7.18.2014

Tesla's Expansion in China Gets a Local Assist

The Wall Street Journal, July 16, 2014

Electric-Car Enthusiast Built His Own Charging Network Between Beijing and Guangzhou


Zong Yi, left, next to one of his charging stations. Xu Lei, right, donated a parking spot to place Mr. Zong's charging pillar. Photo: Phnix



SHANGHAI—Zong Yi, a Chinese businessman with asthma and worries about his country's pollution problems, happily took delivery of his new electric Tesla Model S sedan in May.
His problem: How to get it home.

Mr. Zong lives in the southern Chinese boomtown of Guangzhou, where he founded a business that makes energy-efficient equipment like water heaters for swimming pools. In April, Tesla Motors Inc. delivered its first cars to customers in China in Beijing, about 1,300 miles to the north. Tesla doesn't operate enough charging facilities between the cities to allow him to drive his car home.

Undaunted, Mr. Zong decided to build his own charging network. With the help of partners found online, he bought 20 charging pillars from Tesla for 5,000 yuan (about $800) each and put them in 16 cities along the way.

"I thought it would be cool if I could build China's first electric-car-charging road," said Mr. Zong, who completed the installations last month. A Tesla spokeswoman said the company is aware of, and approves of, Mr. Zong's ambitions.

Mr. Zong's do-it-yourself approach illustrates a major challenge faced by Tesla and other electric-car makers targeting China.

China's government wants 500,000 gasoline-electric hybrid and all-electric vehicles on its roads by next year and five million by 2020 as part of its effort to improve air quality and reduce oil dependence. But only about 17,600 such vehicles were purchased in China last year, according to the China Association of Automobile Manufacturers, including 14,604 electric vehicles. About 18 million passenger cars were sold in the country last year.

Lack of infrastructure is one major reason. China had hoped to have 400,000 charging pillars for electric vehicles in place by next year, but work is behind schedule. State Grid Corp. of China, China's largest power generator by sales, had finished completion of 400 charging stations as of the end of 2013, according to data from the company.

Cost is another issue, said Bill Russo, president of automotive consulting firm Synergistics Ltd., who says many electric cars in China are unaffordable there. In China, Tesla sells its Model S for $121,000. "People who buy Teslas are just showing off," he said.

Tesla has worked hard to keep its rollout smooth. As of Wednesday it had 72 charging stations in 17 different cities, according to spokeswoman Peggy Yang. The company is working with property developers to install chargers for residents.

Still, the lack of infrastructure has caused hitches. In April Tesla said it would delay deliveries to some customers because it worried that they didn't have access to charging stations or to technical support. The frustration led one customer to publicly smash his Tesla's windshield when it was delivered. A video of the incident circulated online.Chief Executive Elon Musk has apologized to customers and said Tesla is working to provide services in more areas.

Others are rolling out charging stations and other support facilities including BMW AG, which plans to set up 50 charging stations in Shanghai with local partners as part of a broader future rollout. Earlier this year, a joint venture between China's BYD Co. and Germany's Daimler AG that makes the Denza electric car agreed to tap Switzerland's ABB Ltd. to supply home chargers in the China market.

Mr. Zong, 44 years old, is a car aficionado who attributes his environmental consciousness partly to concern for his own health. "When I travel abroad, my asthma subsides. But when I return to China, the coughing and sneezing return," he said.

But he's also eager to build his green credentials to boost his business. "My company produces environmentally friendly products. Activities such as donating chargers will help" its image. In addition to Tesla, he also owns a Qin, a plug-in hybrid made by BYD Co.

To start his network, he posted notices on popular social-networking services seeking partners. "I hope to tell people that it might take a much shorter time to build a charging network across China as long as there are more and more participants," said Mr. Zong.

To make the charging pillars accessible to more consumers, Mr. Zong didn't choose a direct route between Beijing and Guangzhou. He stretched the journey out to nearly 5,750 kilometers, or about 3,600 miles (from Beijing to Guangzhou), and modified the charging facilities to accommodate other electric cars such as those built by BYD. His trip ran from May 28 to June 18.

The charging posts are scattered every 300 kilometers, and more than half of them are placed at or close to four-star hotels. "These hotels have spacious parking lots, sufficient electricity power and can offer 24/7 services. That's attractive to electric car drivers," said Mr. Zong. Tesla now lists some of the sites on its website.

The business is attractive to hotel operators because drivers need meals and places to rest, he said, adding a full charge for a Tesla Model S at one of the stations takes seven to eight hours.

In addition to building the charging spots, Mr. Zong also ordered another 20 Tesla Model S vehicles as an incentive for his senior management. "If I give them one million yuan, some might take the money and buy cars with great horsepower. That's not in line with the environmentally friendly image I'm building for my company," he said.

—Rose Yu and Colum Murphy

6.29.2014

GM Chases China Sales With Camaro Transformers

Bloomberg News, June 27, 2014


Visitors take pictures with the Bumblebee Autobot character from the Transformers movies at the Universal Studios Hollywood theme park in Hollywood. GM’s relationship with Transformers goes back to the first film in 2007, which included Bumblebee, a bright yellow Chevrolet Camaro.

As “Transformers: Age of Extinction” opens in theaters, General Motors Co. (GM) is betting on the latest installment of the alien-robot saga to help jump-start Chevrolet sales in China.

The reboot of the movie franchise, which features battling robots that convert into cars and trucks, opens in China and the U.S. today and includes vehicles such as the Chevrolet Camaro sports car and Trax small sport-utility vehicle. The fourth movie in the series gives GM, second to Volkswagen AG in sales among foreign automakers in China, a marketing tool as it introduces six Chevrolets in the country this year.

The goal “is to use it as a springboard for launching new products,” Tim Mahoney, the global chief marketing officer for the Chevrolet brand, said last week in an interview.

The brand could use a boost in China. Chevrolet last year failed to keep pace with the nation’s 16 percent growth for passenger vehicles, with sales rising 8.5 percent to 652,077. Transformers has melded the summer popcorn spectacle with U.S. car culture in a way that has resonated in China, where its middle class has been fueling the world’s largest auto market.

GM’s relationship with Transformers goes back to the first film in 2007, which included a bright yellow Chevrolet Camaro called Bumblebee. Mahoney said he’s seen the effect of the movie on the streets of China, where more than 70 percent of Camaro sports cars are purchased in the same color as the character. In the U.S., it’s just 5 percent.

“The yellow is pretty well associated with Chevy and I think a lot of it, I can’t prove it, but I suspect a lot of it has to do with the role Bumblebee played,” he said.

China Exposure

GM, based in Detroit, plans to use Chevrolet to expand into China’s smaller cities and the country’s western region. The brand’s slower growth last year came “from not having the freshest product in the highest growth segments,” Bill Russo, president of Synergistics Ltd., a Shanghai-based consulting firm, said in an e-mail.

Cristi Vazquez, a GM spokeswoman, declined to say how much GM spent to be part of the movie.

The favorable exposure in the Asian nation could be a boon for GM as the automaker plays defense in the U.S. over its handling of a recall of 2.59 million small cars with ignition issues linked to at least 13 deaths.

Ed Welburn, GM’s head of design, said he’s noticed the Transformer logo on Chevys while riding through Shanghai.

Bumblebee Yellow

“You know it didn’t come through the factory that way,” Welburn said. “People added it to their Chevrolets, and it’s a very positive relationship.”

GM is betting that the latest film, which features a cast led by Mark Wahlberg, will have a similar impact in China. The first three pictures in the franchise have generated $2.67 billion worldwide for Viacom Inc.’s Paramount Pictures, according to Box Office Mojo.

The last installment, “Transformers: Dark of the Moon,” was released in 2011 and had the second-biggest opening weekend for a U.S. film in China, pulling in $56 million, and ending with total sales of $165 million.

The number of theater screens in China tripled from 2008 to 2012, reaching 13,118, according to Beijing-based EntGroup, a research firm. Box-office receipts climbed 36 percent from 2011 to 2012 to reach $2.7 billion and surged to $3.6 billion last year, data from Rentrak show.

Chinese Cast

“Transformers 4 is going to be a very important film for the relationship between Hollywood and China,” said Phil Contrino, chief analyst at BoxOffice.com. “Paramount has cast Chinese actors in the film so there is a lot of outreach to Chinese viewers to make sure that it’s not just selling a film into China.”

Welburn, the design chief, worked closely with the filmmakers and has a cameo role in the movie. A GM plant was also used as a set, according to LeeAnne Stables, president of Paramount consumer products and executive of worldwide marketing partnerships.

The relationship saw GM push to get its new Trax SUV, which went on sale in China this year, in the movie along with the Sonic small car. The Trax is an important introduction for GM in China, where the brand has fallen behind in the small SUV segment.

The automaker and its joint-venture partners reported overall sales gains of 11 percent to 3.16 million in China last year. GM sold 809,918 Buicks in China in 2013 while its Wuling truck brand delivered 1.48 million vehicles domestically.

Guangzhou Auto

GM isn’t the only automaker counting on the Transformers movie.

Guangzhou Automobile Group Co., whose Trumpchi GA5 sedan is driven by actress Li Bingbing in the film, plans to export the Chinese brand to the U.S. as early as next year.

“Our sponsorship of Transformers 4 will help more overseas dealers and consumers know about our cars and over the long run it will greatly contribute to our branding,” Wu Song, head of the Trumpchi brand, said in a phone interview yesterday. “We want to start exporting to the U.S. as quickly as possible and I am confident that they will find our Trumpchi cars competitive.”

China has become the first country to reach more than 20 million new vehicle sales in one year with deliveries rising 14 percent to 21.98 million in 2013. Sales may exceed 24 million in 2014, the state-backed China Association of Automobile Manufacturers has said.

Last year’s sales of passenger vehicles, excluding buses and commercial trucks, climbed to 17.93 million -- or 15 percent more than the U.S. auto industry -- and may increase 9 percent to 11 percent this year, the association said.

As GM works to build Chevy in China, the latest movie arrives with not only cast members from China but also some filming done in Hong Kong as Hollywood also tries to capture a growing market.

Back in Detroit, Welburn, the design chief, said he believes the Camaro’s success in the movie is simple.

“The Camaro is kind of an everyday hero, and it plays that part in the movie.”

To contact the reporters on this story: John Irwin in Southfield, Michigan at jirwin25@bloomberg.net; Anousha Sakoui in London at asakoui@bloomberg.net; Tim Higgins in Detroit at thiggins21@bloomberg.net
To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net Chua Kong Ho

6.20.2014

Real-Life Batmobile Found in Fantasy Junkyard

Bloomberg TV, June 20, 2014

Hollywood came to Hong Kong on Thursday with the world premiere of Transformers: Age of Extinction and they've been spotted in Shanghai as well, along with a string of superheroes including Batman.  Our own caped crusader Stephen Engle has the story. (Source: Bloomberg)

Bill "The Joker" Russo comments begin at 0:23:




Click here to view this story at bloomberg.com

6.13.2014

Uber Looks to Drive Business in China

Bloomberg TV, June 13, 2014

The car sharing app Uber is under pressure in Europe, with thousands of taxi drivers saying the service threatens their livelihood.  But in China, Uber has stayed under the radar, and as Bloomberg's Stephen Engle reports, its's becoming a valuable option.  (Source:  Bloomberg)

Bill Russo appears at 0:36, 2:40, and 2:53 in this video:




Click here to view this story at bloomberg.com

6.11.2014

China to probe car market competition

The Financial Times, June 11, 2014




China is conducting a review of potentially anti-competitive behaviour in the world’s largest car market, the commerce ministry said on Tuesday, as new sales data showed that foreign brands were continuing to acquire market share at the expense of their struggling domestic rivals.

Qiu Zhongyi, a ministry official, confirmed that Beijing had asked industry associations in a range of sectors to share information on problems ranging from monopoly practices to local protectionism. “We want to understand the challenges they are facing,” he said, adding that the review covered dozens of industries including cars, pharmaceuticals and alcohol.

The survey document, circulated late last month, said the reviews were being conducted in accordance with the Chinese Communist party’s pledge in November to ensure that market forces would play a “decisive” role in the economy.

May vehicle sales increased 8.5 per cent year on year to 1.9m units, according to the China Association of Automobile Manufacturers, a domestic lobby group. “If the economy is slowing down, there’s no evidence of that in the auto industry,” said Bill Russo at automotive consultancy Synergistics.

But sales of Chinese brand vehicles again trailed the wider market, growing just 5.4 per cent. “Competition between Chinese brands and foreign brands, and among foreign brands themselves, is intensifying,” Yao Jie, CAAM deputy secretary-general, said at the association’s monthly briefing.

Cars produced by foreign-invested joint ventures dominate the market. While the JVs have proven lucrative for both multinational car companies and their state-owned partners, the latter have failed to develop their own brand products.

The three most popular cars in China are Ford’s Focus and Volkswagen’s Santana and Lavida sedans. Sales of these three models alone exceeded 500,000 units in the first five months of this year. For all of 2013, by contrast, China’s most popular domestic brands, BYD and Chang’an, each sold 500,000 units.

“Continued expansion of the middle-class population is raising the number of potential buyers and foreign brands are building out their distribution networks in lower tier cities,” Mr Russo said. “From a market share perspective there’s no good news for the local brands.”

Even Hebei-based Great Wall Motor, which manufactures China’s best-selling SUV, has recently suffered heavy sales declines in part because of quality issues that have delayed the launch of its latest Haval model.

In an attempt to halt the decline of local brands, CAAM has opposed moves to lift the 50 per cent foreign-ownership cap in China’s auto sector and is urging multinational carmakers to transfer more technology and R&D capabilities to their local joint ventures.

Some foreign car companies have also been criticised for the high prices of their vehicles in China relative to other markets, although they insist this is because of strong demand and import tariffs rather than any anti-competitive practices.

Additional reporting by Wan Li

6.08.2014

China green-car makers see hope in subsidy revamp

The Wall Street Journal Market Watch, June 8, 2014



By Joanne Chiu

Despite being based in one of the world's biggest and most polluted car markets, Chinese electric-car maker BYD Co. until recently sold few of its hybrid or battery-powered electric cars outside of its home province of Guangdong, thanks to a system of local subsidies.

Those rules are now changing under a new effort by China's central government to push local authorities to treat equally all Chinese car makers when granting green subsidies. This year for the first time, big cities are relaxing subsidy rules that effectively prevented sales of electric and hybrid cars by local manufacturers that weren't based in their jurisdictions.

Such restrictions had been a drag on green-car sales in China, particularly for BYD, a midsize manufacturer of cars, buses and batteries. In 2008, BYD became the first Chinese auto maker to produce electric cars, a move that helped attract a $232 million investment from Warren Buffett's Berkshire Hathaway Inc.

This year "is an inflection point for China's electric-car industry," Li Yunfei, BYD's domestic sales executive, said in an interview. "We expect China's electric car sales will continue to record strong growth rates in the next few years," he said, without providing details.

BYD in March said it hoped to sell 20,000 electric vehicles in 2014, a big increase from some 2,000 sold last year. Mr. Li said sales in Beijing and Shanghai, one of the first cities to loosen regulations, have already helped push sales of BYD plug-in hybrid passenger cars to 3,294 in the first four months of this year, with 8,000 more on order. Plug-in hybrids are cars that can run on either gasoline or battery-power.

BYD's change of tone reflects a broader policy shift in China, as the country's leaders make a renewed push to stimulate demand for green cars in a bid to combat pollution and curb rising oil dependence. The nation has set for itself the ambitious goal of putting 500,000 plug-in hybrid and electric vehicles on the road by next year, and five million by 2020.

One example of the shift is the central government's recent push to have provincial governments extend subsidies for electric and hybrid cars to makers based outside, as well as inside, their regions. Such subsidies are vital because they make pricey green-cars affordable. When combined with national subsidies, they can cover around one-third of the cost of a car. BYD's flagship e6 electric car sells for around 380,000 yuan ($60,800) without subsidies. Foreign electric-car makers have limited benefits: Shanghai, for instance, pledged to offer 3,000 license plates free to buyers of imported electric vehicles.      
                                    
The governments of Beijing and Shanghai started offering subsidies for BYD green cars in recent months, and other major cities are expected to follow suit later this year. Other cities plan to build charging stations so electric car owners won't worry about being stranded away from home.

Plenty of hurdles remain. BYD's Qin hybrid car gets 70 kilometers, or 43 miles, on a single charge compared with 121 kilometers, or 75 miles, in a Nissan Leaf. BYD also is still heavily dependent on sales of traditional gasoline cars, and those are declining as more Chinese consumers flee to higher-quality foreign brands. BYD's first-quarter net profit plunged nearly 90% versus the previous period, to 12 million yuan.
At the Chongqing auto show on Friday, hundreds of would-be car buyers milled around the stands of foreign auto makers such as Volkswagen AG, while visitors to BYD's stand were noticeably fewer.

"How do you finance all these new technologies when you're not making money in your core business right now?" wonders Janet Lewis, an analyst at brokerage Macquarie Group who estimates that electric and hybrid cars accounted for only 3% of BYD's car shipments in the first four months this year.

The charging infrastructure for electric cars remains minimal in China, discouraging buyers. Once green-car demand does pick up, the chief beneficiaries may be foreign manufacturers like Nissan Motor Co., which have more-established electric-car businesses. Nissan later this year will produce electric vehicles for the Chinese market through a joint venture with Wuhan-based Dongfeng Motor Group, making it eligible for local subsidies as well. BMW AG and Tesla Motors Inc. also are making a green-car push in China.

"BYD isn't as well established a brand as a manufacturer like Nissan," said Bill Russo, president of Synergistics Ltd., an automotive-focused consultancy. "It will take BYD time to create trust in the marketplace to allow them to sell in significant numbers.

Mr. Li shrugged off potential competition, saying moves by others to ramp up electric-car sales in China will boost interest in green-cars overall. "It isn't a time to compete with each other," he said. "It's a time to develop a bigger market and create economies of scale."

Mike Ramsey contributed to this article.

Write to Joanne Chiu at joanne.chiu@wsj.com and Colum Murphy at colum.murphy@wsj.com

5.31.2014

Bill Russo to Chair Automotive CEO Dialogue at JP Morgan China Summit

Beijing, China, June 10, 2014



Venue:  Grand Hyatt Hotel, Beijing
Time:  2:00pm


Discussion Topic:

China’s Auto Industry:  Adapting to a More Sophisticated Market

Jochem Heizmann Member of the Board of Management of
Volkswagen AG, President & CEO Volkswagen Group China

Chair: Bill Russo