The Chinese Are Coming - #40


Page 1: Why Electrics? 327 Million Reasons  
Page 2: Electrics • Autonomous • Ride-Sharing • New Deals

The Chinese Are Coming is sponsored by:

Screen Shot 2019-04-04 at 9.59.54 PM.png

Western tech and auto executives, wading among scores of EV models at last week's Shanghai Auto Show, want to know this: Why is China so hell-bent on electrics?  

After all, who makes money on electric vehicles? 

Chinese policy makers shrug off the short-term financial pain and point to three massive motivations for EV leadership:  

1. China depends too much on oil, especially imported oil
2. Chinese city skies are thick with dirty car emissions
3. Electrics present an opportunity to lead (not follow) in a cutting edge technology

China imports more oil than any other nation, so the risk of an oil addiction is the most important factor.  

At the end of 2018, there were 327 million cars and trucks running on Chinese roads, far ahead of America and other wealthy countries. 

Vehicle Populations by Country:

China: 327 million
US: 276M
Japan: 69M
Germany: 46M 

By 2020, China will have a car population nearing 400 million. Gas prices in Beijing and other major cities range from $3.98 to $4.47 per gallon.

Imagine the national gasoline bill.

Friends of mine in Beijing, a professional couple in their thirties with one child, tell me they spend $200 per month at the pump. Do the math and we can see that Chinese consumers will soon be spending in the neighborhood of $100 billion (400 million x $200  x 12 months) on gasoline - every year.

No wonder China is racing to encourage EV growth -  1.6 million EVs this year, 5 million annually by 2025, 10 million by 2030.

But wait a minute. Won't China run into similar cost and addiction issues with lithium and cobalt, the raw materials so critical in battery manufacturing?  No question. Therefore, in a significant new policy designed to hedge against too much reliance on electrics, China has also set targets for hydrogen-powered cars: 50,000 per year by 2025 and an ambitious one million per year by 2030.

Ten years from now, China will have cemented a trifecta: First in total car sales, first in EVs and first in hydrogen-powered cars. And second place will not be close.

Where is America's response? 




>> Aiways. Executives declare they will not need dealers for Europe and US market entry in 2020. 

Photo: Aiways U5, an electric 5-seat SUV

Photo: Aiways U5, an electric 5-seat SUV

>> Takeaway: Chinese EV makers see an opportunity to bypass dealers both in the United States and Europe, preferring a direct relationship with the consumer.

>> Karma. China's Wanxiang group acquired Fisker out of bankruptcy in 2013 and renamed the LA-based company “Karma.” Now Karma plans to start China sales this summer, says CEO Lance Zhou.  

>> Designed in America, Made in China: Karma hopes to leverage its based-in-California and designed-in-California brand positioning to win over new buyers in China. 

>> Volkswagen. Plans to make 22 million electric vehicles globally by 2028, half of them in China. 

>> Market Dominance Part II: In the late 1990s and early 2000s, VW won 50% market share in China, producing conventional gasoline sedans like the Santana and Jetta at scale. VW's aim is to accomplish the same with electrics in the 2020s. 

>> Qiantu. Chinese premium electric sports car brand, Qiantu, debuted at the NY Auto Show last week. The company plans to introduce the K50 to the US market in 2020. (Qiantu, pronounced Chien-Too, means "future" in Chinese). 

Photo: Quiantu K50, an electric two-seater

Photo: Quiantu K50, an electric two-seater

Like Karma, Qiantu is aiming for super luxury buyers in key global markets, including China, the US, Europe and the Middle East.


>> Aptiv.  This tech-focused tier one supplier, which spun off from Delphi in 2017, is opening an Autonomous Mobility Center to test vehicles in and around Shanghai. 

Screen Shot 2019-04-23 at 7.58.49 PM.png

Takeaway:  American autonomous tech companies smell opportunity in the People's Republic. By 2030, AVs could account for two-thirds of all passenger miles traveled in China, while generating $1.1 trillion in mobility services, says McKinsey. 

>> Volkswagen. China's number one passenger carmaker plans to make China a major hub for AV software development, drawing on its 5,000 Chinese engineers. 

Takeaway: Who is VW's natural AV partner, aside from maybe Ford? Will the proud German company try to get to Level 4/5 autonomy on its own, by way of China innovation centers?  

>> NXP.  The Dutch chip maker is investing in Chinese autonomous tech company, Hawkeye Technologies.  Co-founder Alex Shi was previously leading Alibaba's Banma Network division. 


>> Didi. Reveals that its core business - ride-hailing - may not be sustainable over the long term. 

Takeaway: Despite overwhelming market share dominance (estimated at 80%) Didi lost an estimated $1.1 billion in 2018 and had to lay off 2,000 workers.  


>> China Tech Global Drive.  A mapping of China's Top 12 tech companies reveals China's global tech reach: 52 5G networks, 140 overseas offices and 115 investments or joint ventures.

The Top 12:
Huawei - Tencent - Alibaba - Baidu - China Telecom - China Mobile
China Unicom - ZTE - CETC - HiKVision - BGI - Wuxi Apptech

Takeaway: China is not only pushing "up" to advanced tech capabilities, its companies are also pushing out to neighboring countries in Asia, central Asia and the Middle East. 

>> CATL/Huawei: CATL inks agreement to cooperate with Huawei in EVs.

Takeaway: Huawei is a magnet for controversy in the US, over its apparently tight relationship with China’s Communist Party. Now the telecom giant is making a major move to enter the auto industry, starting with China's largest battery maker.