start your en­gines

Will tech com­pa­nies or tra­di­tional au­tomak­ers win the race to mar­ket China’s next gen­er­a­tion of smart cars?

NewsChina - - ECONOMY - By Min Jie and Li Jia

When you ar­rive at a high-speed train sta­tion, a driver­less car comes to you. You can get in the car and leave the sta­tion. The car brakes au­to­mat­i­cally and steers more pre­cisely than a per­son. It does not have the prob­lems of drunk driv­ing, drowsy driv­ing or tex­ting while driv­ing.” It's a vi­sion that would en­rich our lives and save us time, as we can con­trol the fa­cil­i­ties in our apart­ment or of­fice on our way. This is how driver­less cars will change our lives in the fu­ture when they be­come a com­mon means of trans­porta­tion, ac­cord­ing to Chen An­ning, gen­eral man­ager of car com­pany Ch­ery, as he ad­dressed a fo­rum on April 25 at Bei­jing's Auto China 2018 ex­hi­bi­tion. There, he un­veiled the com­pany's roadmap for smart travel, and pledged to mass pro­duce its Level 3 self-driv­ing car by 2020, which would of­fer full au­to­ma­tion in cer­tain con­di­tions but re­quire driver in­ter­ven­tion in an emer­gency.

The same day at the same show, Bei­jing­based Sin­gu­lato Mo­tors an­nounced it would de­liver its first smart car at the end of the year, an elec­tric spe­cial pur­pose ve­hi­cle with some self-driv­ing fea­tures. Two days later, it pledged to re­lease a third gen­er­a­tion car in 2019. It also an­nounced a part­ner­ship with Bei­jing Automotive In­dus­try Hold­ing Com­pany (BAIC) to de­velop smart and new en­ergy mo­tors (new en­ergy refers to bat­tery elec­tric ve­hi­cles and plug-in hy­brid ve­hi­cles).

Un­like Ch­ery or BAIC which have years of au­tomak­ing ex­pe­ri­ence, Sin­gu­lato de­fines it­self as an “in­no­va­tion-ori­ented in­ter­net com­pany.” Be­fore join­ing the com­pany, share­holder-ceo Shen Haiyin worked in the com­put­ing and in­ter­net sec­tor for more than 20 years, in­clud­ing as a se­nior ex­ec­u­tive for ma­jor com­pa­nies. Over the past four years, an ar­ray of new car brands have been cre­ated by startups sim­i­lar to Sin­gu­lato.

Known as a “new force in au­tomak­ing,” they fo­cus on new en­ergy smart cars, and plan to bring their brands from con­cept to mass pro­duc­tion within the year. Vet­eran au­tomak­ers em­ploy the same strat­egy. The com­pe­ti­tion prom­ises to shape the cur­rent and the fu­ture jour­ney of China's car in­dus­try.

Green and Smart

At car in­dus­try fo­rums held in Bei­jing in April, ex­ec­u­tives, re­searchers, govern­ment of­fi­cials and PR rep­re­sen­ta­tives of Chi­nese auto gi­ants and tech com­pa­nies dis­cussed the com­ing era of new en­ergy smart cars.

Li Qing­wen, di­rec­tor of Carbingo Acad­emy, an on­line plat­form that ad­vises car buy­ers, told the 10th An­nual Global Auto In­dus­try Sum­mit that new en­ergy au­tos are a “nec­es­sary stage” and smart cars the “most sen­si­ble strate­gic choice” for China's auto in­dus­try on its path to the fu­ture.

Al­though Tesla im­me­di­ately im­pressed the mar­ket with its pow­er­ful bat­ter­ies, it im­pressed Shen more with its in­te­gra­tion of the in­ter­net into ve­hi­cles. Shen drove a Tesla for the first time in 2014 af­ter bor­row­ing it from a friend. He told Newschina he was sur­prised to find the hard­ware was de­signed as a pro­gram­mable plat­form which made it pos­si­ble to add new func­tions to its ex­ist­ing mod­els at any time by up­dat­ing the soft­ware. This is how in­ter­net con­cepts have re­de­fined au­tomak­ing, he says. By con­trast, in con­ven­tional car man­u­fac­tur­ing, all parts and func­tions must be made ex­actly the way they are de­signed. So a new de­sign, such as heated seats, can only be re­al­ized in the next gen­er­a­tion, which might take five or six years to come to fruition.

Shen uses the fol­low­ing anal­ogy. A con­ven­tional car is a restau­rant that only serves what is on the menu – let's say meat fried with green chilis, or egg and tomato stir-fry. But a smart car is a su­per­mar­ket that sells meat and veg­eta­bles, and it's up to cus­tomers to de­cide which in­gre­di­ents to use, and how.

China's tech gi­ants have all jumped on the band­wagon. Ten­cent, Alibaba and Baidu have al­ready be­gun to com­pete in build­ing op­er­at­ing sys­tems for cars. The three gi­ants, as well as e-com­merce plat­form JD, have in­vested in ma­jor new auto play­ers such as NIO, an elec­tric smart car tech­nol­ogy com­pany es­tab­lished in Shang­hai in 2014. In March 2017, Ten­cent ac­quired a five per­cent stake in Tesla.

Once all-elec­tric cars can run more than 500 kilo­me­ters with a sin­gle bat­tery charge, the mar­ket for oil-fu­eled and hy­brid en­ergy cars will be smashed, claims Zhao Zeguo, a sales con­sul­tant for Ch­ery's new en­ergy cars. He told Newschina he was con­fi­dent that this tech­no­log­i­cal break­through could be re­al­ized within two years.

The ex­ist­ing au­tomak­ing in­dus­try has high bar­ri­ers to mar­ket ac­cess be­cause of the fully in­te­grated sup­ply chain, which is dom­i­nated by au­tomak­ers that con­trol fac­to­ries and de­signs. Elec­tric cars are ex­pected to chal­lenge this, says Wang Xiaom­ing, di­rec­tor of Re­search De­vel­op­ment of In­dus­trial Econ­omy at the De­vel­op­ment Re­search Cen­ter of China's State Coun­cil. Bat­tery pro­duc­ers will have more say in the sup­ply chain, and au­tomak­ers could also pro­duce cars for other car brands. In­de­pen­dent con­trac­tors could emerge as we have seen with elec­tron­ics man­u­fac­tur­ing gi­ant Fox­conn which does not have its own brand. All this means new­com­ers, whether in­ter­net teams or bat­tery mak­ers, will have more chance of build­ing a stronger pres­ence in the au­tomak­ing in­dus­try than ever be­fore.

Run­ning Mates?

With so many new play­ers rush­ing into the mar­ket, re­la­tions have grown more com­pli­cated than in the con­ven­tional auto in­dus­try. When elec­tric smart cars first emerged, there was more co­op­er­a­tion than com­pe­ti­tion. In the US, some startups de­vel­op­ing self-driv­ing sys­tems do not make their own cars. They in­stead use one or two car mod­els to test var­i­ous new de­signs, turn­ing the cars into con­cept ve­hi­cles to test the mar­ket. Shen thinks his com­pany should do the same, pro­vid­ing hard­ware equip­ment for driver­less au­tos, such as cam­eras, ul­tra­sonic wave and mil­lime­ter-wave radar, to soft­ware de­vel­op­ers who would fo­cus on the al­go­rithms and big data. This would make Sin­gu­lato a plat­form where any op­er­at­ing sys­tem for driver­less au­tos could be tested.

These ma­jor new au­tomak­ers are now con­sid­er­ing build­ing an al­liance to share re­sources and do col­lab­o­ra­tive re­search. Shen thinks that it is be­cause con­sumers are yet to be con­vinced that elec­tric smart cars are worth buy­ing. “If an elec­tric smart car com­pany fails, the mar­ket sen­ti­ment to­ward elec­tric smart cars will be hit hard,” he said.

But re­la­tions be­tween this group, re­ferred to as the “new au­tomak­ers,” and con­ven­tional au­tomak­ers are del­i­cate. In the race to de­velop elec­tric smart cars the former, with their ad­van­tages in ar­ti­fi­cial in­tel­li­gence, seem to be edg­ing ahead.

But the lat­ter's sup­ply chain dom­i­nance is

ex­pected to hold for the fore­see­able fu­ture.

With­out man­u­fac­tur­ing ex­pe­ri­ence or an au­tomak­ing li­cense, tech-savvy startups of the “new au­tomak­ers” are seek­ing sup­port from ex­ist­ing gi­ants. “In­ter­net-savvy teams are good at de­vel­op­ing cool de­signs, al­go­rithms and ap­pli­ca­tions, but the real com­pe­ti­tion in the fu­ture will be over qual­ity, safety and cost ef­fi­ciency,” said Cheng Bo, di­rec­tor of the Suzhou Au­to­mo­bile Re­search In­sti­tute of Ts­inghua Uni­ver­sity. Cheng told Newschina this was why the new play­ers needed to im­prove their man­u­fac­tur­ing abil­ity by col­lab­o­rat­ing with con­ven­tional pro­duc­ers. For ex­am­ple, An­hui Jianghuai Au­to­mo­bile Group (JAC), an au­tomaker listed on the Shang­hai Stock Ex­change, an­nounced in May 2016 that it would pro­duce elec­tric cars for NIO with in­vest­ment from Chi­nese tech gi­ants, as well as Chi­nese and in­ter­na­tional ven­ture cap­i­tal. Mean­while, these new play­ers, in­clud­ing NIO, Sin­gu­lato and VM Mo­tors, are build­ing their own man­u­fac­tur­ing bases.

Huang Shaotang, chief tech­nol­ogy of­fi­cer of the re­search arm of Guangzhou Au­to­mo­bile Group (GAC), told Newschina that while pub­lic opin­ion once fa­vored the new play­ers and many thought con­ven­tional au­tomak­ers would be­come mere assem­bly lines for them, this was no longer the case. “I was once al­most con­vinced by this fore­cast. How­ever, what hap­pened in the past year has proved that the pen­du­lum is mov­ing back to au­tomak­ing com­pa­nies,” he said.

Some tech­nol­ogy com­pa­nies have sought to turn or­di­nary cars into smart cars by in- stalling their own soft­ware and sys­tems. Huang does not be­lieve this will work, and claims au­tomak­ers will bet­ter their per­for­mance when it comes to au­to­matic safety and con­trol sys­tems.

How­ever, con­ven­tional au­tomak­ers are cer­tainly feel­ing the heat. GAC is pre­par­ing by build­ing their own big data sys­tem. It has joined with in­ter­net and AI com­pa­nies, in­clud­ing nav­i­ga­tion soft­ware com­pany Amap, and ifly­tek, an in­tel­li­gent speech and lan­guage tech­nol­ogy com­pany from An­hui Prov­ince. Mean­while GAC, JAC and King Long United Automotive In­dus­try, a bus and van maker from Fu­jian Prov­ince, are work­ing with in­ter­net gi­ants to de­velop op­er­at­ing sys­tems.

It is too early to say who will lead the mar­ket in the fu­ture. “Con­ven­tional au­tomak­ers may be­come just man­u­fac­tur­ers, or they may ac­quire in­ter­net-ori­ented teams. Ei­ther is pos­si­ble,” said Chen Bo.

In­ter­na­tional Race

The Chi­nese govern­ment has also been ea­ger to em­brace elec­tric smart cars. Elec­tric au­tomak­ers and buy­ers are granted tax ex­emp­tions and sub­si­dies. In Bei­jing, an elec­tric car buyer has much more chance of get­ting a li­cense to own and use the ve­hi­cle than some­one buy­ing a fuel-pow­ered ve­hi­cle. Zhao Zeguo of Ch­ery at­trib­uted the fast growth of the elec­tric car mar­ket in the past three years largely to govern­ment sup­port.

More ex­cit­ing, but dif­fi­cult changes are ex­pected when it comes to mak­ing cars as smart as pos­si­ble. Shen said the new au­tomak­ers that fo­cus on elec­tric au­tos with­out a smart sys­tem could be squeezed out of the mar­ket quite soon once con­ven­tional auto gi­ants all turn to elec­tric.

In this re­gard, an ur­gent chal­lenge for both con­ven­tional and new au­tomak­ers is to bring their con­cept ve­hi­cles to the mar­ket.

“Con­sumers are fed up with all the talk. It's time to prove that driver­less cars can win con­sumers, mar­ket and cap­i­tal,” said Huang Shaotang of GAC.

The govern­ment is ready to help re­al­ize this. Bei­jing and Shang­hai have ap­proved road test­ing for some driver­less cars. Xion­gan New Area in He­bei, a na­tional spe­cial zone with the am­bi­tion of grow­ing into a green, smart and in­no­va­tive global city, could be the first city in China to re­al­ize smart trans­porta­tion and au­ton­o­mous driv­ing. Xu Bin, vice di­rec­tor of the re­form and de­vel­op­ment de­part­ment of the Xion­gan govern­ment, told Newschina that it would be built as a highly dig­i­tally in­te­grated city from the out­set. On De­cem­ber 20, 2017, seven cars self-drove about four kilo­me­ters on the open road in the city fully au­tonomously.

In early Jan­uary 2018, the Na­tional De­vel­op­ment and Re­form Com­mis­sion, China's ma­jor eco­nomic plan­ning agency, is­sued a draft of a na­tional strat­egy for smart cars. It high­lights the sig­nif­i­cance of the in­dus­try not only in solv­ing traf­fic and en­vi­ron­men­tal prob­lems, but in pro­mot­ing China's in­no­va­tion-ori­ented growth. It warns that ma­jor de­vel­oped coun­tries al­ready have a head start

through their na­tional strate­gies and tech­no­log­i­cal ad­van­tages. It aims to have smart cars ac­count for half of new cars and have wire­less ve­hi­cle-to-ev­ery­thing com­mu­ni­ca­tions sys­tems cover­ing 90 per­cent of China's large cities and high­ways by 2020.

A lot must be done to achieve those goals. Wang Xiaom­ing of the State Coun­cil's re­search di­vi­sion be­lieves it is nec­es­sary for the govern­ment to take a broader view when moot­ing auto in­dus­try pol­icy. He stressed the fu­ture of the auto in­dus­try should be part of the fu­ture of trans­porta­tion, en­ergy trans­for­ma­tions and the dig­i­tal econ­omy. He added that the reg­u­la­tory frame­work for the auto in­dus­try should cover both man­u­fac­tur­ers and trans­porta­tion ser­vice plat­forms.

China still lags be­hind in­ter­na­tional auto gi­ants on sen­sors, al­go­rithms and chips. Chi­nese au­tomak­ers typ­i­cally have teams of hun­dreds of per­son­nel that re­search and de­velop these tech­nolo­gies – far fewer than the tens of thou­sands of per­son­nel in such roles at Ger­many's Volk­swa­gen or Ja­pan's Toy­ota, ac­cord­ing to Wang Xiaom­ing. And sourc­ing parts and com­po­nents once smart cars are de­signed on pa­per will also prove tough. “The sup­ply chain of the auto in­dus­try in China is yet to be strength­ened,” Cheng Bo said.

Though Ger­many and Ja­pan may be cham­pi­ons of car and chip man­u­fac­tur­ing re­spec­tively, the US is lead­ing smart car de­vel­op­ment right now. Cheng at­trib­uted this to the com­bi­na­tion of Sil­i­con Val­ley's power in AI and Detroit's break­through in self-driv­ing tech­nolo­gies. He thinks China can com­pete with the US on how the match be­tween cap­i­tal and tech­nol­ogy can cre­ate new tech­nolo­gies, prod­ucts and business mod­els, as China has shown strong po­ten­tial in in­ter­net tech­nol­ogy ap­pli­ca­tions. Wang agreed, say­ing that Chi­nese com­pa­nies are com­pet­i­tive on com­mu­ni­ca­tion tech­nolo­gies, ge­o­graphic nav­i­ga­tion, AI and big data. In ad­di­tion, the com­pli­cated road con­di­tions also give China an ad­van­tage. A car which is tested in China should be able to run any place in the world, Cheng added.

The race is on.

A self-driv­ing ve­hi­cle un­der­goes a road test in Xion­gan, He­bei Prov­ince, Au­gust 24, 2017

A self-driv­ing ve­hi­cle un­der­goes a crash test

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.