Next Monday, the International Motor Show (IAA) kicks off in Munich. This venerable event dating back to 1897 faces a crucial problem today: car shows actually only work in China. This is what industry expert Ferdinand Dudenhoeffer tells us in his interview with China.Table. In China, visitors are still genuinely interested in new vehicles. And the trade fairs in Beijing and Shanghai retain their focus. The IAA, on the other hand, presents itself as a diverse fun event revolving around mobility. “People might as well go to the Oktoberfest,” Dudenhoeffer thinks. In doing so, the IAA is manoeuvring itself further to the sidelines.
But that’s not the end of bad news for the German automotive industry. On the occasion of the IAA, we take a look at contenders from China. Long smiled upon, they are now a superior competitor, analyzes our team in Beijing. BYD in particular stands out. The new electric car from the Shenzhen-based group leaves Volkswagen’s comparable models with hardly any market opportunities. It offers the same features from the consumer’s point of view while only costing a third.
In the big picture, China’s car models are more electric, more connected and cheaper than the German competition. And they are smarter. While both Europe and the US also have their own extensive AI research, China is quicker at bringing its applications into its cars.
The topic of AI in China is also addressed by former Google CEO Eric Schmidt in today’s guest article. Schmidt currently heads a new AI control commission in the US and also has access to confidential information. He warns that an authoritarian China could set standards and is able to force them on others.
Mr. Dudenhoeffer, the IAA begins next week – for the first time in Munich. What will be new and different from the previous one in Frankfurt?
Ferdinand Dudenhoeffer: Cars will no longer be the main focus; public transport, aircraft and bicycles will also be topics at the IAA. There will also be a classic car exhibition, as well as events in the city center. So it is no longer just a classic trade fair, but rather an event with the character of a fair.
That sounds like a popular format.
The reception among car manufacturers is mixed at best. The big German carmakers are there, of course. But Opel is already missing and except for Hyundai, Renault and a few young Chinese car companies most of the big international car manufacturers will stay away from Munich. If cars are not the main focus, many international car manufacturers obviously question why they should attend in the first place. Car shows have to be profitable for them. A great mood at the booths is not enough for them.
The IAA is organized by the German Association of the Automotive Industry (VDA). And surely the VDA should know the needs of its members best?
Car shows in the classic sense have had their time. In the wake of the electric trend, trade shows like Battery Days, Power Days, or Tesla’s own product launches have stolen the show. The Detroit Motor Show is dead. The Geneva Motor Show also needs a new approach. Except for China. There, car shows continue to be a success.
How can this be explained?
China has been by far the most important and largest car market in the world for some time now. And the market in the People’s Republic will continue to grow. In order to keep up, car manufacturers must take every opportunity to present themselves. Otherwise, they will get the impression that they are not present. In addition, Auto China has no need to expand its range of topics. Auto China has a lot of interesting things in store, thanks to the large range of different and domestic car manufacturers, who have a lot to offer, especially when it comes to electromobility and autonomous driving.
Classic car shows are no longer en vogue. The IAA is expanding its range to include mobility in general. This is not reflected in sales numbers. In fact, the number of passenger vehicles has even significantly increased recently. How does that fit together?
Yes, you can see that the automobile has become considerably more important than public transport, especially in times of Covid. And this trend will likely remain for the time being. Virologists ultimately stress that we have to live with the virus in the long run. We see this in the leisure industry. Caravans and other motor homes are experiencing an unprecedented boom. I think the IAA is focusing too much on topics that were popular before the pandemic or are at best trendy here in Germany, for example, Sharing Economy, the renewal of the rail services, the bicycle boom. But that doesn’t reflect the global trend. There is a lot of interest in the development of electric cars and autonomous driving. I think the IAA association didn’t see all facets of this appeal and instead chose topics that didn’t all strike a chord. Trends like motor homes or facts and information on virus protection inside cars would be exciting. When I choose an event, I need a theme I’m interested in, not a washed-out variety. The IAA needs a clearer focus.
Autonomous driving is on the agenda in Munich.
German automakers have this on their radar. But in all honesty, trends are currently being set in Silicon Valley and even more so in China. There are more than 500 kilometers of test tracks in Shanghai and Beijing. Even autonomous trucks are already being tested there. That alone would have been a stand-alone topic that could dominate the entire show. But to mix it with bicycles and classic cars, that raises the question: If I want to know about autonomous driving, will I really find out at the IAA? Or will I be presented with a potpourri of a little bit of everything? I might as well go to the Oktoberfest. The Gamescom in Cologne shows how this can be done, and it’s not like they’re showing the “Mensch-Ärgere-Dich-Nicht” board game or historical board games.
Is this “potpourri” perhaps due to the fact that German carmakers are not leading in these areas?
This mix of topics rather displays the fact that there is no common strategy. At Volkswagen, CEO Herbert Diess is now fully committed to electromobility. Other carmakers like BMW are more cautious and say we still need the combustion engine for a long time. The IAA also finds itself in this discrepancy.
According to a study by the VDA, more than 80 percent of the German automotive suppliers surveyed believe that electromobility will become the new standard, but 88 percent do not expect the internal combustion engine to be completely replaced until 2030 or later.
Those who handle this subject in such a relaxed way run a great risk of ceasing to exist the day after tomorrow.
How do you explain this serenity?
That varies depending on the supplier. Those who build seats, windows or tires are only slightly affected by the shift. Manufacturers of exhaust systems or other parts for combustion engines are the ones taking the hit. The big players have set the right course. Continental, for example, has outsourced its drive technology division. Companies like Bosch will lose business in the future because they cannot do batteries. However, they will make up for part of this sales collapse by developing IT and software. BASF and other chemical companies will be among the winners because their substances are needed for battery production. The problem is that smaller companies still believe that the coming storm won’t be as bad as the weather forecast says.
German cars are still very popular in China. In the first half of this year alone, they reported record sales. But they are lagging behind when it comes to electromobility, especially since Chinese carmakers are extremely innovative.
I’m not too worried about Volkswagen and Daimler. They are fully committed to electric vehicles and are developing operating systems that enable them to master the vehicle’s software. The Germans are the largest premium carmakers in the world. Tesla is catching up in this segment, to be sure. But the VW Group with Audi and Porsche and also Daimler are well-positioned. BMW needs to get in line, but they can make it. They all realized that the future of the German car industry lies in China, not in Europe.
VW had a rather difficult start with the ID.4 electric car in China.
When it comes to electric cars, the market in China is currently divided. The Chinese are either buying expensive SUVs and sedans like Tesla or cheap small cars. The ID.3 is positioned in between. Hong Guang’s Mini EV, for example, is the best-selling electric car in China and can be purchased for the equivalent of less than 4,000 euros. I think VW will recapture market shares with the next model variants.
And how are the Chinese carmakers positioned?
They are catching up massively and will also come to Europe. They are already in Eastern Europe, scoring with affordable vehicles. With Geely’s acquisition of Volvo, a Chinese company is already present in Western Europe. And Geely also has a ten percent stake in Daimler. The next Smart car will be built by Geely and come to Europe. The companies are growing together with an even stronger Chinese accent.
Are German carmakers going Chinese?
They have been for a long time. VW, Audi, BMW and Mercedes build cars according to Chinese taste, longer distances for example. And this will continue. The biggest market decides the standard. In 2030, more than 30 million cars will be sold in China. That is twice as many as in Europe. Only those who have a leading position in China will still be at the top. The Germans are in a good position, but they have to watch out: Toyota is attacking, as is GM. The Chinese market will no longer be what it was in the past. It will no longer be possible to make good profits by taking it easy. The competition will increase massively. VW and Daimler have recently shown that they are able to reinvent themselves. That is the real recipe for success.
Ferdinand Dudenhoeffer is Germany’s most renowned expert on the automotive industry, earning him the reputation as the “car pope”. Until 2020, he was a professor of business administration at the University of Duisburg-Essen. He now heads the privately run research institute CAR-Center Automotive Research in Duisburg.
German car executives may have had very mixed feelings about China over the past year and a half. It is true that business in the People’s Republic saved their balance sheets during the Covid crisis. At the same time, however, Volkswagen, Daimler and BMW had to accept that despite their own model offensives, the EV business in China remains firmly in the hands of domestic manufacturers. They were in the starting blocks years before the Germans and seemed unwilling to relinquish their lead in their own domestic market.
Last year, 6.3 percent of all cars sold in China had an electric engine. This year, the analyst firm Canalys estimates that around 1.9 million electric cars will be shipped to Chinese customers – this would mean that nine percent of all new cars in China would be electric. The breeding ground for the Chinese EV industry is a multibillion-dollar plan by the Chinese government to massively expand electromobility. High subsidies and simultaneous restrictions on gas-powered cars have helped pave the way for electric cars in China faster than in Europe.
One thing is certain, however: there is no secret to success. The business models of Chinese challengers could hardly be more diverse. The best-selling EV of July for the eleventh time in a row was not a luxury vehicle, but the mini e-mobile Wuling Hongguang, an affordable electric car. The company also owes its success to its quick market adaptability. “The mentality of our company is to produce whatever people need,” Wuling’s marketing chief Zhang Yiqin said in an interview with Bloomberg. When it became clear that the small electric runabout was especially popular with young women, Zhang responded quickly by hiring more female staff for his team to develop advertising and marketing.
But Chinese manufacturers are not only cheap. The biggest innovation drivers are young companies with a focus exclusively on electric vehicles. Many of them are already enjoying astonishing sales successes: Car startup Nio doubled the number of shipped vehicles last year to just under 44,000, while its domestic competitor Xpeng shipped 27,000; and at Li Auto, more than 32,000 cars left their factory in the very first year of production.
Compared to the 500,000 cars sold by American e-pioneer Tesla worldwide last year, these figures seem modest. But the expectations are enormous, even among investors. Nio is already valued on the stock market on a similar level as industry giant BMW, and Great Wall Motor, SAIC, BYD, Geely and Xpeng are also ranked among the world’s 20 most valuable car brands.
Since the beginning of the year, the stock value of Shenzhen-based EV company BYD has increased nearly sevenfold and continues to climb. In the week of July 28 alone, BYD’s stock rose more than 40 percent, reaching its all-time high on August 9.
BYD batteries are known to be among the best in the world in terms of safety, range and cost. And with the “Dolphin” model, BYD dares to be the first Chinese manufacturer to attack the small car segment with an internationally competitive product. This is nothing less than a direct attack on Volkswagen’s ID.3, which is considerably more expensive.
The Dolphin made its debut at the Shanghai Auto Show in April. It has been available for pre-order since August 13, and the first vehicles are now being shipped. The electric car has unusual dimensions. At just over four meters in length, 1.80 meters in width and 1.60 meters in height, it is around 15 to 30 centimeters shorter than the Golf, depending on the model, while being 15 centimeters taller. This means that it fits into smaller parking spaces and still feels spacious and airy inside. With a wheelbase of 2,700 millimeters, it is only slightly shorter than the VW ID.4 with its 2,770 millimeters, but 18 centimeters shorter than the Tesla Model 3. Elon Musk has already announced a smaller model.
The design language of the Dolphin is based on the “aesthetics of the ocean”. It was designed by BYD design chief Wolfgang Egger, who worked at Audi. Their vehicles are supposed to exude a young, urban attitude, far from the blandness with which BYD’s Chinese EV competitors present their compact cars. One design clue is its taillights. “They adopt optical structures from the Ming era,” explains Egger. This makes this car instantly recognizable, even from the back.
The info technology also fits: The Dolphin is equipped with a rotatable 13-inch screen. This means it is able to compete with a medium-sized laptop. What’s more, the car can be opened using a smartphone. The small BYD EV is also outfitted with a heat pump that makes it possible to use the car’s excess heat to heat the vehicle in a battery-saving way. This is particularly important for northern China, which experiences Siberian temperatures in Winter.
BYD’s new dwarf is available in three variants with a range of 300 to 400 kilometers, although these numbers are calculated according to Chinese standards. The charging times are particularly attractive. Within half an hour, the battery can be largely recharged. BYD is convinced that the age of compact vehicles is dawning in China as well, especially in large cities.
For the time being, the Dolphin will only be available in China. However, BYD’s first cars are already available in Europe. This summer, the first 100 models of the comparatively conventional Tang E-SUV were shipped to the pilot market of Norway. “People don’t welcome Chinese cars with open arms,” knows Isbrand Ho, BYD’s head of Europe in Rotterdam, “That’s why our cars have to be especially good. And our service even better.” In the event of problems, he says, BYD has to show customers that it is here for them. That’s why BYD won’t rush its market entry into Europe. “If we fail, it won’t be BYD who failed, it will be Chinese cars that failed,” Ho believes. “We have a big responsibility in this regard. It won’t be easy to establish the brand. “That is why it’s not yet clear when cars will be available in other EU markets. And most importantly, when the Dolphin will arrive in the ID.3’s domestic market.
While the Dolphin has just launched its sale, the company is already very successfully generating market share and sales with its established Han model. The car, which is bursting with extras and appealing aesthetics, is available for the equivalent of 33,000 euros. By comparison, the Tesla S manages around 650 kilometers on one battery charge. Although it accelerates one second faster than the Han, it costs just under 77,000 euros.
At present, it is also becoming apparent that the Chinese EVs are performing much better than the new German competition, at least on their domestic market. In July, VW has already sold 5,800 ID.3s. That was significantly more than in June, with only almost 3,000 vehicles sold. But Nio and Xpeng have each sold around 8,000 vehicles. BYD has even sold 50,000 vehicles. That’s nearly nine times as many as VW. Compared to last year, BYD has managed to triple its sales.
It’s already clear that it’s going to be tough for VW and similar companies. After deducting government subsidies, Chinese customers will pay the equivalent of between 12,600 and 16,300 euros for the Dolphin, which looks better and smarter. The starting price for the ID.4 in its small variant, on the other hand, ranges already around 25,000 euros. The ID.4 edition, which is comparable to the Dolphin in terms of features, even costs around 36,000 euros, more than double. It may well be that VW has higher standards when it comes to safety and quality. But the question is: does the customer want to pay that much for a city car? The ID.3 won’t even be sold in China until the end of the year.
The marketing of the ID.4 is also a train wreck: The number four sounds similar to the word death in Chinese. In the next few months, sales figures will show which of the two cars will do better after the ID.4 had a head start of a few months. The industry will be watching this duel closely.
BYD is already considering its next steps: Meanwhile, rumors are spreading that BYD will launch a new premium brand with its own car dealer network in the first quarter of 2021. According to rumors, a new luxury car will be launched before the end of this year. With it, BYD would cover the entire spectrum.
More and more international experts are attesting that the Chinese have done their homework and are building cars of the highest quality. For example, the Chinese manufacturer Aiways, which now also offers its U5 electric SUV in Germany, recently received a knighthood from Europe’s largest motoring association ADAC: “The Aiways U5 proves that cars made in China no longer have to be cheap in the sense of being of inferior quality,” say ADAC experts. In comparison to Mercedes’ rival product, the EQC, for example, the Chinese car is on a par in many disciplines, even performing better in some respects – and only costs half as much.
Experts at consulting firm McKinsey also took apart a number of Chinese cars to determine their performance levels. The result: “The Chinese-made models in our study outperform international automakers on two fronts: operation and customer experience (through better connectivity) and battery technology.” It said the vehicles had caught up significantly with “massive technological improvements” over the past two years.
But it’s not just technology that makes the difference. The Chinese are also smart in their sales models. Geely, for example, is relying on a subscription concept for its European plans: in Germany, Sweden, France, Spain, the Netherlands and Belgium, cars from the young corporate brand Lynk & Co are available for 500 euros a month, including tax, insurance, maintenance and tire changes. There is not much room for choice for consumers in this case: blue or black. Hybrid or plug-in technology, where batteries can be charged both via its combustion engine and by cable. That’s all when it comes to options. With this simplicity, Geely wants to score, especially with young drivers.
Nio, on the other hand, presents its vehicles in China and probably soon in Europe as well via so-called “Nio Houses”, which feature a living room, kitchen and library as well as play areas for children. The first house outside China is currently being built in Oslo, and Nio plans to open it in September on over 2,000 square meters in the center of Norway’s capital. Frank Sieren/Gregor Koppenburg/Joern Petring
The world is only starting to grapple with how profound the artificial-intelligence revolution will be. AI technologies will create waves of progress in critical infrastructure, commerce, transportation, health, education, financial markets, food production, and environmental sustainability. Successful adoption of AI will drive economies, reshape societies, and determine which countries set the rules for the coming century.
This AI opportunity coincides with a moment of strategic vulnerability. US President Joe Biden has said that America is in a “long-term strategic competition with China.” He is right. But it is not only the United States that is vulnerable; the entire democratic world is, too, because the AI revolution underpins the current contest of values between democracy and authoritarianism. We must prove that democracies can succeed in an era of technological revolution.
China is now a peer technological competitor. It is organized, resourced, and determined to win this technology competition and to reshape the global order to serve its own narrow interests. AI and other emerging technologies are central to China’s efforts to expand its global influence, surpass the economic and military power of the US, and lock down domestic stability. China is executing a centrally-directed systematic plan to extract AI knowledge from abroad through espionage, talent recruitment, technology transfer, and investments.
China’s domestic use of AI is deeply concerning to societies that value individual liberty and human rights. Its employment of AI as a tool of repression, surveillance, and social control at home is also being exported abroad. China funds massive digital infrastructure projects around the world, while seeking to set global standards that reflect authoritarian values. Its technology is being used to enable social control and suppress dissent.
To be clear, strategic competition with China does not mean we should not work with China where it makes sense. The US and the democratic world must continue to engage with China in areas such as health care and climate change. To stop trading and working with China would not be a viable path forward.
China’s rapid growth and focus on social control have made its techno-authoritarian model attractive for autocratic governments and tempting for fragile democracies and developing countries. Much work needs to be done to ensure that the US and the democratic world can package economically viable technology with diplomacy, foreign aid, and security cooperation to compete with China’s exported digital authoritarianism
The US and other democratic countries are playing catch-up in preparing for this global tech competition. On July 13, 2021, the National Security Commission on Artificial Intelligence (NSCAI) hosted a Global Emerging Technology Summit that showcased an important comparative advantage that the US and our partners around the world retain: the broad network of alliances among democratic countries, rooted in common values, respect for the rule of law, and the recognition of fundamental human rights.
The global technology competition is ultimately a competition of values. Together with allies and partners, we can strengthen existing frameworks and explore new ones to shape the platforms, standards, and norms of tomorrow and ensure that they reflect our principles. Extending our global leadership in technological research, development, governance, and platforms will put the world’s democracies in the best position to harness new opportunities and defend against vulnerabilities. Only by continuing to lead in AI developments can we set standards for the responsible development and use of this critical technology
The NSCAI’s final report provides a roadmap for the democratic international community to win this competition.munity to win this contest.
First, the democratic world must use existing international structures – including NATO, the OECD, the G7, and the European Union – to deepen efforts to address all the challenges associated with AI and emerging technologies. Here, the United Kingdom’s current presidency of the G7, with its robust tech agenda and efforts to further cooperation on a range of digital initiatives, is encouraging. The G7’s decision to involve Australia, India, South Korea, and South Africa reflects an important recognition that we must convene democratic countries from around the world in these efforts
Likewise, the newly launched US-EU Trade and Technology Council (which in many ways mirrors NSCAI’s call for a US-EU Strategic Dialogue for Emerging Technologies) is a promising mechanism to align the world’s largest trading partners and economies.
Second, we need new structures, such as the Quad – the US, India, Japan, and Australia – to expand dialogue on AI and emerging technologies and their implications, and to enhance cooperation in standards development, telecommunications infrastructure, biotechnology, and supply chains. The Quad can serve as the foundation for broader cooperation in the Indo-Pacific region across government and industry
And, third, we need to build additional alliances around AI and future technology platforms with our allies and partners. The NSCAI has called for the creation of a coalition of developed democracies to synchronize policies and actions around AI and emerging technologies across seven critical areas:
– Developing and operationalizing standards and norms in support of democratic values and the development of secure, reliable, and trusted technologies;
– Promoting and facilitating coordinated and joint research and development on AI and digital infrastructure that advances shared interests and benefits humanity;
– Promoting democracy, human rights, and the rule of law through joint efforts to counter censorship, malign information operations, human trafficking, and illiberal uses of surveillance technologies;
– Exploring ways to facilitate data-sharing among allies and partners through enabling agreements, common data archival procedures, cooperative investments in privacy-enhancing technologies, and by addressing legal and regulatory barriers;
– Promoting and protecting innovation, particularly through export controls, investment screening, supply-chain assurance, emerging-technology investment, trade policy, research and cyber protections, and intellectual-property alignment;
– Developing AI-related talent by analyzing labor-market challenges, harmonizing skills and certification requirements, and increasing talent exchanges, joint training, and workforce-development initiatives; and
– Launching an International Digital Democracy Initiative to align international assistance efforts to develop, promote, and fund the adoption of AI and associated technologies that comports with democratic values and ethical norms concerning openness, privacy, security, and reliability.
This momentum can be maintained only by working together. Partnerships – between governments, with the private sector, and with academia – are a key asymmetric advantage that the US and the democratic world have over our competitors. As recent events in Afghanistan have shown, US capabilities remain indispensable in allied operations, but the US must do more to rally allies around a common cause. This era of strategic competition promises to transform our world, and we can either shape the change or be swept along by it.
We now know that the use of artificial intelligence will increase in all areas of life as the pace of innovation continues to aWe now know that the uses of AI in all aspects of life will grow as the pace of innovation continues to accelerate. We also know that our adversaries are determined to turn AI capabilities against us. Now we must act.
The principles we establish, the investments we make, the national-security applications we field, the organizations we redesign, the partnerships we forge, the coalitions we build, and the talent we cultivate will set the strategic course for America and the democratic world. Democracies must invest whatever it takes to maintain leadership in the global technology competition, to use AI responsibly to defend free people and free societies, and to advance the frontiers of science for the benefit of all humanity.
AI will reorganize the world and change the course of human history. The democratic world must lead that process
Eric Schmidt, former CEO and chairman of Google/Alphabet, is chairman of the National Security Commission on Artificial Intelligence. Translation: Andreas Hubig
Copyright: Project Syndicate, 2021.
www.project-syndicate.org
Elementary school students in Guangzhou receive a medal at the start of the school year. The new school year started on September 1st. In some provinces, children of unvaccinated parents are not yet allowed back to classrooms. But children between the ages of 12 and 17 are also still barred from attending classes in some regions in the country while they are still unvaccinated. China is one of several countries that have permitted the use of its domestic vaccines for children as young as three. Children must wear masks in class.
Next Monday, the International Motor Show (IAA) kicks off in Munich. This venerable event dating back to 1897 faces a crucial problem today: car shows actually only work in China. This is what industry expert Ferdinand Dudenhoeffer tells us in his interview with China.Table. In China, visitors are still genuinely interested in new vehicles. And the trade fairs in Beijing and Shanghai retain their focus. The IAA, on the other hand, presents itself as a diverse fun event revolving around mobility. “People might as well go to the Oktoberfest,” Dudenhoeffer thinks. In doing so, the IAA is manoeuvring itself further to the sidelines.
But that’s not the end of bad news for the German automotive industry. On the occasion of the IAA, we take a look at contenders from China. Long smiled upon, they are now a superior competitor, analyzes our team in Beijing. BYD in particular stands out. The new electric car from the Shenzhen-based group leaves Volkswagen’s comparable models with hardly any market opportunities. It offers the same features from the consumer’s point of view while only costing a third.
In the big picture, China’s car models are more electric, more connected and cheaper than the German competition. And they are smarter. While both Europe and the US also have their own extensive AI research, China is quicker at bringing its applications into its cars.
The topic of AI in China is also addressed by former Google CEO Eric Schmidt in today’s guest article. Schmidt currently heads a new AI control commission in the US and also has access to confidential information. He warns that an authoritarian China could set standards and is able to force them on others.
Mr. Dudenhoeffer, the IAA begins next week – for the first time in Munich. What will be new and different from the previous one in Frankfurt?
Ferdinand Dudenhoeffer: Cars will no longer be the main focus; public transport, aircraft and bicycles will also be topics at the IAA. There will also be a classic car exhibition, as well as events in the city center. So it is no longer just a classic trade fair, but rather an event with the character of a fair.
That sounds like a popular format.
The reception among car manufacturers is mixed at best. The big German carmakers are there, of course. But Opel is already missing and except for Hyundai, Renault and a few young Chinese car companies most of the big international car manufacturers will stay away from Munich. If cars are not the main focus, many international car manufacturers obviously question why they should attend in the first place. Car shows have to be profitable for them. A great mood at the booths is not enough for them.
The IAA is organized by the German Association of the Automotive Industry (VDA). And surely the VDA should know the needs of its members best?
Car shows in the classic sense have had their time. In the wake of the electric trend, trade shows like Battery Days, Power Days, or Tesla’s own product launches have stolen the show. The Detroit Motor Show is dead. The Geneva Motor Show also needs a new approach. Except for China. There, car shows continue to be a success.
How can this be explained?
China has been by far the most important and largest car market in the world for some time now. And the market in the People’s Republic will continue to grow. In order to keep up, car manufacturers must take every opportunity to present themselves. Otherwise, they will get the impression that they are not present. In addition, Auto China has no need to expand its range of topics. Auto China has a lot of interesting things in store, thanks to the large range of different and domestic car manufacturers, who have a lot to offer, especially when it comes to electromobility and autonomous driving.
Classic car shows are no longer en vogue. The IAA is expanding its range to include mobility in general. This is not reflected in sales numbers. In fact, the number of passenger vehicles has even significantly increased recently. How does that fit together?
Yes, you can see that the automobile has become considerably more important than public transport, especially in times of Covid. And this trend will likely remain for the time being. Virologists ultimately stress that we have to live with the virus in the long run. We see this in the leisure industry. Caravans and other motor homes are experiencing an unprecedented boom. I think the IAA is focusing too much on topics that were popular before the pandemic or are at best trendy here in Germany, for example, Sharing Economy, the renewal of the rail services, the bicycle boom. But that doesn’t reflect the global trend. There is a lot of interest in the development of electric cars and autonomous driving. I think the IAA association didn’t see all facets of this appeal and instead chose topics that didn’t all strike a chord. Trends like motor homes or facts and information on virus protection inside cars would be exciting. When I choose an event, I need a theme I’m interested in, not a washed-out variety. The IAA needs a clearer focus.
Autonomous driving is on the agenda in Munich.
German automakers have this on their radar. But in all honesty, trends are currently being set in Silicon Valley and even more so in China. There are more than 500 kilometers of test tracks in Shanghai and Beijing. Even autonomous trucks are already being tested there. That alone would have been a stand-alone topic that could dominate the entire show. But to mix it with bicycles and classic cars, that raises the question: If I want to know about autonomous driving, will I really find out at the IAA? Or will I be presented with a potpourri of a little bit of everything? I might as well go to the Oktoberfest. The Gamescom in Cologne shows how this can be done, and it’s not like they’re showing the “Mensch-Ärgere-Dich-Nicht” board game or historical board games.
Is this “potpourri” perhaps due to the fact that German carmakers are not leading in these areas?
This mix of topics rather displays the fact that there is no common strategy. At Volkswagen, CEO Herbert Diess is now fully committed to electromobility. Other carmakers like BMW are more cautious and say we still need the combustion engine for a long time. The IAA also finds itself in this discrepancy.
According to a study by the VDA, more than 80 percent of the German automotive suppliers surveyed believe that electromobility will become the new standard, but 88 percent do not expect the internal combustion engine to be completely replaced until 2030 or later.
Those who handle this subject in such a relaxed way run a great risk of ceasing to exist the day after tomorrow.
How do you explain this serenity?
That varies depending on the supplier. Those who build seats, windows or tires are only slightly affected by the shift. Manufacturers of exhaust systems or other parts for combustion engines are the ones taking the hit. The big players have set the right course. Continental, for example, has outsourced its drive technology division. Companies like Bosch will lose business in the future because they cannot do batteries. However, they will make up for part of this sales collapse by developing IT and software. BASF and other chemical companies will be among the winners because their substances are needed for battery production. The problem is that smaller companies still believe that the coming storm won’t be as bad as the weather forecast says.
German cars are still very popular in China. In the first half of this year alone, they reported record sales. But they are lagging behind when it comes to electromobility, especially since Chinese carmakers are extremely innovative.
I’m not too worried about Volkswagen and Daimler. They are fully committed to electric vehicles and are developing operating systems that enable them to master the vehicle’s software. The Germans are the largest premium carmakers in the world. Tesla is catching up in this segment, to be sure. But the VW Group with Audi and Porsche and also Daimler are well-positioned. BMW needs to get in line, but they can make it. They all realized that the future of the German car industry lies in China, not in Europe.
VW had a rather difficult start with the ID.4 electric car in China.
When it comes to electric cars, the market in China is currently divided. The Chinese are either buying expensive SUVs and sedans like Tesla or cheap small cars. The ID.3 is positioned in between. Hong Guang’s Mini EV, for example, is the best-selling electric car in China and can be purchased for the equivalent of less than 4,000 euros. I think VW will recapture market shares with the next model variants.
And how are the Chinese carmakers positioned?
They are catching up massively and will also come to Europe. They are already in Eastern Europe, scoring with affordable vehicles. With Geely’s acquisition of Volvo, a Chinese company is already present in Western Europe. And Geely also has a ten percent stake in Daimler. The next Smart car will be built by Geely and come to Europe. The companies are growing together with an even stronger Chinese accent.
Are German carmakers going Chinese?
They have been for a long time. VW, Audi, BMW and Mercedes build cars according to Chinese taste, longer distances for example. And this will continue. The biggest market decides the standard. In 2030, more than 30 million cars will be sold in China. That is twice as many as in Europe. Only those who have a leading position in China will still be at the top. The Germans are in a good position, but they have to watch out: Toyota is attacking, as is GM. The Chinese market will no longer be what it was in the past. It will no longer be possible to make good profits by taking it easy. The competition will increase massively. VW and Daimler have recently shown that they are able to reinvent themselves. That is the real recipe for success.
Ferdinand Dudenhoeffer is Germany’s most renowned expert on the automotive industry, earning him the reputation as the “car pope”. Until 2020, he was a professor of business administration at the University of Duisburg-Essen. He now heads the privately run research institute CAR-Center Automotive Research in Duisburg.
German car executives may have had very mixed feelings about China over the past year and a half. It is true that business in the People’s Republic saved their balance sheets during the Covid crisis. At the same time, however, Volkswagen, Daimler and BMW had to accept that despite their own model offensives, the EV business in China remains firmly in the hands of domestic manufacturers. They were in the starting blocks years before the Germans and seemed unwilling to relinquish their lead in their own domestic market.
Last year, 6.3 percent of all cars sold in China had an electric engine. This year, the analyst firm Canalys estimates that around 1.9 million electric cars will be shipped to Chinese customers – this would mean that nine percent of all new cars in China would be electric. The breeding ground for the Chinese EV industry is a multibillion-dollar plan by the Chinese government to massively expand electromobility. High subsidies and simultaneous restrictions on gas-powered cars have helped pave the way for electric cars in China faster than in Europe.
One thing is certain, however: there is no secret to success. The business models of Chinese challengers could hardly be more diverse. The best-selling EV of July for the eleventh time in a row was not a luxury vehicle, but the mini e-mobile Wuling Hongguang, an affordable electric car. The company also owes its success to its quick market adaptability. “The mentality of our company is to produce whatever people need,” Wuling’s marketing chief Zhang Yiqin said in an interview with Bloomberg. When it became clear that the small electric runabout was especially popular with young women, Zhang responded quickly by hiring more female staff for his team to develop advertising and marketing.
But Chinese manufacturers are not only cheap. The biggest innovation drivers are young companies with a focus exclusively on electric vehicles. Many of them are already enjoying astonishing sales successes: Car startup Nio doubled the number of shipped vehicles last year to just under 44,000, while its domestic competitor Xpeng shipped 27,000; and at Li Auto, more than 32,000 cars left their factory in the very first year of production.
Compared to the 500,000 cars sold by American e-pioneer Tesla worldwide last year, these figures seem modest. But the expectations are enormous, even among investors. Nio is already valued on the stock market on a similar level as industry giant BMW, and Great Wall Motor, SAIC, BYD, Geely and Xpeng are also ranked among the world’s 20 most valuable car brands.
Since the beginning of the year, the stock value of Shenzhen-based EV company BYD has increased nearly sevenfold and continues to climb. In the week of July 28 alone, BYD’s stock rose more than 40 percent, reaching its all-time high on August 9.
BYD batteries are known to be among the best in the world in terms of safety, range and cost. And with the “Dolphin” model, BYD dares to be the first Chinese manufacturer to attack the small car segment with an internationally competitive product. This is nothing less than a direct attack on Volkswagen’s ID.3, which is considerably more expensive.
The Dolphin made its debut at the Shanghai Auto Show in April. It has been available for pre-order since August 13, and the first vehicles are now being shipped. The electric car has unusual dimensions. At just over four meters in length, 1.80 meters in width and 1.60 meters in height, it is around 15 to 30 centimeters shorter than the Golf, depending on the model, while being 15 centimeters taller. This means that it fits into smaller parking spaces and still feels spacious and airy inside. With a wheelbase of 2,700 millimeters, it is only slightly shorter than the VW ID.4 with its 2,770 millimeters, but 18 centimeters shorter than the Tesla Model 3. Elon Musk has already announced a smaller model.
The design language of the Dolphin is based on the “aesthetics of the ocean”. It was designed by BYD design chief Wolfgang Egger, who worked at Audi. Their vehicles are supposed to exude a young, urban attitude, far from the blandness with which BYD’s Chinese EV competitors present their compact cars. One design clue is its taillights. “They adopt optical structures from the Ming era,” explains Egger. This makes this car instantly recognizable, even from the back.
The info technology also fits: The Dolphin is equipped with a rotatable 13-inch screen. This means it is able to compete with a medium-sized laptop. What’s more, the car can be opened using a smartphone. The small BYD EV is also outfitted with a heat pump that makes it possible to use the car’s excess heat to heat the vehicle in a battery-saving way. This is particularly important for northern China, which experiences Siberian temperatures in Winter.
BYD’s new dwarf is available in three variants with a range of 300 to 400 kilometers, although these numbers are calculated according to Chinese standards. The charging times are particularly attractive. Within half an hour, the battery can be largely recharged. BYD is convinced that the age of compact vehicles is dawning in China as well, especially in large cities.
For the time being, the Dolphin will only be available in China. However, BYD’s first cars are already available in Europe. This summer, the first 100 models of the comparatively conventional Tang E-SUV were shipped to the pilot market of Norway. “People don’t welcome Chinese cars with open arms,” knows Isbrand Ho, BYD’s head of Europe in Rotterdam, “That’s why our cars have to be especially good. And our service even better.” In the event of problems, he says, BYD has to show customers that it is here for them. That’s why BYD won’t rush its market entry into Europe. “If we fail, it won’t be BYD who failed, it will be Chinese cars that failed,” Ho believes. “We have a big responsibility in this regard. It won’t be easy to establish the brand. “That is why it’s not yet clear when cars will be available in other EU markets. And most importantly, when the Dolphin will arrive in the ID.3’s domestic market.
While the Dolphin has just launched its sale, the company is already very successfully generating market share and sales with its established Han model. The car, which is bursting with extras and appealing aesthetics, is available for the equivalent of 33,000 euros. By comparison, the Tesla S manages around 650 kilometers on one battery charge. Although it accelerates one second faster than the Han, it costs just under 77,000 euros.
At present, it is also becoming apparent that the Chinese EVs are performing much better than the new German competition, at least on their domestic market. In July, VW has already sold 5,800 ID.3s. That was significantly more than in June, with only almost 3,000 vehicles sold. But Nio and Xpeng have each sold around 8,000 vehicles. BYD has even sold 50,000 vehicles. That’s nearly nine times as many as VW. Compared to last year, BYD has managed to triple its sales.
It’s already clear that it’s going to be tough for VW and similar companies. After deducting government subsidies, Chinese customers will pay the equivalent of between 12,600 and 16,300 euros for the Dolphin, which looks better and smarter. The starting price for the ID.4 in its small variant, on the other hand, ranges already around 25,000 euros. The ID.4 edition, which is comparable to the Dolphin in terms of features, even costs around 36,000 euros, more than double. It may well be that VW has higher standards when it comes to safety and quality. But the question is: does the customer want to pay that much for a city car? The ID.3 won’t even be sold in China until the end of the year.
The marketing of the ID.4 is also a train wreck: The number four sounds similar to the word death in Chinese. In the next few months, sales figures will show which of the two cars will do better after the ID.4 had a head start of a few months. The industry will be watching this duel closely.
BYD is already considering its next steps: Meanwhile, rumors are spreading that BYD will launch a new premium brand with its own car dealer network in the first quarter of 2021. According to rumors, a new luxury car will be launched before the end of this year. With it, BYD would cover the entire spectrum.
More and more international experts are attesting that the Chinese have done their homework and are building cars of the highest quality. For example, the Chinese manufacturer Aiways, which now also offers its U5 electric SUV in Germany, recently received a knighthood from Europe’s largest motoring association ADAC: “The Aiways U5 proves that cars made in China no longer have to be cheap in the sense of being of inferior quality,” say ADAC experts. In comparison to Mercedes’ rival product, the EQC, for example, the Chinese car is on a par in many disciplines, even performing better in some respects – and only costs half as much.
Experts at consulting firm McKinsey also took apart a number of Chinese cars to determine their performance levels. The result: “The Chinese-made models in our study outperform international automakers on two fronts: operation and customer experience (through better connectivity) and battery technology.” It said the vehicles had caught up significantly with “massive technological improvements” over the past two years.
But it’s not just technology that makes the difference. The Chinese are also smart in their sales models. Geely, for example, is relying on a subscription concept for its European plans: in Germany, Sweden, France, Spain, the Netherlands and Belgium, cars from the young corporate brand Lynk & Co are available for 500 euros a month, including tax, insurance, maintenance and tire changes. There is not much room for choice for consumers in this case: blue or black. Hybrid or plug-in technology, where batteries can be charged both via its combustion engine and by cable. That’s all when it comes to options. With this simplicity, Geely wants to score, especially with young drivers.
Nio, on the other hand, presents its vehicles in China and probably soon in Europe as well via so-called “Nio Houses”, which feature a living room, kitchen and library as well as play areas for children. The first house outside China is currently being built in Oslo, and Nio plans to open it in September on over 2,000 square meters in the center of Norway’s capital. Frank Sieren/Gregor Koppenburg/Joern Petring
The world is only starting to grapple with how profound the artificial-intelligence revolution will be. AI technologies will create waves of progress in critical infrastructure, commerce, transportation, health, education, financial markets, food production, and environmental sustainability. Successful adoption of AI will drive economies, reshape societies, and determine which countries set the rules for the coming century.
This AI opportunity coincides with a moment of strategic vulnerability. US President Joe Biden has said that America is in a “long-term strategic competition with China.” He is right. But it is not only the United States that is vulnerable; the entire democratic world is, too, because the AI revolution underpins the current contest of values between democracy and authoritarianism. We must prove that democracies can succeed in an era of technological revolution.
China is now a peer technological competitor. It is organized, resourced, and determined to win this technology competition and to reshape the global order to serve its own narrow interests. AI and other emerging technologies are central to China’s efforts to expand its global influence, surpass the economic and military power of the US, and lock down domestic stability. China is executing a centrally-directed systematic plan to extract AI knowledge from abroad through espionage, talent recruitment, technology transfer, and investments.
China’s domestic use of AI is deeply concerning to societies that value individual liberty and human rights. Its employment of AI as a tool of repression, surveillance, and social control at home is also being exported abroad. China funds massive digital infrastructure projects around the world, while seeking to set global standards that reflect authoritarian values. Its technology is being used to enable social control and suppress dissent.
To be clear, strategic competition with China does not mean we should not work with China where it makes sense. The US and the democratic world must continue to engage with China in areas such as health care and climate change. To stop trading and working with China would not be a viable path forward.
China’s rapid growth and focus on social control have made its techno-authoritarian model attractive for autocratic governments and tempting for fragile democracies and developing countries. Much work needs to be done to ensure that the US and the democratic world can package economically viable technology with diplomacy, foreign aid, and security cooperation to compete with China’s exported digital authoritarianism
The US and other democratic countries are playing catch-up in preparing for this global tech competition. On July 13, 2021, the National Security Commission on Artificial Intelligence (NSCAI) hosted a Global Emerging Technology Summit that showcased an important comparative advantage that the US and our partners around the world retain: the broad network of alliances among democratic countries, rooted in common values, respect for the rule of law, and the recognition of fundamental human rights.
The global technology competition is ultimately a competition of values. Together with allies and partners, we can strengthen existing frameworks and explore new ones to shape the platforms, standards, and norms of tomorrow and ensure that they reflect our principles. Extending our global leadership in technological research, development, governance, and platforms will put the world’s democracies in the best position to harness new opportunities and defend against vulnerabilities. Only by continuing to lead in AI developments can we set standards for the responsible development and use of this critical technology
The NSCAI’s final report provides a roadmap for the democratic international community to win this competition.munity to win this contest.
First, the democratic world must use existing international structures – including NATO, the OECD, the G7, and the European Union – to deepen efforts to address all the challenges associated with AI and emerging technologies. Here, the United Kingdom’s current presidency of the G7, with its robust tech agenda and efforts to further cooperation on a range of digital initiatives, is encouraging. The G7’s decision to involve Australia, India, South Korea, and South Africa reflects an important recognition that we must convene democratic countries from around the world in these efforts
Likewise, the newly launched US-EU Trade and Technology Council (which in many ways mirrors NSCAI’s call for a US-EU Strategic Dialogue for Emerging Technologies) is a promising mechanism to align the world’s largest trading partners and economies.
Second, we need new structures, such as the Quad – the US, India, Japan, and Australia – to expand dialogue on AI and emerging technologies and their implications, and to enhance cooperation in standards development, telecommunications infrastructure, biotechnology, and supply chains. The Quad can serve as the foundation for broader cooperation in the Indo-Pacific region across government and industry
And, third, we need to build additional alliances around AI and future technology platforms with our allies and partners. The NSCAI has called for the creation of a coalition of developed democracies to synchronize policies and actions around AI and emerging technologies across seven critical areas:
– Developing and operationalizing standards and norms in support of democratic values and the development of secure, reliable, and trusted technologies;
– Promoting and facilitating coordinated and joint research and development on AI and digital infrastructure that advances shared interests and benefits humanity;
– Promoting democracy, human rights, and the rule of law through joint efforts to counter censorship, malign information operations, human trafficking, and illiberal uses of surveillance technologies;
– Exploring ways to facilitate data-sharing among allies and partners through enabling agreements, common data archival procedures, cooperative investments in privacy-enhancing technologies, and by addressing legal and regulatory barriers;
– Promoting and protecting innovation, particularly through export controls, investment screening, supply-chain assurance, emerging-technology investment, trade policy, research and cyber protections, and intellectual-property alignment;
– Developing AI-related talent by analyzing labor-market challenges, harmonizing skills and certification requirements, and increasing talent exchanges, joint training, and workforce-development initiatives; and
– Launching an International Digital Democracy Initiative to align international assistance efforts to develop, promote, and fund the adoption of AI and associated technologies that comports with democratic values and ethical norms concerning openness, privacy, security, and reliability.
This momentum can be maintained only by working together. Partnerships – between governments, with the private sector, and with academia – are a key asymmetric advantage that the US and the democratic world have over our competitors. As recent events in Afghanistan have shown, US capabilities remain indispensable in allied operations, but the US must do more to rally allies around a common cause. This era of strategic competition promises to transform our world, and we can either shape the change or be swept along by it.
We now know that the use of artificial intelligence will increase in all areas of life as the pace of innovation continues to aWe now know that the uses of AI in all aspects of life will grow as the pace of innovation continues to accelerate. We also know that our adversaries are determined to turn AI capabilities against us. Now we must act.
The principles we establish, the investments we make, the national-security applications we field, the organizations we redesign, the partnerships we forge, the coalitions we build, and the talent we cultivate will set the strategic course for America and the democratic world. Democracies must invest whatever it takes to maintain leadership in the global technology competition, to use AI responsibly to defend free people and free societies, and to advance the frontiers of science for the benefit of all humanity.
AI will reorganize the world and change the course of human history. The democratic world must lead that process
Eric Schmidt, former CEO and chairman of Google/Alphabet, is chairman of the National Security Commission on Artificial Intelligence. Translation: Andreas Hubig
Copyright: Project Syndicate, 2021.
www.project-syndicate.org
Elementary school students in Guangzhou receive a medal at the start of the school year. The new school year started on September 1st. In some provinces, children of unvaccinated parents are not yet allowed back to classrooms. But children between the ages of 12 and 17 are also still barred from attending classes in some regions in the country while they are still unvaccinated. China is one of several countries that have permitted the use of its domestic vaccines for children as young as three. Children must wear masks in class.
