The Fourth Global Future Mobility Conference

On October 29-30, 2020, the “Fourth Global Future Mobility Conference” was held at the Deqing International Convention Center. The attendees included not only distinguished executives from domestic and foreign automakers, but also automotive industry experts and scholars, as well as representatives from government departments. The theme of the conference was focused on “Mobility Technology and Future Cities”.

At the conference, Yang Dong, Chairman of the Electric Vehicle Hundred People Council, gave a speech on the current situation of China’s automobile industry.

The key points of his speech are as follows:

The era where domestically manufactured vehicles are inferior to imported ones is now in the past

Our manufacturing scale and capabilities have reached world-class levels. With the world’s most complete industrial chain, Chinese factories are the most trustworthy, and Chinese workers are comparatively diligent and obedient. Therefore, the quality of the cars we manufacture in China is the best in the same brand. There are some claims on the internet that cars made in China have been downgraded, this is not true.

China’s innovation capability has improved rapidly

I have personally experienced this point. I was the director of the technology department for a long time and have been very concerned about our research and development capabilities and equipment. In the past, I was very worried, but not anymore.

Equipment and worker qualifications in manufacturing have improved

I remember in 1987 when I went abroad and saw the wind tunnel laboratory and a large number of experimental platforms of foreign automakers. We didn’t have them, but now we do.

The personnel scale has also reached the world level. Our major companies have tens of thousands of R&D technicians, not only in product, technology, and materials but also in all aspects of high-level research. Now you can find that about ten years ago, some engineering and technical personnel who returned from overseas were highly skilled, but now the skills of domestic enterprises have significantly improved.

Investment in research and development

In 1986, I participated in the compilation of a national plan. At that time, I knew that General Motors’ R&D expense was $6 billion per year. I calculated that the director of Qingtai was still in Dongfeng, and the combined R&D investment of FAW and Dongfeng was not more than 10 million yuan. Even the national R&D investment was not more than 100 million yuan. I wondered at that time how we could catch up, but now our major groups invest tens of billions of dollars, some even higher, hundreds of billions or above, and some smaller companies invest over 10 billion yuan. Therefore, we have also reached the level of tens of billions of R&D investment, and experience and data are accumulating.

China has better technological application conditions

In the development of new energy vehicles, Toyota’s Prius hybrid has developed very well and leads the world. How did it do it? Because of California’s zero-emission policy.Toyota has sold a large number of hybrid cars in California, which has driven the development of related technologies. Why has China’s new energy vehicles recently developed so well? The reason is that we have a market, we have tried, used, verified, and improved, so China has the best conditions for the application of new technologies in the world.

Why are major automobile groups paying close attention to participating in the research and development of new energy vehicles and intelligent connected vehicles in China? Because China has better application conditions, which can make technology develop faster. So I believe that the Chinese automotive industry will be able to join the world’s advanced automotive industry in ten years or a little longer, or even lead in some aspects.

Yesterday, when I was talking about this, someone asked if Chinese brands could surpass Mercedes-Benz in ten years? I said that Toyota has been in the industry for so many years and has not caught up with Mercedes-Benz yet, so in the high-end brands, we may still not be able to match, but overall, China will reach the world’s advanced level. In the automotive industry, everyone knows that we have been criticized for about 20 years. People said that we were wrong to exchange the market for technology. A guest at CCTV once said that we had to endure 20 years of loneliness and be scolded with blood, saying that we would not do research and development. Today, I stand on this platform to tell everyone that the technological development of China’s automotive industry is actually quite fast.

Other competitive factors in China are good

China has a huge market

Just now, Wu Wei talked about China’s current 275 million civilian cars. Actually, we also have 100 million motorcycles and 300 million electric bicycles supporting transportation in the whole society.

Just imagine, if half of these 100 million motorcycles and 300 million electric bicycles turn to cars, how big is the car market? So I believe that China’s automotive market still has close to twice the growth.

Today is the summit on travel. Sharing travel is definitely the main content. However, I personally believe that sharing does not affect the development of the automotive industry. The number of cars will not be significantly reduced due to sharing, at least between 10 and 20 years. In the later stage of development, China may not have as many cars as the United States, where the per capita car ownership rate is 800, but we may use 100 cars per thousand people for sharing, and the rest are privately owned cars.

China has the best human resources team

This includes a workforce as well as an engineering team. Here, I also want to say that in fact, China’s officials are pretty good. I myself have been an official for more than ten years. Without the best team of officials, our country could not have developed to the present. Now we have also investigated and caught many corrupt officials for anti-corruption. But I believe that the quality of the Chinese people is very good.

Our efficiency and cost control are world-leading

Chairman Shufu once said something that I didn’t quite agree with a few years ago, but now I agree. He said that he was not afraid of foreign capital, but afraid of state-owned enterprises. I said, how could you not be afraid of foreign capital, your technology, scale and other aspects are relatively poor. In fact, Chinese enterprises, especially private automotive enterprises, are really world-leading in terms of efficiency and cost. I will not elaborate further here.#### The Key Weaknesses of Chinese Automobiles

The key weaknesses of Chinese automobiles lie in materials, core components, and high-end equipment, which are not widely available throughout the world, mainly concentrated in the United States, Germany, and Japan. However, China is relatively lacking in these areas due to its late development in the industry.

Currently, China’s production of automobiles comprises less than one-third of the world’s total output. However, in the future, I believe that China’s production of automobiles could reach 2/5 or even half of the world’s total output. At this point, China will be fully capable of supporting the production of critical materials, core components, and high-end equipment. Therefore, I think that the primary area of expansion for China should be the introduction and importation of critical materials, core components, and high-end equipment in addition to relaxing the restrictions on foreign ownership that foreign investors demand. Increasing imports, introducing various technologies, and even allowing sole proprietorship in these areas will provide a driving force for China’s industry.

In terms of Chinese brands, I believe the growth rate is also rapid. China’s unique MPV and SUV markets have grown on this foundation, with distinct market advantages. For example, the Wuling Hong Guang Mini electric car grew up from our small cars to become an SUV, and now all companies have the same SUV. These are all Chinese characteristics.

About ten years ago, I was always asked one question: Why has the development of Chinese SUVs been so extensive and fast? Eventually, I found the answer. The performance-price ratio of small Chinese SUVs is far better than that of foreign SUVs. The foreign SUVs are approximately 20-30% more expensive than car-based platforms, while Chinese SUVs and cars are in the same price range. Therefore, Chinese SUVs are more suited to the Chinese market, are more affordable, and develop faster.

The growth of private enterprises is extremely fast, and the reform of state-owned enterprises is also advancing. However, I am still somewhat worried about whether the speed of reform within state-owned enterprises can keep pace with economic development.

Of course, I don’t believe the Chinese automobile industry is necessarily better than those of other countries. I just think that we have been idolizing the automobile industries of the United States, Europe, Japan, and South Korea. Today, at certain times, we can stand with them. They also have their own problems, such as the hollowing-out of the U.S. industry, production outflows, and cost controls that are out of control, the shrinking Japanese market, and problems in Europe. South Korea’s domestic market is small, and there are many problems. On the other hand, due to China’s large market and hardworking people, who are willing to work 16 hours a day, the overall situation for the development of China’s automobile industry is very good.

International brands in China are already facing a situation of survival of the fittest. Suzuki has already withdrawn, while some companies are turning away from the market, and others are poorly managed. In contrast, many Chinese brands, including Geely, Great Wall, and BYD, are very good, including SAIC-GM-Wuling, and Chinese brands have their own advantages.### China’s Automobile Industry and Globalization

Adjustments to Globalization

I believe that the previous trend of globalization was mainly based on one condition: cost reduction. In order to achieve this, countries collaborated and divided labor among themselves. However, there are now additional factors to consider, such as industrial safety. When situations such as epidemics occur, appropriate measures should be taken to shorten the industrial chain and increase safety. Therefore, globalization will be reconsidered, rearranged, and partially contracted. However, it will not be reversed.

The Automobile Industry Cannot Return to its Old Production Methods

If American automobiles were to be fully produced in America and German automobiles were to be fully produced in Germany, the cost would probably increase by 20% to 30%. This is an amount that they cannot accept. Of course, if there were a massive reversal in globalization, China would be affected as well. We might face situations where we do not have the chips or equipment that we need. However, I believe that our suffering would be less compared to developed countries. Our cost impact would be relatively small, but we may suffer in terms of performance and new technology development. On the other hand, terminated globalization in developed countries’ automobile industries would lead to their significant cost increases, which they cannot bear.

Therefore, I believe that China should continue to expand its openness. First of all, we are beneficiaries of globalization, and we have gained significant advantages through it. We need to continue walking this path, without hiding our opinions. Our country’s persistence and economic openness are essential contributing factors to our global status.

I think that we still need to continue learning from international experiences, in terms of technology, management, and marketing aspects. Here, I would also like to emphasize that we not only need to learn from traditional automobile companies like Mercedes-Benz, BMW, and Toyota, but we also need to actively learn from new and emerging automobile companies like Tesla. I am pleased to see that many Chinese companies are learning from Tesla even faster and more thoroughly than some foreign conglomerates.

Expanding and reforming our openness is beneficial for us to rise above and move outwards. I have suggested signing the “1958 Agreement” at the auto association before. Back then, the reason we didn’t sign the agreement was fear of competitors entering the market. However, now signing this agreement is advantageous for us to expand our reach. Therefore, we must maintain an open attitude.

Lastly, there is no need to be worried about India and Vietnam replacing China. This will take a long time, as Vietnam’s economy is relatively small, and India is still lacking in cultural aspects, industrial foundations, and government efficiency when compared to us. Thus, we do not need to worry. China’s automobile industry has a bright future.On the way from Shanghai to Deqing, I was listening to a book and the speaker, who was an expert, said that chips still had 100 years to go, and we still had over 100 years for the automobile industry. So, I think we are lucky to participate in this industry, and we can certainly do it very decently and very hard, to benefit the whole society and the people of our country. Thank you everyone!

That’s all for my speech today.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.