Future of transport

Will Tesla face the same fate in China as Uber and Amazon in local rivals’ home turf?

PUBLISHED : Monday, 30 April, 2018, 7:02am
UPDATED : Tuesday, 03 July, 2018, 8:22pm

“A powerful dragon cannot crush a snake in its old haunt,” goes an old Chinese adage. In China’s technology world, that has proven to be the truth.

Uber, once the world’s most valuable start-up and arguably the tech industry’s biggest disrupter, entered China’s ride-hailing market to much fanfare in 2013, burnt through US$2 billion of cash and ended up being taken over three years later by its upstart Chinese rival Didi Chuxing.

Chinese brands Huawei, Oppo, Vivo and Xiaomi are the four biggest smartphone sellers, displacing Apple and Samsung from a market they’ve long dominated.

Amazon, the pioneer of online shopping, has less than 1 per cent of the market share in China, even after it bought one of the local market leaders in 2004, according to data by iResearch.

These foreign companies have not been barred from playing in China’s internet sandbox, yet have thrown in their towel after finding it impossible to compete with rivals across the ocean to reach customers in the world’s most populous nation.

Will the same fate befall Elon Musk’s Tesla, whose well-appointed electric cars have made it cool to drive vehicles on alternative energy?

Infographics: Global carmakers and their Chinese venture partners

“For smart cars, it matters whether you can stay close to users, show faster response to their demand and bring them unique experience,” said William Li, founder and chairman of NIO, a Chinese start-up that counts internet companies Tencent and Baidu among its investors.

Li has been putting his money behind his words. The 43-year-old billionaire has invested in dozens of start-ups in China’s mobility industry, including the bicycle-sharing company Mobike, the automonous driving company Momenta, car sales portal Uxin and Yixin Group, and G7, a developer of so-called Internet of Things that connect devices to each other.

A battle is looming between Chinese electric car builders and Tesla, after the Chinese government lifted ownership limits on the industry, clearing the path for Musk to set up his wholly owned assembly in Shanghai if he so chooses.

Tesla made its debut at the 2018 Beijing auto show, the world’s largest automotive industry trade show, and drew crowds even without a single new model. It displayed a white Model S, a blue Model X and a red Model 3.

“There’s nothing to worry about,” Li said last week at the show. “China’s auto market is already highly competitive. All brands across the world have already come, leaving only very few that haven’t.”

Nearby, the Shanghai-based NIO has its first production model, a high-performance sports utility vehicle with a base price of 448,000 yuan (US$67,788) before subsidies. That’s half the price of a Tesla Model X after import duties are added.

The ES8 comes with a driver-assistance system featuring highway pilot, traffic jam pilot and automatic emergency braking. It also has an in-car artificial intelligence system called NOMI that can help regulate the temperature, take photos and play music based on voice commands.

“NIO is competing not only with Tesla but also with all luxury brands,” said Li. “As a global start-up since day one with a US-based research team of 500, we welcome more competition to help us improve.”

The confidence has in part to thank the age of smart cars, which rely heavily on local data, content services and infrastructures, said Li. “China has given birth to great internet companies such as Tencent, Alibaba and JD over the past years, all providing world-class user experiences. The success of Huawei and Xiaomi have acclaimed in smartphone market is very inspiring to us to think on a long perspective.

In response to an emailed inquiry, Tesla’s China spokespeople said they don’t comment on their competition, or their production plans.

Meanwhile, technology capability is also picking up fast, according to Li, whose four-year-old company has applied for over 2,000 patents across the world and dedicated one third of its entire research team of 3,000 to software development and auto intelligence.

“Our battery cells, electric motor, gateway control systems and assistive driving technologies are all self-developed,” said Li, adding that it’s very unlikely for the company to be implicated in a trade war between China and the US.

With first batch delivery of 10,000 cars to roll out around September, NIO is expected to be one step ahead of other Tesla challengers in officially throwing down the gauntlet and testing China’s ambition for global leadership in smart connected cars.

NIO is “actively preparing for a global expansion”, starting from Europe before moving to the US “eventually”, but that has to wait for first delivering its cars in high quality, said Li.

“I believe autonomous driving, AI and auto intelligentization will become crucial in reshaping user experience,” he said. “Smart car has just given China a head-start to run on a different track.”