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Globalization of NEV production offers rich rewards

By Frank-Jürgen Richter

Global Times, November 23, 2018

China, Asia and indeed the world are beset by many economic and resource-related tensions. China has seen massive economic growth over the last few decades, creating many billionaires and lifting millions out of poverty. However, rapid growth comes at a cost – massive energy supply is needed, often based on coal, and this brings pollution.

Also driving trade were road vehicles and ships – all using oil, another fossil fuel that produces pollution. Easy-to-access fossil fuels helped global populations who demanded ever more energy, a vicious circle that is today being addressed by heavy investment in renewable non-polluting energy generation. But greater coordinated effort is needed: China can guide this change by truly globalizing its automotive sector.

China has an affluent middle class which wants to buy quality goods that are made in China. It agreed to reduce its atmospheric pollution to meet the 2015 Paris Agreement, but this brings a challenge as China’s vast population and economy require huge amounts of energy, making pollution hard to avoid. China is trying to tackle that pollution, but this has negatively affected its ability to produce electricity and goods.

China aims to improve the atmosphere of its cities and free them from poisonous smog, which is created partly by car usage and logistics provision. The government has been pushing for greater use of new-energy vehicles (NEVs) that are battery- or hydrogen-powered. Consequently, China is now the world’s largest producer of electric vehicles. But there is a new problem – that of insufficient globalization within the automotive sector. Development costs are high and there are too few specialist personnel.

Companies such as VW, GM, Ford and Renault that have China-based JV factories all want to produce electric vehicles. NEVs could become commonly owned. There is also a drive to develop autonomous cars, but if local delivery trucks, for instance, become self-driven, it will put many thousands of people out of work. Social solutions will be needed to minimize these problems.

Automotive JVs have designed modular frameworks, such as the Compact Modular Architecture, which is a mid-size unibody platform developed jointly by Geely and Volvo within their China Euro Vehicle Technology R&D group. It is this base that will support Volvo, Geely and also Lynk & Co (which is part of Zhejiang Geely Holding Group) in building cars that will be positioned in the marketplace between Volvo and Geely models. The cars will offer internet connectivity and innovation in order to target young professionals.

Significantly, there is a shortage of talent – solving tough artificial intelligence (AI) problems is not like building a smartphone app. In the whole world, fewer than 10,000 people have the skills necessary to tackle serious AI research. US-based Waymo admits their nearly autonomous cars have to be “retrained” in other countries as their road users have very different cultures, and regulators demand total safety and reliable AI ethics.

But I would venture further – if China’s automotive sector could truly globalize, it could create very large savings. Tariff barriers would be removed all along the supply chain, from assembly to end-user sales, and there would also be economies of scale.

A common AI platform would constantly evolve; yet it would provide regulators and governments with a common base for discussion.

The time is right, companies have the willingness, the savings will be immense, and regulators can offer constructive insight for development across all jurisdictions. Furthermore, strong cooperation within the China/EU networks would reduce the long-term negativity of the US-China trade issues. Getting AI to think better than us will enhance all our future development.

 

The author is founder and chairman of Horasis, a global visions community.