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Smart EVs to drive Made-in-China 2025 (III)

With a theme of “Smart EV: How it Defines Made-In-China 2025,” CBU’s 21st annual international conference was held in Beijing on May 24-25 in association with CCPIT-Auto.

The one-and-a-half-day event featured 18 speakers from Chinese and global OEMs, suppliers, new startups, industry think tanks and consultancies who shared their insights and perspectives on topics such as Policy, Regulations & the Market; The New Car Manufacturing Movement: For Dough or Show?; Supplier’s Role in Defining Made-in-China 2025; Autonomous Driving & Telematics: Can China Take the Lead?; Smart EVs and Made-in-China 2025: OEM’s Role; and Made-in-China 2025: Evolution of the Industry Chain. Following are highlights of the event. – Editor


Feng Wutang: Chery to build delicate small NEVs and cost effective large ones

Chery’s small-sized NEVs should be energy-saving with delicate consumer experience, while its larger ones should have longer ranges and be the most cost effective, said Feng Wutang, vice president of Chery Automobile Co., Ltd.

As a veteran in the traditional car industry, Feng thinks there is too much criticism on gasoline vehicles regarding traffic safety, energy security, pollution and congestion, which is irrational. He took traffic safety as an example. The annual death toll of traffic accidents stands at 1 million globally and 100,000 for China alone. Though a shocking number, most of traffic accidents are not caused by automobiles, but drunk driving, fatigued driving or lack of facilities. When checks on drunk driving in China tightened, death rate halved, the number decreased to 30,000 in 2014, according to Feng. “If fully autonomous driving (L4 autonomous driving) are massively promoted, which supposed to reduce 90 percent of accidents, it would be a blessing for the world,” added Feng.

Chery’s aim is to achieve L2 autonomous driving by 2018, L3 by 2020 and L4 by 2025.

He thinks the industry players are ready to embrace the change brought on by electrification and smart connectivity. Traditional OEMs have progressed on power, smart manufacturing, big data based R&D and digital marketing and their efforts on NEVs have reestablished the auto ecosystem, said Feng.

As for Chery, Feng is proud that it has 30 units of BEVs running inside the Zhongnanhai (central headquarters for CPC and State Council of China) since 2012, an honor and name card for the brand.

Feng believes product safety, phasing out of subsidy policies, innovative consumer experience and sources for clean energies are worth noticing on NEV development. He also summarized Chery’s strategy on NEVs as “457” – 4 platforms, 5 interchangeable branch systems and 7 core technologies.

Feng believes the core of future auto industry is “character,” which is quality plus taste. Chery has pursued on quality and brand rather than scale and growth speed since 2010. J.D. Power’s 2015 China IQS study showed that Chery’s IQS score is already on a par with foreign brands.


Paul Lin: Vehicle as future mobile terminal can profit through app-like new models

A 1.5 hour ride in a car daily can provide quite a lot of data, which is a profitable business. The vehicle as future mobile terminal may profit not through sales or maintenance, but apps installed within or from other business modes, according to Paul Lin, vice president of Yudo New Energy Vehicle Co., Ltd.

“In the future, intercity travel in China would not be a frequent activity, instead taking a high speed train from city A to city B will be the most popular option,” Lin said. 

When commuting inside a city, one usually drives for 50 km, which is within the range of most EVs, while for some people who travel between cities, they require longer ranges. So Lin believes different ranges cater to different groups of people: 200 km for one type and 400 km for another.

Lin recalled his experience to reflect on the Chinese EV market: it soared in 2013 when the government released a policy package to support the industry. Many NEV models were shown at the Shanghai Auto Show that year. Most OEMs decide to go for EVs, but they choose different ways. “One is to make a car to hit the market as soon as possible, the other is to build a real pure electric vehicle from scratch,” said Lin.

“Building a car from scratch into a fully tested car, this requires at least 30 months,” so he predicted that “The peak will be the second half of this year and next year. We will see more and more NEVs or pure EVs developed coming from scratch to hit the market.”

Lin believes the market will grow slower later because it is a bit overheated. The explosive market saw too many players, some even under average levels, with few models thus the government would cool down the market, according to Lin.

Driven by policy and environmental protection needs, the EV industry faces challenges regarding battery, charging facility and range.

For battery, the cost is much too high. Balance point has to be found between lightweight of a vehicle and batteries it carries. While for charging facilities, Lin thinks it should be the least concern. It is a growing pain which would continue for years, but the building of facilities should go together with selling of EVs. As for range, he cited Tesla to prove the range alone cannot be the problem.

Some say Tesla’s core strength comes from BMS, lightweight or software, but Lin believes it is because that Tesla has found the perfect balance on body weight, battery cost, software and target customers.  

As for Yudo, Lin introduced from three aspects that it would use 18650 batteries which have the highest energy density together with advanced BMS system; focus on cloud share platform or HMI system to provide services such as car sharing; and flexible business models including B2B and B2C. 

Besides these, Yudo enacts a comprehensive sales and marketing strategy which includes car selling, rental and sharing. It has also developed an advanced diagnosis system which can push program to fix problems and thus save consumers’ labor into shops 

Yudo’s core competency can be summarized as core technology, lightweight, battery technologies, intelligent interconnection and safety, said Lin.


Chen Quanshi: Bring Chinese NEV brands in line with international advanced level

We must bring Chinese energy-saving and new energy vehicle brands in line with international advanced level, urged Chen Quanshi, director of Auto Research Institute with Tsinghua University.

“We have some 10 years, but if left undone, we will be out of the game,” said Chen.

He agrees with the point of a famous strategic analyst that electricity would become the main power to drive a car and the shift of fuel and combustion engine to E drive would greatly simplify the inner structure of a vehicle. E-control systems would be applied more to leave vehicles with more functions. Like computers or cellphones, vehicles would be able to be upgraded every one or two years to gain more functions.

He believes wireless charging and autonomous driving are two indispensable technologies for NEVs and should be developed and applied simultaneously.

The Chinese government’s great effort on promoting NEVs is not only to meet energy-saving and carbon emissions reduction targets, but also pressured by huge oil import demand owing to large number of vehicles on the roads, according to Chen.

Chen quoted words by Minister of Science and Technology Wan Gang that “developing electric vehicles shoulder both social responsibility of environmental protection and historic mission of industry upgrading” to emphasize the importance of the NEV industry.

Chen believes that subsidy policies on NEVs must be adjusted.

The Ministry of Finance would subsidize more on electricity while less on traditional fuel. Policy enacted in 2015-2019 period says that subsidy on fuel would gradually decrease on the 2013 basis, with a 60 percent drop by 2019. E-buses would be promoted first in key provinces and cities with heavy air pollution, then to central regions and last to other regions. Electric buses and new energy buses should take 80, 65 and 30 percent respectively by 2019 in the total number of newly brought or replaced buses in these three regions. Subsidy would be given in full consideration of factors like range, length, capacity, curb weight and energy consumption, thus to guide the healthy NEV industry development.

Chen also pointed out problems hidden behind the explosive NEV market.

On vehicles themselves, because of immature technologies, there might be some safety problems. To say, some vehicles’ ranges greatly discounted, some cannot run in winter due to unreasonable designs, according to Chen. Examination and check is also a problem. Rules, equipment, personnel and training are all urgently needed.

There are also safety, performance degradation and price problems for batteries alone, not to mention BMS systems and charging modes. 

When asked what the most wanted NEV products are, Chen answered that consumers should be educated to choose cars by real needs, not just go for bigger sized expensive ones, which he believes is a waste of money and contradicts with national policy on environmental protection.

Currently with still relatively low battery performance, Chen believes it is meaningless to develop EVs with too long ranges by adding too many batteries. In his opinion, one gasoline car for long-distance travel and one EV for daily commuting fit well at present.


Jack Perkowski: EV + Internet to afford Chinese automakers chances of corner overtaking

Jack Perkowski, founder and chairman of JFP Holdings, believes that overseas M&As by Chinese companies can help them rapidly accumulate technologies and experience and the aftermarket is the largest development opportunity for China’s automobile industry.

“Electric vehicle and Internet+ will grant Chinese automakers chances of corner overtaking,” commented Perkowski.

Many Chinese enterprises have merged or acquired overseas companies, especially in the electric vehicle sector, and Perkowski believes this phenomenon will continue for a long period of time. Market diversification as well as the slowdown and reorientation of China’s economy prompted Chinese automakers to acquire overseas entities. The favorable government policies also grant freedom to the largest extent in M&A. The desire for technology and knowhow urged more and more Chinese companies to expand beyond borders. Moreover, as much sales revenue in China are RMB dominated, it is a golden time for enterprises to merge companies in the U.S. and Europe for the sake of currency arbitrage.

The desire to be global players also impelled Chinese companies to be involved in overseas M&A.

“The aftermarket is the most promising segment of China’s auto market,” said Perkowski. The average service life of a car in the U.S. is 11 years while that in China is only five years. As time goes by, there will be more cars on the roads of China with longer service life, which is bound to boom the aftermarket in China. Current aftersales service of components and warranty in China just covers a single city or a province, let alone a whole country, and the situation will change for sure in the next five years.

Many industries in China are not seeing any growth space and electric vehicles and smart vehicles, as an emerging market, have earned huge attention of investors. Total auto sales are around $1 trillion worldwide and make the auto industry the only one with scale growth. Different from traditional automakers, who eye automobile as a product, the newcomers refer automobile only as a device that they can sell other services through it. It might be hard for Chinese automakers to realize corner overtaking simply through electric vehicle production, however, it might come true when the automakers combine electric vehicle and the internet, predicted Perkowski. EV + internet will overturn the rules and is apt to account 50 percent of passenger vehicle sales in the future. Internet+ vehicles developed by Alibaba or Baidu will be much more promising in the local market than Google-based vehicles, predicted Perkowski.


Shah Firoozi: Combustion engine will continue to exist and China is the greatest EV hope

Shah Firoozi, founder and CEO of PAC Group, believes that internal combustion engines will not vanish for at least 30 years and China is the greatest EV hope around the world given the government’s determination. The change of automobile will bring about cleaner air and environment and higher fuel efficiency with human beings experiencing unprecedented changes in behavior, lifestyle and family relations, said Firoozi.

Most auto companies has the word “motor” in their names – such as Ford Motor and General Motors, for they own the engine technology which controlled the entire auto industry in the last century. Nevertheless, those who control IT technologies such as big data processing will have more advantages in the automobile industry in the future, and the word “IT” might be included into the names of auto companies, predicted Firoozi. 

Firoozi also believes that ICE-powered vehicles as well as gasoline and diesel engine vehicles will still exist in the next 30 to 50 years, especially in under developed regions such as Africa. He is confident that if Chinese president Xi Jinping wants five million NEVs on the roads by 2020, the country will meet that goal. But, how to stabilize the NEV model in the long run after the subsidies are phased out will be the toughest challenge confronting China, according to Firoozi.


Vanessa Moriel: Only those that can adapt will survive

Vanessa Moriel, managing director Asia of LIASE Group, shared the impacts of internet+ automobile trend to traditional and new automakers in terms of talents cultivation and the development of the new market through a bunch of recent executive shuffling examples.

According to Moriel, traditional carmakers turning into internet vehicle makers is an inevitable global tendency with moguls of every segment having started the process. However, many traditional automakers are still reluctant to innovate, change and decisions are often slow. With conservative mindset, people in traditional automakers are unable to start from scratch, which can also be seen from the talent recruitment procedure. For example, Didi Chuxing, a major Chinese ride-hailing service company, usually hire a talent within one day, while it takes two whole weeks for a traditional carmaker to complete its recruitment process for a new staff.

Some traditional carmakers regard themselves no longer as a car company and their employees hold such a contradictory attitude and consider the change an absolute negation of their origin and path. Neither can they call themselves an internet carmaker, with the identity bewilderment remains a big challenge for the management team and staff. 

Moriel suggested carmakers to better coordinate with suppliers and figure out a new way of sharing and cooperation in the new ecosystem. Sometimes a carmaker may not want to cooperate with the same supplier continuingly for the sake of cost reduction, which could trigger a change of relations. Only those who could adapt to and fit into the new environment will truly survive, according to Moriel.

The fundamental problem for Qoros, a controversial company, is that Qoros does not own a team or team attraction, said Moriel. The talents were from McKinsey, Volkswagen, and other major OEMs and suppliers with different backgrounds, but they could not work together harmoniously, which led to the predicament of the company, commented Moriel from a HR perspective.

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