Advanced Search

The story appears on

Page B3

March 23, 2015

GET this page in PDF

Free for subscribers

View shopping cart

Related News

Home » Business » Autotalk Special

Today’s experiments,tomorrow’s vehicles

By Zhu Shenshen | March 23, 2015, Monday | Print Edition

It’s a natural business decision for information technology giants to expand into the car business. I admit the gambit is not without risks because most IT companies lack experience in the automotive industry. But what they lack in background, they make up for in sheer ingenuity. They bring some unique advantages to the market. Consider the following.

Capital and technology reserves

No one can deny that the automotive industry is capital-intensive and requires continuous innovation and highly professional talent. 

Compared with the Big Three US automakers — General Motors, Ford and Chrysler — the new players certainly have the money to invest. Look at the list of IT giants moving into car sector: Google, Alibaba and even Apple.

Beijing-based Letv, which offers Internet video and TV, has been a focus of attention in media and capital markets since it announced last November the creation of the SEE project to expand into electric cars. 

Its share price tripled to 90 yuan (US$14.5) in the four months after the announcement. Its project also won the public endorsement of the Ministry of Industry and Information Technology, the country’s top industry and IT regulator.

Various media reports said that Apple, which developed the CarPlay system, has created a special unit baptized Titan, endowing it with hundreds of staff to begin development of an electric car with a 2020 target date. 

That may help answer the question persistently put to Tim Cook, Apple’s chief executive: How will the company deal with the huge capital flows created by iPhone and iPad, some US$180 billion now?

By comparison, the Detroit giants are facing capital shortages after recovering from the last finanial crisis. They are grappling with surging labor costs, increased spending on marketing, and heated competition.

That’s not to say that traditional carmakers haven’t turned their eyes to IT. For example, Ford recently opened a research center in Palo Alto, the heart of the Silicon Valley.

Good track records

You can’t ignore Tesla when talking about new players in the car industry. The California company plans to boost annual production of its high-end electric car from a projected 50,000 this year to 500,000 by 2020. The US and China are the two largest markets, according to Chief Executive Elon Musk. 

It’s true that Tesla is facing problems in China. Initial sales have been less than expected, and a lack of charging facilities inhibits buyers. But no one can deny that the company has achieved superstar status in the car industry. Tesla is a dream car for many people, ranking alongside Audi, Mercedes Benz and BMW, especially among affluent young and IT aficionados. 

Musk came from Paypal before founding Tesla. The electric power, huge touch screen and wireless connection with the iPhone showcase the car’s DNA for geek and IT.

Another local success story is BYD, one of the first Chinese carmakers to embrace hybrid and electric cars. It notably counts Warren Buffett among its investors. In February, BYD shares were up 60 percent from a year earlier at about 60 yuan. At present, the Shenzhen-based company, which started out in 1995 as a handset battery maker, operates three business : cars, IT and new energy products.

Another perhaps less-mentioned participant in the convergence of cars and IT is Tata from India, which sells entry-level cars with prices starting at US$2,000. Tata is also one of the top IT outsourcing firms. 

Following the trend

Electric cars are the main intersection of IT and automaking industries. It’s a sector that the Chinese government is actively promoting to reduce dependence on fossil fuels and tackle the urban smog problem.

We all know that new energy cars are the vehicles of the future, but progress has been slow in both development and public acceptance.

Even if they can see the writing on the wall, traditional car manufacturers have been forced by costs and labor concerns to keep production capacity at plants producing gasoline-powered cars. IT giants don’t carry that kind of baggage.

In Europe and the US, two of the most voiced complaints about electric cars are their relatively low speeds and the limited distances they can operate between charges. Those concerns are not so prominent in China, where air and rail transport between major cities still prevails over car travel because of cost and traffic congestion.

To go on a business trip from Shanghai to Beijing, few people would choose to drive. Even travel from Shanghai to nearby cities such as Nanjing and Hangzhou usually involves rail or even bus, no matter whether the traveler has a car at home or not.

Cars in China are still predominantly used for local transport. In an urban environment where traffic is generally heavy, speed is not a major concern.

IT giants have developed clear strategies for car segments — the entry-level market for Tata and BYD; the high-end market for Tesla. 

Chinese consumers are smitten with everything digital and anything new. Concepts such as self-driving cars, vehicle-to-vehicle communications, wireless connection with smartphones, and other applications that can be paired with driving are exciting. It’s not hard to see why today’s experiments will become tomorrow’s daily life. 

Autotalk Special


 

Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.

沪公网安备 31010602000204号

Email this to your friend