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April 27, 2016

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Internet converging with the auto industry

EDITOR’S note:

INTERNET Plus, a concept highlighted in the government work report delivered by Premier Li Keqiang at the annual session of the National People’s Congress in Beijing in March, is pushing the boundaries of China’s traditional industries. Nowadays, enterprises across the country are embracing changes by incorporating advancements in the Internet and related technologies into their business models. In a new series by Shanghai Daily, we explore how this concept is reshaping our world.

THE current Beijing Auto Show is adding a new dimension to the idea of mobile Internet.

Internet-related features that are increasingly becoming selling points for new cars are upstaging the automobile as a thing of beauty in its own right.

The so-called “seamless connected driving experience” is now being touted at almost every booth at the show. It’s the age of computers on wheels.

Carmakers, together with Internet companies, are eager to prove that the only limit is how far the imagination can stretch. Boundaries that once seemed impenetrable are being torn down. Impediments to the convergence of auto and Internet industries are being stripped away.

Cowin, a young, entry-level sub brand of Chery, is already blurring the boundaries of car design. The concept SUV i-CX displayed at the auto show comes not from the company’s design studios or its boardroom, but from crowd-sourcing. It is the result of more than 107 design drafts submitted and 16 million votes cast on social media by ordinary people.

The car’s heightened stance and muscular lines are reminiscent of an eagle spreading its wings. A touchscreen-based user interface and colorful ambient lightening add to the confidence of the vehicle. It is cool, modern and trendy.

“We want to make our cars young and intelligent, in a way that our target customers can feel it themselves,” said Zhen Zhaorui, head of Cowin. “So we engage them into the making of that concept.”

For years, Chinese carmakers struggling to come up with original, good-looking cars worshiped foreign designers. They envied how Peter Schreyer revitalized Kia with amazing designs to compensate for Korea’s lack of technological innovation as a disadvantaged latecomer in global carmaking, like China.

That was never the choice for Cowin. Emerging at a very difficult time for newcomers, as growth in China’s auto market contracts, Cowin was given a scant 2 billion yuan (US$307.5 million) budget to get started. It was expected to draw heavily on the technology and manufacturing prowess of Chery. Design by crowd-sourcing was a way of creating differentiation at a reasonable cost. The winning designer was promised a sales-based commission, instead of a design fee.

Relinquishing executive power over decision-making has been difficult. Zheng admitted that he personally preferred the runner-up vehicle in the voting. To make sure the winner would be a winner, he assembled a focus group to review it.

At the age of 38, he is a relatively young leader for a car brand. Even so, it is hard for him to put himself in the shoes of a 20-something. A yawning gap of age and taste is not uncommon among the decision-makers at the polar ends of the entry-level auto market. Social media allows them to narrow the gap.

At first, Cowin risked its crowd-sourcing concept getting a cold shoulder from the public because it was a relatively unknown brand. However, it managed to attract its first enthusiasts from among college students majoring in industrial design. But, at the end of the day, it was the power of the Internet that took over the process. Young potential car buyers were eager to seize the change to tell the car industry what they really wanted to drive.

Still, Cowin has not relinquished the final say over the car’s design. Before going into mass production in 2018, the concept car favored by the voting public will need to undergo changes to meet safety standards. More importantly, will all those fancy details produced by Internet brainstorming survive cost controls in a car to be sold for between 80,000 yuan and 120,000 yuan? The public has very little idea about the tough calls a company has to make to survive and thrive amid tough competition.

Cowin is just one example of how the Internet is radically transforming the car industry.

At LeEco, the boundaries of specialist work is blurring, Formerly known as Letv, the company started out as a video-streaming website before aggressively extending its reach to every corner of digital life, including building cars.

Its Super Electric Car Eco-System, known as SEE, started 28 months ago. LeSee, its first concept car, was unveiled at the Beijing Auto Show. It is shifting debate from whether an industry outsider can build cars to how good those cars might be.

“Cars will not be just cars or just gateways to the Internet, but rather critical points in a connected, electric, intelligent transport eco-system,” Jia Yueting, LeEco founder and head, said, describing his ambition to put China at the forefront of a watershed in auto industry history.

The LeSEE packs all the fancy ideas of future mobility into a full-size sedan body. It beats the current benchmark of electric motor-powered 0-100km/h acceleration, top speed and mileage set by Tesla. Its highly connected central console can switch between auto-drive and self-drive modes, and change the interior layout accordingly. The front face of the car displays its driving status, including whether it is available for LeEco’s Yidao car hailing service. Its big screens in the cabin stream LeEco’s exclusive movies and live sports. It is all impressive, except that most of these concepts are still on paper.

The company has patented 833 technologies in the US, covering batteries, electric motor, electric control unit and connected car solutions. Its professional team of automotive engineers work with Ding Lei, co-founder and global vice president of SEE and former head of Shanghai General Motors. On the eve of the auto show, Zhang Hailiang, former vice president of SAIC Motor, confirmed rumors that he is joining LeEco to lead its SEE project in China.

But just when a car like LeSEE will be available on the market is still anyone’s guess. A concept car needs to go through a long research and development cycle. LeEco is also a company without any track-record of carmaking in China. It is still waiting for a local manufacturing license from the government, while its US manufacturing partner Faraday Future just broke ground on its first plant in Las Vegas earlier this month.

The far-off prospect of return on capital investment in the tens of billions of yuan raises more questions. Can LeEco juggle its businesses of smartphones, TVs and cars, all adhering to a strategy of selling cheaper than manufacturing costs? Are Jia’s ambitions of making LeSEE cars eventually for free just a pipe dream?

Jia explained the logic behind free hardware by explaining that more money can be made on the content and on client services that draw on the huge data traffic generated by his company’s eco-system.

It will be a truly borderless Internet world, with its touch points accounting for very little value, but only if LeEco can manage its finances until the new vision becomes reality.


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