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Executives discuss car making in mobile internet age at December MAS in Beijing

CBU/CAR held its third Monthly Automotive Salon (MAS) in Beijing on December 9, with a theme of: Automobile+ vs. Internet+ The Making of an Automobile in the Digital Age. Around 20 executives from OEMs, suppliers and consulting companies attended the event held at the Great Wall Sheraton Beijing. Lu Qun, chairman of CH-Auto Technology, and Erman Wang, co-founder and CEO of EnnoHub Technology, shared their perspectives on opportunities and challenges of both traditional carmakers and internet companies in the making of an automobile in the digital age. Following are highlights of the event.Editor

Industry disruption won’t necessarily come from internet companies

Lu believes that automotive industry will be disrupted someday, but disruption may not necessarily come from internet companies. Many new players are jumping into the automotive industry because the mobile internet age is coming, not because of EVs.

Internet companies believe that they can do everything and disrupt every industry. They are ambitious because we are now in the internet era, which is easier to build a brand and make the brand known by customers because the internet improves efficiency. All those internet people want to use their internet thinking to build traditional cars and they think they can do it in quite new and different ways.

Internet companies have an opportunity to make vehicles which are as good as Volkswagen and Toyota cars if they keep doing right things, but we cannot attribute all technological improvements to the internet, said Lu.

The competition will be about traditional vehicles vs. electric vehicles, not traditional carmakers and “internet” carmakers.

Building an EV is still quite difficult. Traditional carmakers built their electric vehicles based on combustion engine-powered vehicles. They did not develop new chassis and platform for EVs. This is very dangerous because cost structure of EVs is very different from that of traditional combustion engine-powered vehicles. Batteries are very expensive. If traditional OEMs do not change the way they build EVs now, they will not be able to sell any EVs at all once government subsidies are eliminated.

Internet companies may not have to resolve difficulties in vehicle engines and transmissions, but they are faced with challenges in other respects, for example, vehicle body, chassis, quality control, supplier and manufacturing process management.

Everybody has opportunities. The people who combine new ideas, business models and technologies with traditional vehicle manufacturing smoothly and efficiently will be the winners.

When asked about suppliers’ strategic changes amid fast growth of EV sector in China, Lu shared different attitudes of three types of supplier groups towards cooperation with CH-Auto.

Almost all large Chinese suppliers in traditional automotive industry refused to cooperate with CH-Auto on components development as they question its vehicle manufacturing qualification. However, multinational suppliers such as Bosch are very active to build partnership with CH-Auto. Battery suppliers, such as Samsung, LG and new materials such as aluminum magnesium alloy and carbon fiber manufacturers are also intending to cooperate with CH-Auto.

Lu disclosed that the company is building a green field plant in Suzhou, Jiangsu Province and will launch it at the end of 2016 or early 2017. CH-Auto has built 15 prototypes and sent them to be tested by China Automotive Technology and Research Center (CATARC) in Tianjin. The company will receive all test reports at the end of the year and then get the government’s license, according to Lu.

“The most basic concern of the people is how to make charging as easy as refueling, but do we need exactly the same convenience? No, we just need convenience, rather than ‘the same’ convenience as refueling,” said Lu.

The gas station is backward notion in the human transportation system because gas refueling is neither convenient nor efficient and the EV recharging should be made even more efficient and convenient, according to Lu. Gas station is not the best energy refueling method. The reason to build gas stations is because gas is very dangerous and very difficult to be transported, but electricity is easier to be transported and it is everywhere. It is possible that EVs can be charged anywhere and anytime after infrastructure improves and there will be no range anxiety then.

Lu believes that building EVs with very long range is not difficult for OEMs and the only solution is to put more batteries on the vehicles. The problem is cost. EV’s marginal cost is very high because batteries are very expensive. Buying long range or short range EVs is customers’ choice.

“Don’t use yesterday’s solutions for tomorrow’s questions. It is a new age for the new mobility idea, and what we need to do is breaking down the walls in our minds,” said Lu.

Apple and Google may not want to become carmakers

Wang believes that Google and Apple may not intend to make cars eventually, but just want to be suppliers. New players in the industry have to build key advantages over others and differentiate themselves to be successful, but “I have not seen any Chinese newcomer having the advantages even they say they have,” said Wang. “Newcomers need to be good at something if they want to make their names known in a very short period.”

Internet carmakers’ contract manufacturing with traditional OEMs which are not capable of making good quality cars will be unsustainable because quality is the fundamental thing, according to Wang.

Wang does not believe internet companies will disrupt the automotive industry which is very complicated, but thinks they will have a chance to make a difference if the battleground changes because building an electric car is much easier than a traditional car. The newcomers would have opportunities.

Wang suggests buying new, immature technologies from foreign companies if Chinese traditional carmakers have the capital because the technologies will become Chinese companies’ effective weapon once they are commercialized in such a large economy.

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