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WM Motor aims to be China’s BEV for the masses

April 11, 2019

I was in China the last half of February doing interviews for a comprehensive report on China’s NEV sector I am writing for Wards Intelligence. It should be out in May. Everyone buy it!

One of the folks I interviewed was my old friend Freeman Shen, whom I met in the year 2000 or so when he was head of BorgWarner China. That doesn’t even come up in his list of positions nowadays it was so long ago. He went on to be a top exec at FCA and Volvo/Geely.  Now Freeman is putting those years of experience and connections to good use at WM Motor, an EV startup initially known as Weltmeister, Its Chinese name remains Weima.

My Wards Intelligence report is looking at how NEVs in China are the basic unit of a digital lifestyle. I tend to think of that as meaning a way to get content to consumers, but Freeman looks at it from the other angle – as a big data gathering advice. WM’s BEVs are part of a digital ecosystem, he told me, one where owners use the connected car to meet your daily needs from paying for insurance for the car to paying for parking, electricity, and everything else Chinese already do digitally anyway using WeChat.

Rather than portraying itself as a part of an entire digital lifestyle the way NIO and Byton do, WM Motor sees itself as a vehicle company. But the vehicle is a “rolling data collector,” says Freeman.

“We are a hardware company,” he says. “The vehicle is smart hardware, a way to capture big data to improve performance.”

WM Motor is currently selling one BEV, the EX5 SUV.  Freeman says “thousands” of units have been delivered since it went on sale in Beijing in December of 2018. The price before incentives is 200,000 RMB.  He doesn’t fear the end of government subsidies (which is good as it happens soon.)

WM Motors EX5

WM EX5 in garage under building where EV maker has an office.

“I like it that they are cancelling the (NEV purchase) incentives,” says Freeman. “We are already at a lower price point.”

It hasn’t announced sales volume goals yet, but WM Motor aims to be number one on a delivery basis by 2021, says Freeman. He emphasizes delivery to differentiate WM from EV startups that talk about volume in terms of sales but not how many vehicles have actually been given to the owner. Have no doubt, however, volume sales are Freeman’s goal. Big volume. WM Motor will launch two more models in 2019 and two models in 2020.

“I want to become the Volkswagen or Xiaomi of the EV sector,” he says. “I don’t want to be Mercedes.”  Xiaomi is a very popular low-priced mobile phone brand n China.

As for his distribution model, WM Motor will do direct marketing as well as have franchised dealers, says Freeman. It is a new retail concept in China, he says, because WM Motor will have a direct relationship with every owner, even if the BEV is purchased through a franchised dealer. The dealers will help deliver the vehicle and provide aftersales service, but all the data the vehicle generates belongs to WM Motor.

One area that is crucial to any startup’s survival is funding, a lot of it. WM is funded through equity plus bank loans, says Freeman. This is one area where his immense industry cred is very helpful.

“I have a very good reputation,” says Freeman. “I did fund raising for the Geely acquisition of Volvo.”

WM Motor just finished a round of funding raising from investors including Baidu, Tencent, Sequoia Capital China, and government-backed Chengtong Fund as well as some “big SOEs,” says Freeman. This round raised more than 20 billion RMB, or nearly US $300 million.

“We are focusing on local sources of capital,” says Freeman. It has no plans to export to the U.S. “yet,” he says.

Some see ride-hailing or ride-sharing fleets as the biggest future market for BEVs. WM Motor is flexible, says Freeman. It can be B2B or B2C. Already, Beijing-based delivery service Meituan Dianping is testing the EX5, he says. “We can produce a car just for ride-hailing,” he adds. “There is a lot you can do to make the driver and the passenger safer.”

 

 

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Human Horizons aims to be more than just an EV startup in China

December 20, 2018

Ecosystem is the new buzz word in China’s electric vehicle startup world. Take my recent conversation with James Shyr, chief design officer and a founding partner of Human Horizons, a Shanghai-based company.

“The automotive industry, in our opinion, has largely remained inside its own walled garden, closed off from the rest of the ecosystem,” says Shyr. “We believe this is about to change.”

Shyr

I have known James for nearly two decades. We met in the early 2000’s when he was design director at the Pan-Asia Technical Automotive Center (PATAC), the SAIC-GM joint venture design and engineering center in Shanghai.

Shyr is not the only GM China alum at Human Horizons. Ding Lei, former SGM general manager, is the founder, chairman and CEO of Human Horizons; and Phil Murtaugh, the former chairman and CEO of GM China, is co-founder and vice chairman. Kevin Chen, another SGM alum, is also a co-founder.

These guys have decades of experience in the traditional automotive world. That gives them a leg up on some other startups, says Shyr. “We know what we are doing, what are the risks,” he says. “We can push the boundaries.” Their long experience has also made them fearless, Shyr adds. “We are not afraid of the unknown. No Fear is our motto for designing the vehicle.”

For sure, the automotive future is a bit murky. So perhaps being fearless is a bonus. In any case, there is no doubt that having so many experienced China auto executives running Human Horizons should come in handy, though the fact that they all come from a traditional automotive background may hinder the company in some ways.

Human Horizons has three parts, Shyr says: The smart car, the smart road, and the smart city. “The vehicle development is the foundation of this company,” he says. “This is what we do best.’

But, he adds, “The smart car itself is not enough.” Hence the smart road and smart city. Human Horizons is developing all three simultaneously, says Shyr.

Human Horizons was “officially sanctioned” on December 12, 2017, but “we were working before that, he says. It was publicly introduced on October 22, 2018 in Shanghai. It has set out a pretty ambitious goal. Here is a quote from Ding Lei: “By re-examining the human-vehicle-road-city relationship and using smart vehicles as the information terminal, HUMAN HORIZONS aims to equip roads with sensors to facilitate smart transportation. Leveraging its digital service operation platform – the Digital House, Human Horizons will create an information system for the smart city.”

Shyr is an automotive designer, so naturally we talk about designing the cars. Human Horizons will only produce electric vehicles, he says. “We truly believe in the all-electric vehicle.” But electric doesn’t mean boring and Shyr set out to prove that with its first concept, the H Hypervelocity car.

The Hypervelocity concept

With the H car, says Shyr, “we were exploring the boundary of how a human can move.” It is a vehicle for a person who would enjoy driving, he says. They designed a computer assisted model, and built a clay model, then decided they hadn’t pushed the boundaries enough, trashed that, and went back to the drawing board.

The current version has some cool features such as a sliding steering wheel – enabled by its steer-by-wire system, or to quote a press release: “The RE.C.E.S.S. or RE-configurable Cockpit Electric Steering System. It would enable anyone “to-be-or-not-to-be-the-captain “at any time, ……because we know that you want to have a choice to work or relax.”  The H car also has flexible seating positions, which I guess also helps anyone to be or not to be the captain.

They had a lot of interior space to play with in the design process because the car is powered by in-wheel electric motors produced by Protean Electric! Yep, the Protean Electric led by KY Chan, that I blogged about in late October.  Indeed, Shyr told me about the cooperation before Protean put out the official press release. I hadn’t gotten around to writing this up or I would have broken the news.

Human Horizons also has  debuted a smaller electric vehicle concept, the A Agility. I can’t even describe it so will just past in the HH description: “The Concept A Active-agility presents a concept based upon a passenger capsule that can be connected to different sub-systems by the top or the bottom to provide different modes of transportation. Its POD (Personification-On-Demand system) provides an intelligent and efficient solution for people to move around and keep connected.”

Active Agility car

Active-agility concept

Human Horizons will launch its first product in 2021, says Shyr, and is forming a sales channel right now. The first vehicle to market won’t be one of the futuristic concept vehicles. No, it will be a mainstream electric vehicle offering a portfolio of electric powertrains including in-wheel motors, he says. They will create a vehicle brand name in mid-2019, says Shyr.

The vehicles will be produced at several plants that are “in the works,” says Shyr. It seems both are in Yancheng, a city in northeastern Jiangsu province. The plants are “80 percent greenfield,” he says.

Connections matter

Human Horizons will build more than just plants in Yancheng. The city will also be the testing ground for the smart car-smart road-smart city ecosystem Human Horizons is developing, says Shyr.  The Yancheng government is an investor in Human Horizons, which should smooth the approval process quite a bit. “That is why we are so confident we are going forward,” says Shyr.

He figures a working model of the smart ecosystem concept will be in place “no later than 2025.” There isn’t anything revolutionary about the technology, says Shyr. What is revolutionary is the way Human Horizons will put it all together, he says. “A lot of new startups concentrate on the vehicle alone,” says Shyr. “Does this world need another car company? No.”

 

Protean Electric gaining traction in U.S., China with in-wheel motors — finally

October 28, 2018

 

Protean_Primary_Logo_without_strapline_CMYKKY Chan suit

The proof is in the pudding, as the saying goes. I’m not exactly sure what that means, but I think it applies to Protean Electric’s current situation.  I’ve been writing about Protean since 2012. The “start-up” is still chugging along, still working to get automakers to give its in-wheel electric motors a try. “We have found it is very difficult to convince OEMS to use our motor,” Protean CEO KY Chan told me recently. It needs some pudding to prove its product. That may finally be happening.

Electrification takes many forms.  Protean Electric, based in the U.S., U.K., and China, makes in-wheel electric motors. To quote its web site: “Our aim has been to create an in-wheel motor with integrated power electronics and digital control that can be packaged with a brake as a single product.”

Though it is ten years old, Protean is still in start-up mode as it is still “burning shareholder capital,” says Chan. It landed $40 million Series E funding earlier this year in new equity and manufacturing licenses. The majority of that funding – some $30 million – came from Weifu High Technology Group Co. Ltd, which now owns 12.34 percent of Protean, according to an announcements by Weifu and Protean. The two companies will establish a joint venture in Wuxi, China to manufacture ProteanDrive Pd18 in-wheel motors, which are designed to fit an 18-inch wheel rim.

Protean has another site in China, in Tianjin. I wrote about that in March of 2016. It houses what Chan refers to as a “prototype line” where it can produce motors for customers that need small quantities – several dozen, say – to help those customers make up their minds about the product. That plant has also aided Protean in developing its supply chain in China. “When Weifu and U.S. licensees want to scale up, they can rely on our original suppliers,” says Chan.

The in-wheel motor maker has received small purchase orders from eleven OEMS in China to test the technology, he says. If they decide to scale up, they will buy the motors from the Weifu plant, says Chan.

Protean doesn’t plan to expand the Tianjin site into large scale manufacturing, he adds. “Our mission is in the next two years before our China licensees scale up, they can rely on Tianjin to build prototypes.”

As we all know, or anyone reading this is likely to know, China has an ambitious plan to grow its electric vehicle sector.  It has mandated that automakers produce a certain volume of electrified vehicles or pay fines – a policy similar to California’s Zero Emission Vehicle (ZEV) policy, which indeed was a model for the China policy.  Concurrently, Beijing is rolling out an updated Corporate Average Fuel Consumption (CAFC) policy. Automakers must meet that as well.   So, OEMs in China are interested in Protean’s in-wheel motors, which can help meet both targets as they can also improve fuel efficiency.

The key, of course, is to get OEMs to try the motors. And while Protean has always believe its biggest opportunities would be in the passenger vehicle segment, says Chan, for the next several years, “our business will mainly come from the logistical vehicle manufacturers.”  Indeed, in March of 2018 Protean signed an agreement with Consolidated Metco Inc. (ConMet) to develop in-wheel motors for the medium- and heavy-duty vehicle markets.

ConMet, based in Vancouver, WA, is a global supplier of components to the commercial vehicle markets. Protean and ConMet have already put a motor and battery system together and are promoting the system to customers such as Volvo Heavy Duty and Scania, says Chan.

It also just announced a deal with Linamar Corp. , a huge Canadian automotive parts manufacturer, under which Linamar will manufacture Protean’s in-wheel motors for both the commercial and passenger car segments.

Waste delivery vehicles is a promising area, says Chan. Garbage trucks, as such vehicles are commonly known, stop and start over and over again. “Using a Protean motor would save a lot of energy,” says Chan. Another promising segment – cold chain delivery trucks that deliver to supermarkets and the like. The container is a big refrigerator that traditionally uses a diesel engine as a compressor to keep the container cold.

“What ConMet and Protean would be providing is a way to use the action of the vehicle to generate energy through the Protean motor, that can be used for the refrigeration,” says Chan.  The product they offer is a complete system including a battery, electric motor, and battery management system, says Chan.  Competitors generally only offer the electric motor, says Chan.

Protean is also talking with another customer in the U.S. that he can’t reveal, says Chan. That customer, a major Tier One supplier in the Detroit area, has agreed to become a Protean licensee.  The deal is quite important for Protean because it will give major OEMS more comfort in dealing with Protean, says Chan. Until now, they have hesitated because of his firm’s small size, he says. That pudding is beginning to gel.

Given its growing U.S. business, Chan has relocated from Asia to the San Francisco Bay Area. His kids all work in the Bay Area, so that was another factor, he says. It has a small presence, just Chan, a VP of U.S. sales, and a few others. “Hiring is very difficult” in the Bay Area, he sighs.

Back in China, Protean is eyeing another business opportunity as well – ride hailing. The central government in China has recognized that convincing Chinese consumers to buy electric vehicles may be even tougher when the current hefty incentives are phased out by 2021.  So, Beijing is encouraging Didi Chuxing, the giant of the ride-hailing segment in China, to go all electric, he says.

Didi doesn’t want to produce its own EVs; it is encouraging Chinese automakers such as FAW and SAIC and BAIC to produce them and to lease the EVs to Didi drivers. “I would like Didi to mention to the OEMs that they should look at in-wheel motors,” says Chan.

 

GYON adds name to long list of Chinese EV startups

August 13, 2018

LOS ANGELES — Can you believe it? Another EV startup — that will produce “affordable luxury” electric vehicles — has popped up. It is called GYON — name is an acronym for “Grow Your Own Niche.”  I attended an event here on August 8 to announce GYON’s partnership with the Gaffoglio Family Metalcrafters, a firm in Fountain Valley, CA.

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GYON’s mission is to “create the next generation of electric, intelligent, connected, and socialized transportation products and services.” Sounds really familiar, I know. And yes, we are all rolling our eyes. I asked Joe Chao, the co-founder and president of GYON, what made his EV company special. “We are not just a car company,” he told me. “We are a system provider.”

Although details of the actual car, battery, and charger were scare, GYON showed a photo of a “Smart City Ecosystem” circle — car operation-AI Smart-Charging Network-Finance-Connectivity — which make up the system, I guess.  Not exactly new but a hot topic in China. GYON is headquartered in the southwest China city of Chengdu, and has a lot of support from the local government, Joe told me.

It is true that the local governments in China all want their own EV champion. And Chengdu has a pretty solid automotive base — Volkswagen, Toyota, and Volvo have plants there. I guess the Chengdu government feels like it needs its own EV startup.

GYON aims to build two production plants in Chengdu with a total capacity of 480,000 units. The plan calls for one plant to be finished in 2021, the second in 2024. But, Chao admitted, that depends on negotiations with the Chengdu government going well. Control seems to be a sticking point — GYON wants full control to ensure quality, etc.

Most — actually all except for me — of the journalists there were Chinese, most flown over from China, it seems. The first press release was in Chinese. So the audience was clearly in China.  Los Angeles was chosen as the location for the event because Gaffoglio Family Metalcrafters are based nearby in Orange County.

GFM will produce a prototype for GYON. No sketch was available — the whole thing is pretty nascent, was my feeling. But GFM does have a stellar list of clients and accomplishments so I expect the prototype — which may be rolled out at CES in 2020 — will look great.

GYON_Brand_Launch_Press_Conference_2

GYON is super ambitious — it says it will turn out nine vehicles in eight years. They will be in the sedan, MPV, SUV, and even station wagon segments. The first models look to be small EVs, however, A and B segment or sub-compact and compact.  GYON says it will turn out “affordable luxury” cars and the price point for the first models — 100,000 to 200,000 RMB, or US $14,668 to $29,337 at current exchange rates — is pretty darned affordable. It will be interesting to see how much luxury GYON can pack into the vehicles at that price.

Joe pointed out that the quality of an EV maker’s team is very important in landing funding, and he has assembled a pretty stellar group. Joe Chao is, of course, the former head of DaimlerChrysler’s China operations. He oversaw the production of the Beijing-Benz plant whose opening I attended. He also was an SVP at Chrysler, worked at GM, and after leaving DaimlerChrysler worked for Fisker and Karma in China, among others.  He’s been around.

Also at the event were Jacky Xian, a GYON investor and CEO of Sitech; Sunho Park, head of GYON quality center and also quality manager at Sitech; Sebastien Yang, manager of GYON marketing and product planning; and Thomas Zhang, chief engineer. All have impressive automotive CVs.

Another common trait is that many have connections to Sitech, another EV maker, which is backed by FAW.  Sitech launched it own little EV, the Dev1, earlier this year. Joe says GYON and the Dev1 won’t share technology. Sitech is an investor in GYON, however, which means FAW is an investor, in a way.  As with so many companies in China, the ownership structure of GYON is a tangled web.

Joe said that GYON might use FAW’s manufacturing capacity if GYON had a production-ready vehicle and its plants weren’t ready.  Loose FAW ties aside, GYON doesn’t have a close relationship with an established automaker.  Its execs, who do have a lot of automotive experience among them, touted this as a risk and an advantage (they would, of course…).

“We don’t have a big uncle behind us,” said Chao. “It is up to us. This is about risk..” But, he said, they were not going to use that as an excuse not to found GYON.

Jackie Xian added: “In China, people have an open mind to welcome a new brand.”

Not sure how true that is.

 

 

 

 

Magna aims to sell EVs in China through JV with BAIC

June 29, 2018

Magna International is jumping on the China EV band wagon. Well, that’s not entirely correct. It was already a major player in the EV component space. Now, Magna will form two joint ventures with Beijing Automotive Industry Holding Corp aka BAIC. One joint venture will focus on engineering, the other will manufacture pure electric vehicles.

The announcement Magna and BAIC would work together first came out in April of this year. That announcement proclaimed the agreement was between BAIC and Magna Steyr, the Austria-based contract vehicle manufacturer that is part of Magna International.

Magna Logo - High Res

The actual JV was announced in mid-June, but the parties were Magna (no Steyr) and BAIC. That is because Magna has decided to refer to all its subsidiaries as simply Magna, Klaus Drobnak, vice president fuel systems for Magna Steyr, oops, I mean Magna, told me.  Drobnak heads up Magna Steyr’s Asia business. Magna Steyr is known for engineering and manufacturing vehicles for other companies.

Magna International’s supplier business has long had a thriving presence in China. Its components are in pretty much every foreign brand car in China and many domestically-badged vehicles as well. Why jump into vehicle manufacturing in ‘China now, I asked? China “is a large market, BAIC is a strong partner. We see is as a good opportunity for us,” says Drobnak.

Drobnak Klaus 416304(18)

I saw that coming. The large market, that is. In 2017, China was the world’s largest market for electric vehicles, including battery electric and plug-in hybrid electric vehicles. Some 700,000 BEVs and PHEVs, plus a few hydrogen fuel cell vehicles, were sold in the Middle Kingdom in 2017. BAIC’s EC series of electric vehicles was far and away the top seller.

By 2025, “the forecast for (sales of) all electric vehicles in China is 5 million,” says Drobnak. That is the government’s target, I remind him. But given that this is China, that target will likely be met.  Government regulations are another compelling reason to start producing EVs in China now.  Automakers must produce a certain number of electrified vehicles each year because of several government policies, which I wrote about for Wards Auto and you can read about here.

“We think (electric vehicles) is going to be a strongly growing segment,” says Drobnak. A good bet.

Of course, the main customers for electric vehicles in China thus far have been government fleets.  That doesn’t worry Drobnak. “The first (markets for EVs) are always fleets,” he says. Drobnak figures Chinese consumers concerned about pollution will warm to electric vehicles.  He also thinks that the daily driving behavior of China’s city-dwellers fits well with the range of electric vehicles.

One market driver Drobnak isn’t counting on are vehicle registration policies making EVs license plates easier or cheaper to obtain. Though they are major reason behind consumer EV sales in many large cities now, Drobnak figures those incentives will vanish as the volume of EVs on the road rises.

China’s healthy purchase subsidies are also scheduled to be phased out in a few years.  Drobnak didn’t sound too worried about that. The price of EVs is “definitely coming down” as volumes increase, he says. As for batteries, which account for the bulk of an EVs cost, their price is also coming down as volumes increase and cell manufacturers become more capable, says Drobnak. “I am positive the sale price (for electric vehicles) will go in the right direction,” he says.

Two JVs

Magna will be the majority owner of the engineering joint venture with BAIC; the Chinese company will be the majority owner of the electric vehicle JV.  The partnership hasn’t been approved by the central government yet, but BAIC is owned by the Beijing municipal government. “Our expectation is (the two JVs) will be approved,” says Drobnak.

BAIC, through its Beijing Electric Vehicle subsidiary, already produces the EC series, which with sales of 13,169 units in 2017.  But those are small, inexpensive EVs. With the JV, BAIC will move into higher-priced segments.

The engineering JV will develop a smart EV platform suitable for a medium or premium segment model. Drobnak declined to say what style of vehicle the JV would make, but there are plenty of clues.

Magna contracts to produce one other all-electric vehicle, the just-launched Jaguar I-PACE SUV.

jaguaripacesyulongwhite017-resize-1024x682

Magna Steyr produces the Jaguar I-Pace EV.

The SUV/CUV segment in China is the fastest growing. You be the judge of what style vehicle the Magna BAIC JV is likely to produce.

Production will be at a brownfield plant –meaning an existing plant BAIC owns — in Zhenjiang, in east China’s Jiangsu province. That plant has an annual production capacity of 180,000 units. Start of production is set for mid-2020, says Drobnak.

Zhenjiang is on the banks of the Yangtze River between Suzhou and Nanjing. That puts it smack in the middle of a technology and manufacturing hotbed in China, as well as near automakers SAIC – GM, and SAIC VW. There should be a good supplier base there, but a lot of competition for staff.

Magna has 51 manufacturing plants in China producing components ranging from electrical systems to structural and powertrain components to transmissions. It has more than 22,600 employees in China. The new JVs will boost that by more than 3,500.

Why did you decide to form a joint venture with BAIC rather than another automaker, I asked? “BAIC group has been a customer to our engineering and components for quite a while. This came out of our regular business discussion,” says Drobnak.

Beijing just said it will allow foreign automakers to own 100 percent of an electric vehicle manufacturing company. Why not go it alone, I asked Drobnak?

Most automakers are sticking with a Chinese partner, he points out.  Magna is no different. Also, BAIC is will be the new entities’ first and primary customer, he adds.

 

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Big connected electric SUVs, or what I saw at Auto China 2018

May 1, 2018

I lived in Kunming in January of 1992 when China’s then-paramount leader Deng Xiaoping made his famous “Tour of the South,” meant to reassure Chinese that his reform and opening policies would continue. That the common people in China were convinced was immediately apparent in Kunming, the provincial capital of Yunnan in southern China on the border with Vietnam.

Overnight on a downtown street, dozens if not hundreds of card tables sprouted. Illuminated by bare incandescent light bulbs strung overhead in long lines, those tables sported all manner of small items for sale by individual “business people” who had decided to “xia hai,” or jump into the sea of doing business for themselves, albeit on a small scale.  I mentioned it to a Chinese friend who said, “Chinese people are like a swarm of bees. When the government policy suggests something, they all do it.”

I saw evidence of that same swarming effect at Auto China 2018, which this year took place in Beijing (the show alternates between Beijing and Shanghai). One area the Made in China 2025 policy encourages is development of electric vehicles.  Boy have Chinese firms swarmed into this area. The show included 174 new-energy vehicles, which includes battery-electric, plug-in hybrid electric, and hydrogen fuel cell vehicles.

For all intents and purposes, however, it means BEVs and PHEVs. Of those at the show, more than 70 percent were made by Chinese firms. Note that I do not say automakers because all manner of Chinese companies, from automakers to internet companies to home appliance makers are investing in the sector.

One could see all this investment in EVs as a great thing.  How admirable that so many companies in China have the resources – including intellectual property, technology, design capability, human resources, etc. etc. – to answer the government’s call? On the other hand, one could also consider this a huge mis-allocation of resources. I lean more towards the huge mis-allocation side.

And it is only getting worse. The top Asia Pacific executive at a global supplier told me that they currently have applications from 41 wanna-be EV makers who want to use his firm’s technology. Having to wade through all these applications is a huge waste of his staff’s resources, the exec complained.

We’ve seen this before – in the traditional auto industry. China has more than 100 traditional automakers, most of them producing very small volumes of not very good ICE vehicles. Now, it has dozens — probably hundreds if commercial electric vehicle producers are added in — of companies trying to produce EVs.  I am the one who always says, “Shoot with buckshot and you are more likely to hit something.” But in this case, it really is a mass waste of resources in many instances.

True, China’s EV market is fast-growing. In 2017, it grew by 53 percent compared to the previous year to some 770,000 units, including 479,000 passenger vehicles, according to the China Association of Automobile Manufacturers. That was a tiny percentage of the total passenger vehicle market of 28.9 million units.

EVs have a bright future in China, no doubt.  But a lot of the investment being poured into EV production is still going to be wasted. There is very little to differentiate many of these models from each other. Consider the photos  at the top of this blog, which I snapped on the floor of the show. They represent a very small slice of the large electric connected SUVs on display.

What will differentiate these EVs, and in the end determine which manufacturers will succeed, is technology, most specifically connected car technology. I mean connectivity in the broad sense, so vehicle to vehicle, vehicle to smart phone, etc.  A pair of reporters from French media (but both were ethnically Chinese, so I automatically slipped into Chinese during the interview, only realizing later they probably wanted me to speak English) stopped me on the floor on the second media day and asked me to name one word to describe the show. I had to mull it over for a while before choosing connectivity.

connectivity

I won’t go into the special connective features of the various models because I don’t know them all. But I will say that the various executives I interviewed at the show thought China would lead the world in connectivity technology. Their reasoning: The government is mandating it – connectivity aka smart car technology is also part of Made in China 2025. Chinese consumers are demanding it. And the shear size of the market means that there is more investment and testing going into connectivity ergo faster development. Big data writ really big.

I also won’t – indeed, since I am not in China on a daily basis I don’t feel able to – pick winners and losers in the China connected EV race.  I do however think China will “win” the EV race simply by virtue of the size of its market. But it won’t necessarily have EVs that are any better than other countries, just more of them. And, some of those will carry foreign badges.

I am becoming more convinced that my friend Bill Russo may be onto something with his Automobility focus, at least where connected cars are concerned.  There is a lot to be said for sheer scale paired with actual innovation.

Now, let’s hope the government doesn’t decide there is a bit too much freedom of information in the sector and clamp down on it. That likely won’t happen, however. Indeed, the eagerness for Chinese to be connected to all things in all ways aids the government in its quest to know more about and to control what its people are saying and thinking. But I won’t go there….

 

 

Firm formerly known as Wheego again looks to China for funds

April 13, 2018

I read recently that Evatran Group Inc., a wireless charging company based in Richmond, VA, (and which I blogged about in 2015 and 2016) would no longer pursue being acquired by Zhejiang VIE Science & Technology Co, a Chinese firm that was already an Evatran investor. According to a story in the Richmond Times-Dispatch, the acquisition is “currently off the table primarily due to the Chinese government regulatory approval environment.”

That vague statement by Evatran board chairman Bob Mooney can be read several ways. It may refer to Beijing’s more restrictive attitude towards Chinese firms investing abroad.   It may also refer to the current U.S. administration’s much more restrictive approach to Chinese investment approval.  In any case, Chinese investment in the U.S. dropped by 36 percent in 2017 compared to the previous year, according to The Rhodium Group.

Either way, it could be an ominous sign for automotive startups here in the U.S. as Chinese money has been an important building block for many of them. This week, I talked with one such firm, Autonomous Fusion Inc. If that name isn’t familiar, I am not surprised. Until just a few days ago, Autonomous Fusion was known as Wheego Technologies, Inc.

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It is the second name change for the company. In October of 2015, Atlanta-based Autonomous Fusion changed its name from Wheego Electric Cars to Wheego Technologies. At that time, CEO Mike McQuary told me “We are a technology company whose primary focus is on electric vehicles and autonomous driving systems.”

McQ09

Mike McQuary says his firm is now purely a technology firm, offering software as service (SAS).

Now it is all-in for autonomous driving software.

To quote McQuary, now CEO of Autonomous Fusion:

“About three years ago we realized that if we were going to continue making EVs we were going to have to raise an enormous amount of capital, around half a billion dollars.  I struggled to find a business model that would work.  We had established a group to look at automotive future tech, a skunkworks group. I talked to some folks at Georgia Tech (and) they had figured out Autonomous Driving was going to be one of the corner stones of the industry.  Artificial Intelligence and Machine Learning were the way it would succeed.”

His team at Wheego was already working in that space, so it pivoted to a software as service company whose first product is a “full stack” autonomous driving software solution based on Artificial Intelligence and Machine Learning, says McQuary.

“That is what ADAS (Advanced Driver Assistance Systems) is going to be,” he says, “Particularly Level 3 and Level 4, because of the dynamic nature of the driving environment. Using machine learning as a platform for an ADAS product, you will need constant updates.”

That doesn’t mean EVs are a thing of the past for McQuary. “The software is not specific to EV’s, “he says. “It works great in ICE cars; but the automakers who are making EV’s know that their consumers will want the most advanced technology in their vehicles and so are being more aggressive in pursuing L3 ADAS.”

Autonomous Fusion is in preliminary talks with several automakers to use its software, says McQuary, and now we get to the China part of this story. Most of those automakers are Chinese.   There is a lot of interest in China, he says.

Due to government, industry, and investment community support, “China will be a lot more aggressive it their employment of ADAS and EVs,” says McQuary.  Indeed, a new policy from China’s central government calls for 50 percent of all vehicles to have full or partial autonomous function by 2020.  That same year, China aims to have five million new energy vehicles — which includes battery electric, plug-in hybrid electric, and fuel cell vehicles — on the road.

That goal is backed by a dual-credit scheme combining standards similar to California’s ZEV policy and increasingly strict vehicle emissions standards. Automakers will have to earn enough credits by producing NEVs or pay fines.

That has created an opening in the China market for foreign firms such as Autonomous Fusion. Chinese technology in the ADAS area is still developing. And, Chinese automakers are now more willing to pay for good technology than in the past, when low cost was the highest priority, says McQuary.

But the ADAS software space is getting pretty crowded, I mention. How will Autonomous Fusion stand out? Guanxi was pretty much his answer.

“It helps that we have in our DNA over ten years where we have built relationships over here,” he says. “Our relationships are deep-standing, not just on the auto side, but also in China’s evolution in technology” from copying to developing its own.

And here is where the matter of Chinese investment comes in. Wheego relied on Chinese investment to keep going. In 2013, Wheego needed funding and wasn’t having any luck finding investors in the U.S.

McQuary was visiting suppliers in China, and made an appointment to meet with GSR Ventures, a Beijing-based venture capital firm. GSR was happy to invest in Wheego so long as it turned its focus to producing EVs in China for the China market – mainly local governments, McQuary told me in 2016.

But that small EV sector is a pretty crowded market in China, so now we are back to where McQuary decided to “pivot” to the software as service business model.

Autonomous Fusion is at a familiar spot. Automakers – mostly Chinese – are interested in its software.  It is ready to go into production of a Level 3 autonomous vehicle, says McQuary. Until it finds more funding, however, it can probably only take on one new customer, he adds.

“We are sort of walking a fine line between commitments and the ability to take on full commercial customers,” says McQuary.

China once again seems like the best bet for funding. Besides Chinese VC firms, many local governments are investing in ADAS and EV startups, he says.

Like his vehicle-agnostic software, McQuary is funding-source agnostic.

“I am out in venture markets,” he says. “I am looking in China and the U.S. for money. We have gotten interest.”