell Model S sedans, Tesla realized quickly that the Model X would be a much bigger story in China. China’s obsession with SUVs is 10 years old and going strong. Their popularity stems from a variety of factors: Domestic ­makers produce good models; their seating can accommodate an entire extended family; they’re widely believed to be safer; and their higher prices imbue status. German luxury-car maker Porsche’s bestselling vehicle in China isn’t a sports car but its Macan SUV.

By 2015, SUV sales were the only growing part of the Chinese auto market; in the first half of 2016, SUVs accounted for 35% of passenger-vehicle sales. It’s no coincidence, then, that a spike in Tesla sales coincides exactly with the first Model X deliveries in China, in June 2016. In the second half of last year, with the SUV available, Tesla notched 7,670 sales—about three-quarters of its total for the year in China. Tesla’s sales had finally caught up to its hype.

Close government relations are a must in China for foreign companies, and Tesla has carefully cultivated them. Like Apple, Tesla has created new businesses thanks to its demand for Chinese-made components, particularly its cars’ giant touch screens. In 2015, Tom Zhu said Tesla would double its spending on Chinese-made parts, committing to buying $500 million worth of supplies from Chinese companies that year; such spending has likely only skyrocketed.

The far bigger question mark is whether, and when, Tesla will announce plans for a factory in the country. Every car brand with significant China sales—including luxury-auto makers like Mercedes-Benz and BMW—runs a joint venture with a local partner. The government has required as much for decades. Imported cars face hefty fees, as Tesla owners are painfully aware. A Model 3 sedan’s $35,000 starting price in the U.S. becomes $50,000 in China after a 25% tariff and 17% value-added tax—a heavy lift for a middle-class buyer. “If they don’t announce plans for local production, they will struggle to sustain this performance,” says Bill Russo, former head of Chrysler North East Asia and managing director of Gao Feng Advisory in Shanghai.

Tesla remains cagey about what those plans could look like. Dong Yang, the auto lobby official, says several potential local partners are courting the company, and that multiple provinces and municipalities want Tesla to build a plant with them: “They all offer better and better options,” Dong says. In May, Musk said Tesla would more clearly define its plans for China production by the end of this year; a spokesman declined to give further details.

Tesla Joins a Very Exclusive Club

When Fortune introduced its list of the 500 largest U.S. companies by revenue, in 1955, it included five U.S. automakers. By 1999, only Ford and General Motors remained. Tesla is the first new car manufacturer ever to join the list. Here, a look at Fortune 500 carmakers from years past.

Tesla may be hesitating because of today’s sales numbers. If you build fewer than 100,000 vehicles a year, it doesn’t make sense to manufacture in China, says Steve Man, analyst at Bloomberg Intelligence in Hong Kong. Tesla’s factory in Fremont, Calif., can churn out more than 500,000 vehicles annually. Even if it doubles China sales this year, Tesla will just pass 20,000 cars. It faces a catch-22: It won’t sell cars at lower prices that drive sales if it doesn’t produce them locally, but local production won’t be economical until sales rise drastically.

Intellectual property is a looming headache as well. Critics of Chinese business practices argue that Tesla faces certain IP theft as soon as it brings manufacturing into China. “Yes, some of its tech will be stolen,” says Crystal Chang, a lecturer at University of California at Berkeley who studies China’s auto market. But Chang adds that the danger inherent in that theft is overstated. “Just stealing tech does not make [a rival] a competitor,” she says. “It’s all about brand.”

Today more than a dozen Chinese-backed manufacturers (many of them American startups that now have Chinese owners) are tripping over one another to promote their electric cars and acceleration times; Faraday Future, Karma Automotive, NextEV, and Future Mobility are but a few. But most are likely to be stuck in the concept or prototype phase for the next several years—even as Teslas zip across China.

That’s one reason Tesla may be able to reach an agreement to produce cars in the country on favorable terms. China lusts after Tesla’s technology but also its management practices. And Tesla already offers its patents to anyone who asks—making it highly plausible that Musk would agree to more information-sharing in return for a vastly expanded market for Tesla’s cars.

One big Chinese corporate player seems to have no doubt about Tesla’s prospects. In late March, Tencent, the politically connected technology giant that recently became one of the world’s 10 largest publicly traded companies, said it spent $1.8 billion buying Tesla stock. Not long afterward, Tesla’s market capitalization edged past that of General Motors, making it the most valuable American automaker.

On a recent Sunday night, three dozen prospective buyers gather in a Tesla showroom in Beijing for a wine tasting. The crowd of mostly thirtysomethings skews wealthy, and cares some about the environment, but they’re mostly in awe of the brand. Tesla’s buyers’ circle has expanded to include the rich along with the very rich. Jeff Yu, whose family runs a yogurt business, thought about buying an SUV from Mercedes-Benz or Maserati, but was put off by their glitz. “Tesla is a tech thing. That’s my taste,” he says.

Evan Qu, a slim man sporting a designer shirt and Buddhist wrist beads, sells audio equipment; he thinks executives at his biggest customer, CCTV, the central broadcaster, will appreciate the environmentalist aura of the Tesla when he rolls up to their next meeting. “This car helps you get more deals,” he says. On Tesla’s website, he’s customized his Model X—color: ocean blue—for a total cost of 1.2 million yuan ($175,000).

A waiter refills Qu’s glass as a promotional video on a loop in the background underscores his aspirations. Choose a Tesla green vehicle, it says, over and over, to advance a better life in the future.

A version of this article appears in the June 15, 2017 issue of Fortune with the headline “Tesla Makes a U-Turn in China.”

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Driving Large Scale Electrification of China’s Automotive Industry

Gao Feng Insights, May 2017

China’s automotive industry is entering a period where discontinuities and disruptions are likely to reshape the competitive landscape – and this represents an opportune time to guide the development in alignment with China’s overall industrial development goals.  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 the next decade.

Leveraging new energy and connected vehicle technology as entry points for accelerating auto industry development and transformation, the policy’s objective is to transform China from the largest auto market to a global leading automotive production base.  Specifically, the guideline sets a goal for Chinese new energy vehicle[1] (NEV) companies to be among the Top 10 NEV companies worldwide by 2020, and to further expand their global impact and market share by 2025.  A target has been set for the domestic NEV sales to reach 2 million units by 2020, and 7 million units by 2025 (20% of total vehicle sales).

Chinese automakers have struggled to reach a global leadership position in the automotive industry due to their relatively short history and lack of technical experience in advanced automotive technologies centered on the internal combustion engine.  The NEV market opens a window for China to potentially level the playing field and assume a more competitive position versus the global industry, as multi-national players have not yet established a sustainable market leadership position.

[1] New Energy Vehicles include Plug-in Hybrid (PHEV) and Battery Electric Vehicles (BEV)

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

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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