CHINESE E-MOBILITY

Electrifying a Nation’s Cars

  • Why it matters

    Why it matters

    China is gearing up for massive production of electric cars, hoping to create a world-beating Chinese car industry, while also solving the country’s chronic pollution.

  • Facts

    Facts

    • Based in Shenzhan, the new electric carmaker FMC is a joint venture between internet giant Tencent, car dealer Harmony, and iPhone maker Foxconn.
    • In 2016, half a million electric cars were sold in China; in Germany, sales amounted to just 25,000.
    • According to a Chinese government plan, by 2030, 40 percent of all Chinese cars should be electric: this will require 15 million new electric cars a year.
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    Audio

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Power Plants And Electric Vehicle Charging Stations A Year After China’s ‘Iron Hand’ Hit Polluters
Electric vehicle charging stations in China. Source: Bloomberg

A disused factory complex in the southern Chinese city of Shenzhen could hold the key to 21st-century carmaking.

The location, now being prepared at top speed, will be the headquarters and main production location for FMC. Remember the name: with the backing of three huge Chinese conglomerates, and led by two leading German auto executives, FMC—Future Mobility Corporation—wants to conceive and build the world’s first truly mass-market electric car. The future of mobility, they say, will be born in China.

“We want to be the Apple of the car industry,” says Carsten Breitfeld, FMC’s German chief executive. Some may scoff at the grandiose claims: FMC is less than a year old, has no factory, and hasn’t produced a single car.

Nonetheless the company is causing concern among competitors worldwide. FMC has hired some of the world’s best carmaking and tech talent, including top developers from BMW, Daimler, Google and Tesla. They also have plenty of capital, and lots of political clout. Behind FMC are huge Chinese firms—internet giant Tencent, car dealer Harmony, and iPhone maker Foxconn—and the government in Beijing. FMC’s chief operations officer Daniel Kirchert says: “The government has a vision. It wants to put China’s car industry on global stage with clean, zero-emissions cars.”

Mr. Breitfeld is a mechanical engineer by training, with 20 years’ experience as a BMW developer. His last assignment: developing the hybrid sports car i8. The 43-year-old Mr. Kirchert is an old China hand, a fluent Mandarin speaker. As BMW’s head of Chinese sales and marketing, he increased sales six-fold, then did something similar for Infiniti, the Japanese luxury car brand.

“FMC is combining German production quality with Chinese cost structures and IT competence.”

Daniel Kirchert, chief operations officer, FMC

Now the two executives are going head-to-head with their former employers. And making big claims: “We’re combining German production quality with Chinese cost structures and IT competence,” says Mr. Kirchert.

Mr. Breitfeld and Mr. Kirchert are not the only heavy-hitters FMC has enticed on board. The company have poached the chief designer of BMW’s “i” electric car project, and the main electric motor developer and the leading product manager. From Google and Mercedes, two specialists in self-driving cars. Three leading executives from Tesla, including Marc Duchesne, who organized the California company’s global supply chain. The word is that FMC are paying footballer-level salaries. With 10 percent of shares are reserved for top executives.

Big rewards, but the targets are daunting. FMC wants cars that are high-performance like German cars, hip and innovative like Silicon Valley gadgets, and mass-produced and affordable, Chinese-style. Their first model is in development simultaneously in Germany, China, and southern California: the aim is to produce an electric SUV for around $45,000. A “tablet on four wheels,” says Mr. Breitfeld. Maybe even self-driving.

The time pressure is immense: they want the car on the market by 2019. The usual development cycle in the car industry—for carmakers which actually have factories, specialists, supply chains, and so on—is four to five years. FMC is starting from scratch. But, say the company’s German managers, that is where opportunity lies.

“Our industry has a problem,” says Mr. Breitfeld. “Everyone knows e-mobility and batteries are the future. But how to get there? FMC does not have to carry the weight of the past.” In other words: no combustion-engine factories, no unionized jobs to retain, no locked-in supply contracts, no shareholders to fret about quarterly figures. Many established carmakers are trapped in old ways of thinking, says Mr. Breitfeld: “A typewriter company can’t invent a computer.” FMC could represent a radical break. And no more appropriate place for it than Shenzhen, the great metropolis of the Chinese economic miracle.

General Economy Images As Citic Sees PBOC Staying Out of Market to Curb Debt
The Chinese city of Shenzhen. Source: Bloomberg

Until 1979, Shenzhen was a sleepy fishing village near Hong Kong. Then the government decreed it a Special Economic Zone, a testbed for privatization, industrialization, and market reforms. Now Shenzhen is a high-tech city, teeming with skyscrapers, linked by 12-lane highways. Officially, it has 12 million inhabitants, unofficially it is more like 20. Huge placards announce new Chinese slogans: “Time is Money, Efficiency is Life.” Change is non-stop. At first, the city produced cheap electronics: alarm clocks and fake Rolexes. Now, it makes robots and high-end electric engineering: one-third of all the world’s smartphones are assembled here.

Nowadays, the fishing boats are just for tourists. The fish in the bay are all dead. Shenzhen is also a perfect example of the downside of Chinese industrialization: catastrophic pollution. Fumes from cars, factories, and coal-fired power plants have poisoned the air in many large cities. More than 1 million Chinese die every year from air pollution. Now the Chinese government is looking to the e-mobility revolution to ward off ecological collapse. An order has gone out: in three years’ time, there are to be 5 million electrically-powered cars on Chinese roads. Already in 2016, 500,000 electric cars were sold on the Chinese market. In Germany, the total was 25,000.

The Chinese e-car revolution is sending out shockwaves in the global car industry. “Here, production volumes can quickly achieve critical mass,” says Dirk Meyer, car industry expert at Forum Bric, a platform that helps companies navigate emerging markets. In other words: huge sales volumes can quickly grow into profitability.

China’s government is determined to accelerate the development, using both carrots and sticks. Provincial governments are courting e-car makers with tax breaks, cheap land, and credit guarantees. E-car buyers receive a government premium of up to $7,500. State news agency Xinhua claims the country already has 270,000 charging stations. Landowners who refuse to host charging stations can face fines and penalties.

New e-cars get immediate registration and enjoy free parking: in big cities, non-electric cars often wait months for a government permit. During smog alerts, they can be banned from the roads. Chongqing, a 30-million mega-city, recently ordered its entire taxi fleet to go electric. The Chinese government has ordered 30 percent of its official vehicles to go electric, and they must be Chinese-made.

Mr. Breitfeld, the FMC chief executive, is impressed by how Beijing forces through change. “People in Europe still don’t get what’s going on here,” he says. According to one ministerial plan, by 2030, 40 percent of all cars on Chinese roads should be electrically-powered. That translates to 15 million new cars a year, most made in China.

It is all part of an industrial master plan, one going far beyond cars. “Made in China 2025” is the state plan to make China a high-tech power, with four key strengths: robotics, AI, aerospace, and electromobility. So far, cars have been the weak spot in Chinese industrial development. Although it quickly rose to dominance in areas like consumer electronics, solar panels, and wind turbines, its car industry has consistently fallen short.

It seems the tactic of trying to copy foreign technology does not work well with cars: the engineering for combustion engines is just too complex. But electro-motors could change everything. “China is going all out for e-mobility and digital cars,” says Jost Wübbeke, head of technology research at the Berlin-based Mercator Institute for China Studies. “These areas are not yet dominated by international players,” he says.

“Many established car makers are trapped in old ways of thinking. A typewriter company can’t invent a computer.”

Carsten Breitfeld, chief executive, FMC

There are many advantages: far fewer worldwide patents and regulations on e-cars; electric motors are simpler; battery technology is improving exponentially. By the time FMC’s models roll off the production line, range should be 500 kilometers per charge. “We are on the threshold of a mass market,” says Mr. Meyer, the car industry expert.

Electric motors need no gas tank, no clutch, no gears, no exhaust, and no cooling system. That leaves far more room for other functions. And this is where Chinese industry is set to move in hard and fast. Tencent, one of FMC’s parent companies, began as an internet chat provider, but is now a vast supplier of digital services—airline tickets, share trading, electronic payments, and much more. With a customer base of 800 million people, it is now among the 50 most valuable companies in the world. “Chinese companies want to turn electric cars into digital eco-systems for their own products and services,” says Mr. Wübbeke, the China expert.

But no one can guarantee success in this field. FMC faces massive challenges, above all the need to recruit large numbers of middle managers and engineers in a short period of time. There are plenty of qualified people in China, but far fewer have the necessary mix of know-how and creativity, says experts. The new company is betting it can build a large Chinese team that can mesh well with Bavaria and southern California.

Currently, Mr. Breitfeld und Mr. Kirchert are shuttling between China, Germany, and California, getting everything in place. Call it globalization: executives spending their lives on airplanes, so that more Chinese can drive clean digital cars.

This article first appeared in newsweekly Die Zeit, a sister publication of Handelsblatt. To contact the author: redaktion@zeit.de

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