Jul 13, 2017

The real reason China dominates the electric vehicle race... & it's not what you think...

This piece isn't about the food delivery space in China. But it is helpful in understanding how and why China will continue to dominate the drive towards electric, and ultimately autonomous, transport globally.

(See Bloomberg and CBi for more on the massive firepower being poured into the latest battleground by local heavyweights BAT et al. and top tier global VC's like Sequoia)

"How is food delivered to your home?"

That was the question a friend from out of town asked me the other day. On the face of it, a question with no obvious link to the rather confrontational title.

This piece isn't about the food delivery space in China. But it is helpful in understanding how and why China will continue to dominate the drive towards electric, and ultimately autonomous, transport globally.

(See Bloomberg and CBi for more on the massive firepower being poured into the latest battleground by local heavyweights BAT et al. and top tier global VC's like Sequoia)

The reason why China is winning the electric vehicle race, and it's not what you think....

As tech industry and market darling Telsa’s value continues to rise, only yesterday losing its spot as America's most valuable auto brand, it is easy to once again (and incorrectly) assume that leadership of this sector resides in the West.

It doesn't.

Going back to my friend's question (and my dining habits!) for a minute;

More often than not, food is delivered to my home in Shanghai by one of Meituan.com's 200,000 (yep! two hundred thousand.) strong delivery crew, every single one of them riding electric scooters.

1 Company

200k Staff

ALL ON ELECTRIC VEHICLES

Meituan is just one player in a very competitive space. In this regard, they're not unique. Electric scooters aren't their ‘thing’ or part of their brand or USP.


In China, electric vehicles are table stakes, status quo. 


It's part of the infrastructure. Not only Meituan or their competitors in food delivery, but for everyone.


As consumers, most Chinese have never been faced 

with the decision of whether or not to go electric.


For years now electric has been and still is, 

the first - and for many - the only vehicle option.


All while the rest of the world continues to debate not only climate science but the inherent and obvious consumer and economic benefits of electric vehicles. And once again, putting whatever imaginary "rights" ahead of our very real and actual "responsibilities."


In much the same way that this current first generation of digital or digital-first natives shape our future globally, when it comes to vehicles, transport, infrastructure and the culture of electric, intelligent and autonomous, China and Chinese are our planet's first electric natives.


From an industry perspective I am reminded of a Q&A session w/Jack Ma. When asked about the many differences between Amazon and Alibaba, he talked scale, pointing out the running and capex costs associated with maintaining an ever growing fleet of petrol guzzling vehicles vs an efficient electric army. Logistics costs passed onto the consumer or borne by the shareholder throttling scale, even for giants.


The differences are huge. Aside from the obvious - electric being cheaper to run vs gas:

  • Costs to hedge or maintain actual petrol reserves.
  • Wear and tear, time / cost inefficient maintenance, service and spare parts.
  • Reliance on and on-going training of this service workforce in what is essentially dead tech.
  • Safety implications through capped / hardwired speed limits.
  • Actual capex cost of the fleet, whether your own or 3rd party.


All in all an inefficient waste of time, mind and capital solely to prop up an inefficient dead man walking industry out of self-serving nepotism, or worse, lack of will and foresight. Zombie rent seeking much?


Amazon is one of the main faces of the future in the West, a symbol of tomorrow. In that respect, when the torch bearer for leading and changing the world for the better is reliant on outdated, extractive and destructive methods of the past, it doesn't really shout “let’s hear it for tomorrow!” does it….


Arguments around laws, legislation, subsidies, or even dare I say it, technology are not the solve. It's culture, pure and simple.


Culture is the character and personality of your organization - company or country. It's what makes your group unique and is the sum of its values, traditions, beliefs, interactions, behaviors, and attitudes.  Culture is at the bedrock of it all and the laws, legislations, subsidies are just outputs produced by the people all defined by it.


And China's culture as the planet's first electric transport native nation 

is the reason why the country is dominating this space.


A culture that is tangible and global, as demonstrated last week by the most Swedish of Swedish brands, Volvo, announcing that it will only produce electrified cars - in line with their Chinese parent Geely.


Let's not forget, culture is, after all, the most valuable competitive advantage and a massive force multiplier.


That is why China has and will continue to drive our electric and autonomous future.

#ChinaMatters


About the Author: I'm not very good at speaking in the third person, so I don't. If you want to know what I really think, read this. If you'd like to say hi, please do.