Car shar­ing

The auto in­dus­try must pool re­sources to meet the chal­lenges of the 21st cen­tury

The Daily Telegraph - Business - - Front Page - Li Shufu

The theme of the 15th Bei­jing auto show, start­ing later this month, is “Steer­ing to a New Era”, and re­flects the chal­lenge fac­ing the whole in­dus­try: all car­mak­ers must ad­just to an era of tech­nol­ogy dis­rup­tion, tougher reg­u­la­tions and chang­ing own­er­ship pat­terns.

For the past 20 years or so, com­pa­nies fo­cused on re­lent­less cost-cut­ting, just-in-time de­liv­er­ies, fewer plat­forms, and ef­forts to en­hance pro­duc­tiv­ity. Brands that were in­ef­fi­cient or lacked scale sim­ply dis­ap­peared. In their place, chal­lenger brands ar­rived with en­tirely new busi­ness mod­els: from DiDi to Uber and from Waymo to Tesla.

In less than a gen­er­a­tion, a pha­lanx of new brands also emerged to serve the world’s largest auto mar­ket: China. They in­clude new-en­trant brands such as Nio and Fara­day Fu­ture. Do­mes­tic Chi­nese brands are fight­ing for a share of a mar­ket with 185 mil­lion ve­hi­cles on the road and where an ad­di­tional 30 mil­lion cars could be sold this year.

But China faces the same is­sues im­pact­ing ma­ture mar­kets such as North Amer­ica and Europe. We are bat­tling with con­ges­tion and pol­lu­tion. Reg­u­la­tions are hard­en­ing: the Chi­nese gov­ern­ment has man­dated that 20pc of in­dus­try vol­umes should be low-emis­sion “new en­ergy ve­hi­cles” by 2025. Con­sumers also want the same cleaner, in­creas­ingly au­tonomous, in­tel­li­gent, con­nected cars and in­fra­struc­ture that are be­ing de­vel­oped in other mar­kets.

Chi­nese brands need to think be­yond their own borders. This is recog­nised by Zhe­jiang Geely Hold­ing Group, which I founded in 1997. It is to­day China’s largest pri­vately-owned car group. We have re­shaped busi­ness at home and ex­panded over­seas.

Our in­ter­na­tional ex­pan­sion has been dom­i­nated by the suc­cess­ful trans­for­ma­tion of Volvo Car Group, which we ac­quired in 2010 from Ford. Volvo has re­dis­cov­ered its di­rec­tion, re­turned to prof­itabil­ity and grown over­seas, cre­ated promis­ing global syn­er­gies – in­clud­ing by man­u­fac­tur­ing in China, for China and for ex­port. We sub­se­quently ac­quired the Lon­don Taxi Com­pany in 2013, since re­named the Lon­don Elec­tric Ve­hi­cle Com­pany, to pro­duce the first elec­tric black cabs from a new plant in the UK. Last year, we ac­quired a ma­jor stake in Pro­ton of Malaysia with full man­age­ment rights and a con­trol­ling stake in Lotus Cars in the UK.

At the end of 2017, we be­came the big­gest holder of share cap­i­tal in Volvo AB by agree­ing to ac­quire 8.2pc of the share cap­i­tal, and 15.6pc of the vot­ing rights. In Fe­bru­ary 2018, we ac­quired a 9.7pc stake in Daim­ler to be­come the sin­gle largest share­holder in the Ger­man group.

The fu­ture of the in­ter­nal com­bus­tion en­gine is now in doubt. Our in­dus­try must think about new ways both to co-op­er­ate and in­no­vate. Few com­pa­nies can do this in iso­la­tion.

This re­al­ity check un­der­lines part of our think­ing be­hind re­cent in­vest­ments in both Daim­ler and AB Volvo. These com­pa­nies, like our own, are con­tem­plat­ing a world of dis­rup­tive tech­nol­ogy and soft­ware, and ever-chang­ing prod­uct us­age. We must con­sol­i­date from be­ing hard­ware man­u­fac­tur­ers into tech­nol­ogy com­pa­nies of­fer­ing on­line and dig­i­tal so­lu­tions, as well as mo­bil­ity ser­vices. As we make that tran­si­tion, we be­lieve that more com­pa­nies will need to co-op­er­ate on fu­ture tech­nolo­gies and com­mon sys­tems, which can be achieved with­out jeop­ar­dis­ing their in­tel­lec­tual prop­erty rights or unique brand po­si­tion­ing. They must do so with­out com­pro­mis­ing strate­gic au­ton­omy and with­out risk­ing anti-com­pet­i­tive be­hav­iour to de­liver cross-in­dus­try co-op­er­a­tion that com­plies with mar­ket reg­u­la­tions and that is also trans­par­ent and open.

The les­son we ap­plied at Volvo Car Group has been to pro­tect brand and prod­uct in­de­pen­dence. But we also recog­nise there are long-stand­ing pos­si­bil­i­ties to ex­plore part­ner­ships and co-op­er­a­tion in a mar­ket-ori­ented man­ner. If any po­ten­tial part­ner­ship meets the re­quire­ments of laws and reg­u­la­tions, all bi­lat­eral and mul­ti­lat­eral co-op­er­a­tion of mu­tual ben­e­fit can and should dis­cussed. This is one of the pow­er­ful at­trac­tions of the mar­ket econ­omy, with open­ness to­wards shared strate­gic in­no­va­tion.

This is nec­es­sary if we are to en­sure the com­mer­cial vi­a­bil­ity of nextgen­er­a­tion tech­nolo­gies. We must ex­plore the pos­si­bil­ity of ex­ten­sive al­liances in­stead of evad­ing re­al­ity. We must of­fer new tech­nolo­gies in ways that prom­ise a re­turn on in­vest­ment. New mo­bil­ity ser­vices such as CaoCao, the Chi­nese ride-shar­ing ser­vice, pro­vid­ing elec­tric ve­hi­cles in more than 20 cities with 16,000 elec­tric ve­hi­cles, are clearly de­sir­able. But as such ser­vices grow in­ter­na­tion­ally, they must have a pay­back and can­not burn through funds.

This is our in­dus­try’s key chal­lenge: how to nav­i­gate the era of change in ways that are sus­tain­able and prof­itable. It must be pos­si­ble to lever­age global economies of scale and to re­duce risk, while re­spect­ing brand in­de­pen­dence and man­age­ment au­ton­omy. Equally, it must be pos­si­ble to en­hance share­holder re­turns while pre­serv­ing and re­spect­ing prod­uct dif­fer­en­ti­a­tion and IP rights.

This is not a threat to strate­gic in­de­pen­dence. It is a com­mer­cial re­al­ity. As our in­dus­try con­tin­ues to trans­form, we must har­ness the op­por­tu­ni­ties of the in­ter­net age. We need to es­tab­lish a com­pet­i­tive edge, es­pe­cially in ar­eas cov­er­ing ve­hi­cle tech­nol­ogy and re­lated dig­i­tal ap­pli­ca­tions in a prac­ti­cal and downto-the-earth man­ner. This ef­fort will be­come even more im­por­tant as tech­no­log­i­cal progress re­shapes the busi­ness world as we know it. In the au­to­mo­tive in­dus­try, this will mean mov­ing to a plat­form busi­ness model in which tech­nol­ogy is in­creas­ingly shared. So tra­di­tional au­tomak­ers need a self-awak­en­ing. Those will­ing to join hands with each other to forge pro­pri­etary dig­i­tal plat­forms, which will can be shared and utilised by their dif­fer­ent brands, will hold a win­ning for­mula as our sec­tor be­comes in­creas­ingly com­pet­i­tive. Re­spect­ful co-op­er­a­tion, recog­nis­ing mu­tual in­de­pen­dence, of­fers a new route to nav­i­gate this trans­for­ma­tion.

It is not with­out risks. With frank dis­cus­sions – con­ducted fairly, trans­par­ently and com­pli­ant with all le­gal rules – we can de­liver lon­glast­ing re­wards for in­vestors and stake­hold­ers alike.

‘Those will­ing to join hands with each other to forge pro­pri­etary dig­i­tal plat­forms will hold a win­ning for­mula’

Pol­lu­tion fears: China has de­manded that 20pc of auto in­dus­try vol­umes should be lowe­mis­sion ‘new en­ergy ve­hi­cles’ by 2025

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.