10.17.2014

How Connected Mobility Technology Is Driving The Future Of The Automotive Industry

GlobalBusinessProfessor.com

Click here to view the seminar given by Bill Russo

We are pleased to share with you a seminar on the topic Reinventing Mobility in the China Context: Building the Internet of Mobility & Related Smart Car Technologies. With the auto industry developments and the increasingly prevalence of the wireless internet and mobile devices, we expect that the Internet of Vehicles will create discontinuous opportunities for product and business model innovation.

We believe the conditions in China – the world's largest auto market and the market with the largest number of both internet and "smart phone" users – will likely make it the incubator for rapid commercialization of such innovations. China's urban transportation challenge, the high rate of adoption of connected mobile devices, combined with the rapid and aggressive introduction of alternative mobility and vehicle ownership concepts from new entrants, will ultimately compress the time needed to commercialize smart, connected car technologies and related services. Such developments will dramatically alter not just the feature content of vehicles, but may also usher in a revolution to the business model of the automotive industry – where a model focused on "users of mobility services" could emerge as a real alternative to the traditional model of "car ownership".



Click here to view the presentation slides

Click here to read the associated paper

为何戴姆勒搞不定克莱斯勒 菲亚特却能带着它上市 (Why the Chrysler Fiat Listing is Able to Work)

Jiemian.com, October 12, 2014

菲亚特与其美国公司克莱斯勒合并的决议将生效。而10月13日全新的菲亚特克莱斯勒汽车公司FCA(Fiat Chrysler Automobiles)的股票将正式以FCA为代码在纽约证券交易所上市交易。

新的菲亚特克莱斯勒汽车公司也将继续扩大销售额,并寻找潜在的联盟机会。扩大菲亚特汽车在中国等市场的份额将是这一进程的下一个重大步骤。

合并后的菲亚特克莱斯勒成为世界第七大车企,并计划整顿老旧的工厂和产品线,希望在销量上更加接近日本丰田汽车,美国通用汽车和德国大众集团这三大巨头。

菲亚特克莱斯勒汽车公司CEO塞尔吉奥·马尔乔内说:“(合并后)将有空间塑造一家比现在的汽车业领导者丰田更大的车企。”计划在2018年退休的马尔乔内为菲亚特克莱斯勒制定了五年规划,到2018年时公司的销售量相比2013年应该增长60%至每年700万辆。而丰田、通用及大众三家公司2013年的全球销量均在900万辆以上。

重组专家企业阿历克斯合伙公司的欧洲主管斯泰法诺·阿维萨(Stefano Aversa)说,菲亚特和克莱斯勒的合并以及新公司在美国的上市让62岁的马尔乔内有更多筹码来出售非核心业务,或者是达成更多联盟。他表示,“我不认为马尔乔内制定的是一个单一策略,应该是根据市场状况以及企业表现来执行的多重战略。公司在美国的上市给了他很多选择,这本身就是极有价值的。”

现年38岁的菲亚特集团主席约翰·艾尔坎(John Elkann)支持马尔乔内的决定。他表示:“我并不打算出售菲亚特的股权,尽管菲亚特与其它企业的合并将会导致阿涅利家族所持有的集团股份遭到稀释,但这会使菲亚特变得更加强大。”Exor SpA持有菲亚特集团30%股权,是意大利知名的阿涅利家族(Agnelli)资产。该集团目前正由艾尔坎执掌。

菲亚特在7月以4.75%的利率出售了8.5亿欧元债券。国际策略和投资公司的股权研究员在这次发债之后称,“我们想知道一家美国公司通过美元计价发行债券的成本将可以低多少。”报告称,菲亚特的财务状况和信用评价都使得这个问题存在疑虑。

评级机构标准普尔在伦敦的企业信用评级董事阿莱克斯·赫伯特(Alex Herbert)说,纽约上市本身不会改变菲亚特的信用评价,更重要的问题是:菲亚特什么时候能够拿到克莱斯勒集团的现金。菲亚特克莱斯勒目前计划在2016年对克莱斯勒的债券进行再融资,有望通过这一操作完全掌控克莱斯勒的现金储备。这笔现金在6月底的时候已经达到133亿美元。

克莱斯勒是美国著名汽车公司,曾与通用、福特并称美国三大汽车公司。1998年,德国戴姆勒-奔驰汽车公司和克莱斯勒公司合并,是历史上汽车制造业最大的一起合并。戴姆勒-克莱斯勒公司成为当时全美第二大汽车生产商、世界第五大汽车公司。

2007年戴姆勒克莱斯勒公司宣称因止不住长期亏损将子公司克莱斯勒集团80.1%的股权出售给私人资本运营商Cerberus Capital Management L.P.。曾轰动一时的跨文化合并就此走到了尽头。2009年,克莱斯勒宣布破产,由美国政府和菲亚特共同接手。直至今年年初,菲亚特正式完成对克莱斯勒的并购,两家公司合并。

德国汽车界业内人士分析认为,梅塞德斯-奔驰与克莱斯勒的结合有先天的缺陷和后天的不足。由于欧美的文化差异,双方在管理方法和管理作风上截然不同;同时存在战略决策失误。根据美国人喜欢庞大舒适轿车的特点,克莱斯勒开发的皮卡车和SUV一度备受欢迎,而2005年石油价格增长令美国人环保意识加强,克莱斯勒的库存开始大量积压,公司不得不把产量削减,并关闭了克莱斯勒在美国的多家工厂。

前克莱斯勒东北亚负责人、高风咨询公司董事总经理Bill Russo对界面记者表示:“文化差异并不是戴姆勒克莱斯勒分家的关键原因。一家豪华汽车企业(戴姆勒奔驰)与一个大众品牌(克莱斯勒)合并在一起本身就阻碍了合并后协作效应产生作用。”

Bill Russo说:“戴姆勒克莱斯勒遇到的问题将不会在菲亚特克莱斯勒身上重演,两家公司都是大众品牌汽车公司,合并后将共享技术和生产平台从而增加产品的范围。管理层也更加具有对并购公司的管理经验。克莱斯勒将获得小型轿车的生产平台和零部件技术,特别是动力系统。而菲亚特也可以借此打入北美市场。”

一名与菲亚特克莱斯勒汽车公司关系密切的投资银行家说:“塞尔吉奥·马尔乔内非常迫切地希望菲亚特不再被视作一家意大利企业,他希望完全撤出意大利,但是他也知道这在政治上不可能。他能做的只是逐渐离开,这也是本次美国上市的主要意义。”

无论菲亚特还是克莱斯勒,进军中国时机都不算晚,但都以失败告终。马尔乔内也曾坦言:“菲亚特曾在中国市场存在决策错误。在当时,试图用落后的平台,落后的技术,落后的车型进入中国市场,我们当时完全没有了解中国消费者的预期和需求,也没有洞察中国市场和消费者的快速变化。”

菲亚特克莱斯勒合并后调整战略,重新进入中国市场。目前,菲亚特克莱斯勒与广汽集团合作,已经发布了菲翔、致悦等菲亚特品牌车辆,以及Jeep品牌车辆。今年菲亚特克莱斯勒在华销量也在持续增长,1至8月份,菲亚特克莱斯勒在华销量为9.82万辆汽车,与2013年同期相比攀升了55.7%。

10.12.2014

Bill Russo to Join Panel Discussion at Global Automotive Forum

Wuhan, China, October 16, 2014

TOPIC:
The Transformation of China’s Auto Dealers
Auto dealers in China thrive on new car sales and highly profitable repair services. What opportunities and challenges do dealers face with the growing number of vehicles on the road, increased competition, the internet, and the establishment of more independent repair shop chains?
  • Relationship between e-commerce through the internet and the current sales channels.
  • Transformation from a “commodity economy” to a “customer economy” by applying big data technology.
  • Standardization of the used car market.
Hu Bo, Chief Marketing Officer, Greater China and the ASEAN regional, Volkswagen
Liu Zhifeng, Executive Deputy General Manager of Beijing Hyundai, China Group ChinaChina
Pang Qinghua, Chairman of Pangda Group, China
Bill Russo, Managing Director with Gao Feng Advisory Company, China

Moderated by,
Ma Xiaowei, President of Iautos.cn, China


10.02.2014

奔驰和比亚迪用四年造了款车 你会买吗?(Mercedes-Benz and BYD Took 4 Years to Create the Denza EV: Would You Buy It?)

Jiemian.com, September 26, 2014


戴姆勒和比亚迪合作的第一款车终于推向市场,但似乎腾势对中国汽车新能源市场并没有足够的信心。

9月26日,腾势首款纯电动汽车率先在上海上市。这距离比亚迪和戴姆勒成立合资公司已经过去了四年。用四年时间来研发生产一款车在中国人眼里看来似乎太长。深圳比亚迪戴姆勒新技术有限公司COO罗格林(Arno Roehringer)告诉界面记者,如果时间允许,他希望用更长的时间来完成这个项目,因为这是一个全新的项目。

腾势的电池容量为47.5千万时,官方续航里程为300公里。为了加强电池组的安全性能,腾势的电池组外包裹着一个电池防护装置,它降低了汽车在发生碰撞时的自燃几率。比亚迪的E6电动车2012年曾在碰撞之后发生大火。

前克莱斯勒东北亚负责人、高风咨询公司董事总经理Bill Russo称,这款车更容易被一些“早期先驱者”购买。

腾势汽车在比亚迪的大本营深圳生产。双方合作中,戴姆勒提供整车制造工艺以及结构安全的品控,比亚迪负责电池、电机、电控和大规模路试。双方将其归结为“技术与品牌”的合作。
腾势为消费者最担心的充电设施做足了准备。腾势与全球电力和自动化技术企业ABB合作,为购车者提供充电解决方案。界面记者获悉,腾势内部还成立了一个专门针对恒大、万科和SOHO这类地产商的游说部门,该部门的主要职责是进行充电设备安装的合作推广。

腾势的首批经销店分别在上海、北京和深圳三个城市,分别由利星行、庞大集团和中升集团代理,他们同时也是奔驰品牌的经销商。

腾势相关负责人称,选择这些城市是因为这些城市出台了地方新能源补贴政策,也是国家节能与新能源示范推广试点城市。南京、杭州等地的经销店则计划在2015年一季度开业。

腾势两款车型售价分别为人民币36.9万和39.9万元。上海、北京和深圳的消费者在享受国家和地方新能源推广补贴后的购买起步车型的价格都不超过30万元,还能享受减免车辆购置税等优惠。
庞大集团董事长庞庆华称,“原计划在9月中旬开业的北京经销店现稍有延迟,目前接到了30多个订单。”未来腾势经销店还提供免费接送的充电服务。

双方的准备似乎非常充分,但戴姆勒对腾势未来的销量持谨慎态度。腾势汽车一份内部规划显示,今年9月产量为115辆,半年后月产量也只有213辆。而腾势工厂的规划产能是4万辆。

原计划去年11月亮相的腾势一直拖延到今年的北京车展,上市之前也没有大的品牌宣传活动,这和比亚迪汽车一贯的处事风格大相径庭。罗格林告诉界面记者,从戴姆勒的角度来讲,他们更注重产品的质量和提供的服务,对于宣传不是特别在意,所以最终按照戴方的意思执行。

Bill Russo认为,中国的电动车市场目前主要受补贴驱动。大规模的营销活动在初期并不是必须的,更重要的是让消费者接受产品本身,让政策制定者通过税收和补贴政策吸引消费者。

“相对于奔驰品牌,腾势是一个全新的品牌和产品,很多事情还在摸索中,”上海利星行腾势经销店的负责人郑雄伟称,虽然有很多热心客户询问,但后续效果如何他们也不得而知。

在中国,德系三大豪华汽车品牌选择了不同的新能源汽车发展道路,这些道路看起来都趋向于保守。稍早上市的华晨宝马之诺电动车选择了“只租不售”模式,奥迪还未在中国市场推出电动车型。今年8月份,德国总理默克尔访华期间曾为德国汽车制造商推广新能源汽车,呼吁统一中德充电标准。

“发展新能源汽车需要时间,需要建立政府部门、汽车公司和基础设施提供者合作的良性生态圈才能让消费者接受。”Bill Russo告诉界面记者,只有消费者认可了,看到这些利益机会时,汽车制造商才更有信心。

林肯重返中国步伐缓慢 公布两款车预售价 (Lincoln Comes to China with Two Models)

Jiemian.com, September 25, 2014



曾服务过10任美国总统的林肯牌轿车早在1925年就被美国贸易商贩卖到当时亚洲最繁华的城市上海,但在近一个世纪后,重返中国市场的林肯会发现在向中国新兴富裕阶层推销高档车时,历史声望恐怕帮不上忙。

林肯近日公布了其重返中国的两款车的预售价和上市时间。将于10月23日上市的林肯MKC越野车的预售价为人民币35万至45万元,MKZ轿车为32至40万元。界面记者采访的多名汽车业分析师都认为这一定价策略与凯迪拉克相似,略低于占据主导地位的奥迪、宝马、奔驰,符合市场预期。

LMC汽车市场咨询公司总经理曾志凌表示,这个定价策略是林肯作为迟到的小众进口车所做的尝试,林肯到底能走多远还不好说。

距离2012年林肯宣布重返中国已经过去两年、新车上市还有一个月,官方网站上显示林肯正在北京、上海、广州、重庆等34个城市招募经销商。10月30日,林肯将在北京、上海和杭州三个城市率先开业3家经销店。林肯还在多个城市设立体验中心,邀请潜在车主登门体验,为即将开售的MKZ和MKC造势。

已经拥有一辆奥迪Q5的胡建志是林肯瞄准的目标消费者——林肯将他们称为“更加年轻的中国新贵”。胡建志前不久受邀参加了成都站的体验活动,但随后放弃购买林肯中型越野车MKC转而选择了奔驰,理由是担心二手车保值和售后服务。因此,潜在车主在购买林肯汽车时会与奥迪、宝马和奔驰进行比较,并产生胡建志那样的心理斗争。

中国车主对林肯的印象还停留在“加长礼宾车”、“总统车”上,林肯希望利用这些久远的记忆,并用个性化服务、宣传历史上的辉煌来突出品牌独特之处。

林肯市场营销副总经理徐佩文告诉界面记者:“这个群体对于品牌的需求不再是彰显自己的地位,而是彰显自己的品位,因此,深入的品牌体验变得更加重要。”

为产品和品牌预热而设立的体验中心——“林肯空间”透露出林肯将会采用的一些做法,例如进门处设有暖棕色的幕墙,还有一个专门的图像展示区宣传林肯品牌以及福特汽车创始人的历史事迹,顾客在店内可以享用茶道服务,临走时得到一个用林肯座椅相同皮料制作的行李牌。

徐佩文认为林肯能够凭借这些服务在豪华车市场上独树一帜。确实有顾客在参观过体验中心后对服务和环境印象深刻,但这无法改变一个事实——大多数购车者对林肯实在缺乏了解。林肯已有六年未在中国开展业务,2005年至2008年期间也只是以进口方式销售少量过时车型。
曾志凌表示,林肯已经有10年时间没有什么产品给中国人留下印象,几乎是一个全新的品牌,很多事情都要从头开始,而最困难的任务就是重塑品牌。他说:“林肯既小众又没有国产,没有太多先例可以参考。Jeep在中国卖得好是因为它知名度比较高,从1980年代就开始在中国生产。”
一位曾申请过林肯代理资格的经销商称:“有些人提起林肯,都不知道它是汽车。”

林肯缺席的这六年是中国豪华车市场超高速增长期,富人和新兴中产阶级面对着越来越多的想要为他们提供高档产品和服务的公司,其中不乏一些已经深入人心的汽车品牌。

新华信咨询公司汽车分析师金永生对依靠独特服务来赢得消费者的做法也持怀疑态度。“如果产品不能吸引消费者,单靠服务是没有意义的。服务本身很难创新,林肯现在推出的只是新的概念和称谓。”金永生还提到,林肯在产品上市前应该多多宣传技术上的独特之处。

中国消费者对林肯缺乏了解还给它带来一些额外的挑战,比如在寻找经销商方面。

眼下豪华品牌都在中国争夺有资金实力和管理经验的经销商,同时销售汽车的利润却在普遍下滑。

林肯去年邀请北京惠通嘉华投资有限公司到二、三线城市开店,遭到了拒绝。惠通嘉华是中国一家以经营捷豹、路虎和梅赛德斯-奔驰等豪华汽车品牌的经销商,其位于北京市建国路的路虎4S店是路虎在中国销量最大的4s店之一。

惠通嘉华一位不愿透露姓名的负责人表示,以林肯目前的设计风格、定价和品牌,只能吸引到25至40岁的小众群体,不看好短期赢利前景,只有在一线城市开店才能将风险降低到可以接受的程度。IHS轻型车销量预测经理林怀滨预测,林肯进入中国第一年的销量会很少。

林肯最终多是选择像福瑞汽车这样代理过福特品牌的经销商,福瑞汽车是长安福特在中国最大的经销商,由林肯的母公司福特与中国长安汽车集团共同投资。中国汽车流通协会副秘书长罗磊表示,让销售大众化产品的经销商代理豪华品牌不意味着会出问题。“只要它按照豪华品牌的标准去做,接受培训,或者从其他豪华品牌那里引入人才。”

林肯计划在2016年将经销商扩大至60家,是首批开业的3家经销店数量的20倍。林肯称其首批开业的店面数量比原计划多出两家,但这一比较是以林肯截至今年年底的8家经销店为基础。林肯中国销售副总经理高瑾馨在今年北京车展前离职,这是新车上市前最重要的宣传期。

外界猜测林肯高瑾馨的离职与经销商网络发展不顺利有关,林肯中国和高瑾馨则称离职是出于个人原因。

汽车业分析人士认为重返中国是林肯唯一的选择。麦肯锡在《中国高档汽车市场展望》中预测,到2016年中国豪华车销量将有望超过美国,在2020年之前中国豪华车市场仍有能力维持12%的年增长幅度。

前福特CEO艾伦·穆拉利(Alan Mulally)曾告诉媒体,林肯品牌发展重点锁定中、美两国,暂不考虑欧洲。林肯也已经将国产设为长期目标,但需要先以进口方式达到一定销量,较为激进的做法是达到3万辆便开始筹备国产事宜。

美国另一豪华品牌凯迪拉克经过9年的努力,目前中国豪华车市场占有率大约为4%,远远落后于奥迪、宝马和奔驰三大德系品牌,而林肯刚刚走出自己的历史低谷,在品牌复兴之路上还要落后于凯迪拉克,主力车型新MKC在美国本土市场也不太引人关注,7月份的销量只有1534辆。

林肯计划到2016年向中国市场投放5款车型。在MKZ和MKC之后,将继续推出一款中大型SUV、一款全尺寸四门轿车和一款大型SUV——林肯领航员。目前在中国市场上销售的豪华车型已超过 120款,主流豪华车品牌都在扩大产品种类和争夺市场份额。

前克莱斯勒东北亚负责人、高风咨询公司董事总经理Bill Russo称,中国豪华车市场的服务不够好,未来5年销量将会翻倍,这意味像林肯这样的豪华品牌仍有进入的机会,充分借助福特的技术和本土化经验,避免设计张扬能够提高成功的几率,但最终成功与否依赖于林肯如何讲述自己的品牌故事。

“并不是很多人知道林肯这个品牌。”他说,“在产品上市前它要花更多的时间让大家了解林肯代表什么。”

9.30.2014

Reinventing Mobility in the China Context: Internet Vehicles & Related Smart Car Technologies

GlobalBusinessProfessor.com 

Click here to access the seminar

Bill Russo, Managing Director, Gao Feng Advisory Company

Bill RussoBill RussoManaging Director, Gao Feng Advisory Company.
His career includes over 30 years of industry experience, 15 years as an automotive executive with Chrysler, and 10 years of experience in China and Asia.  Mr. Russo has worked with numerous multi-national and local Chinese firms in the formulation and implementation of their global market and product strategies.  While the Vice President of Chrysler North East Asia, Mr. Russo successfully negotiated agreements with partners and obtained required approvals from the China government to bring 6 new vehicle programs to the market in a 3-year period, while concurrently establishing an infrastructure for local sourcing and sales distribution.  Mr. Russo is a highly sought after opinion leader on the development of the China automotive industry.

9.23.2014

China in 2025 and Implications for the Automotive Industry: Part 2

Plausible Scenarios for China in 2025


Urbanized world

China has gone through rapid urbanization over the past few decades, with urban population share rising from 17.9% in 1978 to 53.7% in 2013.  City clusters such as Beijing-Tianjin, Shanghai and Guangzhou are home to 18% of China’s population and generate 36% of the nation’s GDP.  Cities are the main engines of China’s unparalleled economic growth in the past few decades.  Nonetheless, the development is highly unbalanced with urbanization rates of 62% in the coastal regions, but only 44%-48% further inland.

The urbanization momentum will continue, on a size and scale never before experienced in history.  By 2025, 65% of Chinese citizens will live in high-density urban population centers. This will no doubt place significant stress on the environment as well as the urban transportation infrastructure, which is already struggling to keep up with the current urban population.  While limits placed on car registrations has limited growth rates in the more mature coastal tier 1 and tier 2 cities, China’s automotive industry will continue to expand with a steady stream of first time purchasers from lower-tier cities joining the repeat buyers and upgraders of the more mature regions.   Emergence of the less developed lower-tier regions will be the key driver to incremental demand for personal mobility.

Demand for mobility solutions will need to anticipate the emergence of a more “binary” market with consumers in the more mature upper-tier cities continuing to prefer globally recognized brands, while those from lower-tier cities will seek no-frills products and solutions from brands that deliver “the greatest bang for their RMB”.  This presents unique opportunities for both foreign and domestic manufacturers. 

Figure 2:  China 2025 Scenarios:  Urbanized World

Possible 2025 scenarios
Implication to automakers
·       Emerging from China’s lower-tier region, a Chinese automaker has become the first to sell 1M cars in overseas markets, and they are commonly called ‘the Chinese Hyundai”.  Chinese OEMs are now competing in the EU and North America
·       To secure long-term growth, automakers must strengthen offerings in the entry-level segment
·       Leverage China as the base to develop entry-level models for export to other developing markets
·       Having successfully penetrated China’s lower-tier markets with cars engineered in China, automakers are selling “Engineered in China” cars in the global markets
·       To expand the market, auto loan penetration reaches 50% in China and financing becomes a critical lever for growth, particularly with younger, budget-conscious buyers.
·       Leverage automotive financing as a platform to sell a full range of mobility services


Domestic brands are more popular among lower-tier cities consumers as they penetrate the market with lower-priced cars “good enough” to meet their mobility needs.  Chinese automakers could continue to serve this base by leveraging their low-cost advantage improving their product safety and quality performance.  International OEMs must also seize the opportunity to develop competitive entry-level models and no-frills platforms tailored for the Chinese market, while subsequently leveraging such “Engineered in China” offerings to penetrate other developing markets.


New mobility solutions

Today, China has 14 cities with more than 10 million residents.  This number will perhaps double by 2025.  As the home to so many densely populated urban areas, China will require unique solutions for traffic congestion, energy consumption and pollution. The privately owned, energy-intensive and people-driven cars we have today are not viable and sustainable options for future urban mobility.

By 2025, new urban mobility solutions will comprise of a mixture of public transportation, non-motorized alternatives and energy-efficient personal transportation solutions.  Innovations in technology, business models and regulation will come together to disrupt the automotive industry.  We anticipate a number of discontinuities:

Innovative car use model

In an effort to rebalance supply of transportation solutions with demand for mobility, we believe a car ownership model will gradually migrate to a “pay per use” service model.  This migration can be significantly accelerated with regulatory intervention forcing higher usage charges on those who choose to own vehicles. 

By 2025, a pay-per-use model will emerge as a preferred option for providing personal mobility in populous urban areas.  On the one hand, the China government will continue to regulate new car registrations through tax or quota to limit the growth of private car ownership in large urban areas to within 1% per year.  On the other hand, high fuel prices, parking and traffic congestion charges will make private vehicle ownership less economical and therefore less attractive.

A technology-enabled intelligent model will supplant traditional car leasing and rental companies’ asset-heavy offline model.  This will confer advantages and pave the way for internet-powered “mobility services” companies to emerge in the market.  Moreover, person–to-person (P2P) car sharing will position platform companies at the center of the eco-system, connecting online and offline activities through advanced mobile technology.  As the ownership-usage model evolves, OEMs will need to partner with digital players and service providers to offer innovative products in order to maintain their market shares.


Figure 3:  China 2025 Scenarios:  New Mobility Solutions

Possible 2025 scenarios
Implication to automakers
·       Chinese internet companies vertically integrate car leasing services into their internet portals
·       Partner with innovators and internet companies to deliver “urban mobility services” for different markets
·       Alibaba successfully builds alliances with a leading Asian OEMs to develop synergies with the “Internet of Mobility”
·       Tencent has successfully acquired a recognized automotive brand


Connected “smart” cars

In big cities, driving is becoming a frustrating, time consuming chore for people who have to commute. At the same time, traffic accidents and congestion are a by-product of human driving behavior and inadequate traffic and urban infrastructure planning.  Smart connected cars will rely on telecommunication and sensor technologies to respond to vehicles, objects and people while navigating, and communicating with its passengers through their on-board telematics system.  A smart transportation system has the potential to eliminate accidents, increase the capacity of existing road infrastructure, collect and disseminate useful real-time traffic data, and at the same time facilitate new models of vehicle ownership, increase travel time predictability, and improve productivity and energy efficiency.


Figure 4:  China 2025 Scenarios:  Connected “Smart” Cars

Possible 2025 scenarios
Implication to automakers
·       Driven by policy in tier 1 and some tier 2 cities, China has invested in building a smart transportation infrastructure and 300M “Smart Vehicles” are on the road
·       Consider leveraging China as a base platform for smart car technology development for the global markets
·       Just 17 years of age, Jasmine summons her car via her Xiaomi device, which arrives at her door step within minutes and delivers her to school, while allowing her to do her last minute revision for her Gaokao (高考) en-route
·       Invest in disruptive technologies at the intersection of automotive and internet - leveraging both organic and in-organic business development
·       “TencentCar” competes with “Apple Car Play” and “Android Auto” on user experience, network connectivity and localized content – and enjoys strong user acceptance


According to China’s Ministry of Industry & Information Technology, as a strategic focus of the national development plan, the Chinese Government will provide up to 10B RMB in subsidies to catalyze the development of “smart mobility”.


Energy Saving & New Energy Vehicles

China has become the largest world’s carbon emitter.  Big cities suffered from smog, often exceeding “hazardous” levels.  By 2025, China will become the world’s largest oil importer, spending USD500B a year on crude oil imports, 66% of which will likely be from OPEC nations.  Worsening pollution and energy security has compelled China to seriously invest in NEV and related infrastructure development.  The Government will continue EV subsidies and qualify a wider range of fuel-efficient and environmental friendly technologies.

City cars will adopt fuel-efficient and environmentally friendly technologies, such as lightweight composite components and electric powertrains. New generations of ultra-light weight personal urban mobility (PUM) devices will become popular – designed specifically for city-use to transport 1-2 persons and light cargo over short distances. OEMs will partner with non-traditional suppliers and utility companies to complete the eco-system.

Figure 5:  China 2025 Scenarios:  Energy Saving & New Energy Vehicles

Possible 2025 scenarios
Implication to automakers
·       China’s investment in EV charging stations and smart grid construction has created the complete eco-system for “Made in China” New Energy Vehicles, which are now being exported to the US and Europe
·       Engage with Chinese partners (auto, government and infrastructure) to build the supporting ecosystem in order to make EV technology value proposition accessible in the China market
·       New generation of ultra-light weight personal urban mobility (PUM) devices are popular – designed specifically for city-use to transport 1-2 persons and light cargo over short distances
·       All taxi and bus fleets in China are fully electrified, with foreign brands excluded from the approved vendor list
·       Energy Saving and New Energy Vehicles achieve 25% share of a 40M unit market as traditional gasoline-powered cars are banned from densely populated cities



Emergence of mega-SOEs and mega-Suppliers

As we have witnessed in the time since the opening of China’s economy to foreign investment, the changes in the market have occurred rapidly, making China the engine for growth of many multi-national corporations.  However, China’s policies and industrial developments are typically implemented via investments made with government-backed State-Owned Enterprises (SOEs).  While SOEs and huge investment holding companies and are often contained profitable businesses, they often lack the capabilities and entrepreneurial spirit of independent, market-driven businesses.

In the coming decade, China’s state-owned automotive OEMs and suppliers will be influenced by a new round of SOE reform led by the State-owned Assets Supervision and Administration Commission of the State Council (SASSAC).  The reform will focus on diversifying ownership, adopting modern corporate governance and establishing a state-owned asset management company.  As a result, state-owned automotive OEMs and suppliers will become more efficient and market-driven, and gradual consolidation will eliminate several weaker players.  Several of these OEMs and suppliers will play an even more important role in the international market.

Meanwhile, we expect to see new entrants into the automotive ecosystem, especially innovative companies armed with disruptive technologies.  It is entirely plausible that an Internet mobility services provider becomes a major player the automotive industry by initially offering a portal to provide “mobility services”.

MNC players will need to adjust their strategies to address a competitive landscape that includes a new breed of mega-SOEs and mega-suppliers, as well as nimble Internet mobility services suppliers who aim to create a new ecosystem of personal transportation services.   Many of these services may be first incubated in China before being rolled-out to the rest of the world.


Figure 6:  China 2025 Scenarios:  Emergence of Mega-SOE’s and Mega-Suppliers

Possible 2025 scenarios
Implication to automakers
·       More efficient SOEs and innovative new entrants with preferred access to the 40M unit China market provide a platform for rapidly scaling up new transportation solutions for global deployment
·       Strike a balance of power with local SOE partners, e.g. become strategic partners to jointly exploit overseas market leveraging China as a base
·       飞马 (Fei Ma, or Flying Horse) is the top selling luxury sedan globally for the past 5 years; fully designed and crafted by skilled artisans in China, it offers unparalleled but understated luxury with strong oriental themes and innovative technologies that have become the rage of the globally mobile elite around the world


Conclusion

The discontinuities we have described are all very plausible – the key question is whether traditional auto OEMs at first recognize the potential disruptive threats, and are then willing to seize the discontinuous opportunities that may ensue.  Like Nokia and Motorola 10 years ago, auto OEMs may be facing an existential threat from new entrants from outside their traditional competitive set.  Such competitors are anxious to seize on the Chinese consumer’s rapid acceptance and adoption of mobile technology and pervasive Internet connectivity services to deliver a new ecosystem for “mobile connected car services”.  

Automotive OEMs have the complex challenge of addressing this potential for disruptive change, while simultaneously continuing to deliver better and more cost efficient products in the hyper-competitive China market.  The ability to simultaneously address these challenges will separate the ultimate winners and losers in the next decade.  The only thing that is certain is that the formula that has worked until now is no guarantee for future success.


-----------------------------------------------------------------------------------------------

 End of Part 2

For further discussion, please contact the authors:
Bill Russo
Managing Director,
Gao Feng Advisory Company
bill.russo@gaofengadv.com
Dr. Edward Tse
Founder and CEO,
Gao Feng Advisory Company

Chee-Kiang Lim
Principal,
Gao Feng Advisory Company
ck.lim@gaofengadv.com


Note:  The above authors wish to thank Ms. Emily Wang for her efforts in researching and summarizing the findings of this analysis.