China’s tech giants give auto show a miss even as they push to dominate future of mobility

The three biggest Chinese internet companies Tencent, Alibaba and Baidu, collectively known as BAT, each have ongoing autonomous driving projects, services connecting users to their vehicles and have invested in electric-car start-ups.

PUBLISHED : Tuesday, 24 April, 2018, 6:04am
UPDATED : Tuesday, 03 July, 2018, 8:22pm

Visitors to the world’s biggest car exhibition starting later this week in Beijing will get to see thousands of the latest models offered by both Chinese and foreign carmakers. But a big proportion of the most futuristic automotive technology will not be on show. 

For that, they may have to go to a tech showcase instead. CES Asia 2018, to be held in Shanghai in June, for instance will see a 50 per cent increase in automotive exhibitors this year, including Hyundai Motor and FAW. But none of the big internet companies will be taking part in Auto China, the annual car exhibition that alternates between Shanghai and Beijing that will open this week. 

Auto China gained in prominence as China overtook the US as the world’s biggest passenger-vehicle market, a proxy to the country’s growing importance as a consumer market. The show replaced the Tokyo Motor Show as the most important industry event in the region, a testimony to the shrinking market in Japan. 

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The three big Japanese carmakers, Toyota, Honda and Nissan, instead routinely make their most important announcements at the Detroit auto show in January, or increasingly, unveil technology-related advances at the CES trade show in Las Vegas a week earlier.

“What carmakers sell now, driving functions and safety will no longer be considered important. No drivers will be needed and car accidents will be brought down to zero,” said Yale Zhang, managing director of Autoforesight Shanghai Co. “The body of the car will become unimportant and only the ‘brain’ will matter. Tech giants like BAT have advantages in data to train the `brain’ that can power smart cars.” 

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Even the new electric start-ups that are bringing new cars to market in the next few years are giving the traditional motor show a miss. Xpeng, which counts Alibaba as an investor, opted to take part in the Global Mobile Internet Conference held later this week, also in Beijing. The company will conduct test drives on the sidelines of the meeting. CHJ Auto, the start-up that signed an agreement to co-develop a compact car for Didi, is also a no-show. 

The body of the car will become unimportant and only the ‘brain’ will matter
Yale Zhang, Autoforesight Shanghai Co

Alibaba is the parent company of the South China Morning Post.

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Expectations that technology will remake every industry, the century-old automotive trade among them, have propelled valuations for technology companies over old-school industrial companies. Toyota, Volkswagen and General Motors, at their peak the symbols respectively of Japanese, Germany and American manufacturing might, have a combined market capitalisation of about US$370 billion, or about a third of the US$1 trillion valuation commanded by China’s BAT. Yet the three internet companies earned less than half the profit of the three auto giants in the last quarter, according to data compiled by Bloomberg. 

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Most automakers will end up as white-goods manufacturers with no brand recognition or a say in sales or marketing, becoming essentially factory workfloors for the connected, self-driving cars of the future, said Zhang. Still, that future is 20 to 30 years away, providing a window for Big Auto to get their act together and develop smart cars and autonomous driving, he added.

Technology companies and car start-ups will share the stage with traditional auto giants in the future, which will be shaped by the forces of electrification, connectivity and autonomy, according to Ian Zhu, partner with NIO Capital, a Chinese investment firm affiliated to carmaker NIO. 

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“The auto industry is expected to lead one of the most drastic changes over the next decade. It will be nothing short of what mobile phone makers experienced,” said Zhu. “Just like smartphones now dominate the mobile market, smart cars will dominate the whole sector in 10 years’ time.” 

Just like smartphones now dominate the mobile market, smart cars will dominate the whole sector in 10 years’ time
Ian Zhu, NIO Capital

Baidu, which is developing its Apollo platform for autonomous driving, held a three-hour event in Beijing last Friday where it unveiled the setting up of an automotive cybersecurity lab and showcased its Apollo 2.5 version of the platform. 

“The future of the automobile lies in the combination of hardware and software. Even the concept of hardware evolves,” said Li Zhenyu, Baidu’s vice president and general manager of the intelligent driving group. “It is no longer just about traditional hardware, such as engines and steering wheels, but also about things like sensors.” 

But don’t be so fast to pronounce the death of the traditional automaker, one industry veteran says. 

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For Carlos Ghosn, who has successfully turned around Renault and Nissan and is now trying do the same with Mitsubishi Motors, technology companies will play a complementary, rather than competing, role. The supposed threat from technology companies is overblown by media, which likes to “cover what is new, what is exciting”, said Ghosn, who will not be attending Auto China. 

“It's the same thing in the new era where you have a lot of tech companies coming in with technologies that can be really useful for the car,” he said in an interview in Hong Kong. “You should see this more as a cooperation between tech companies and carmakers.”