Are Chinese Car Companies Really THAT Far Ahead?

 

The WSJ ran an article recently about Chinese leadership in electric car design. The focus of the article was on Chinese development management.  Instead of stepping through a series of processes, each with defined entry and closure points and separate departments, the Chinese electric car development process involves representatives from across the company at each stage and allows for the initiation of later stages earlier than has traditionally been possible. For example, by using simulation, software control systems can begin development to physical testing being complete (or perhaps even being carried out at all).

What struck me was that the WSJ seemed to be hyping the Chinese management model as something inherently more flexible and faster paced than Western management models. The storyline seems appealing, especially for those who seem intrinsically enamored with the ability of totalitarian systems to chalk up splashy achievements in whatever the hottest area happens to be. A few years ago, it was infrastructure, then real estate, then COVID response etc… Now, electric cars are what’s hot and so the admiring eyes of the technocratic set are envious of what the Chinese model can achieve. However, the world of the Chinese Communist Party isn’t one of great flexibility and well-tuned adaptation. On a macro-scale, the feedback lag problems demonstrated by their heavy-handed economic and social management make the country look like an unsteady novice constantly overcorrecting while walking an increasingly narrow tightrope. On a micro-scale, their continued failures in football show the limits of top-down control. So how are Chinese companies more agile than Western ones?

The answer has less to do with how they are developing products and more to do with with what they are developing.

If we look at the history of any technology, there is an S-curve of innovation. Initial innovation is slow and hard, then there is a rapid pace of change (and integration). Finally, at the top of the curve, there is a slowing of innovation as the technology matures. In addition, at this point, the installed base can actively limit drastic change. We see this occurring in almost every technology. Major shifts in mechanical aircraft design last occurred decades ago, improvements since have been evolutionary tweaks. Now, even those tweaks are almost coming to a halt. The S-Curve is nearing its peak.

What remains once innovation flatlines are changes for how that technology is used as a platform. The F-35 isn’t the world’s most maneuverable fighter, but it is a great platform for leading-edge electronics. WheelTug (a company I work for), is adding new capabilities to extremely mature airframes – but not by touching the core flight capabilities. Wi-Fi has come to aircraft. While there are a few in the aerospace world (see the Celera 500) who seem to on the cusp of a fundamental revolution in technology, such opportunities are few and far between. As a rather harsh example, the latest innovations in engine design seems to have come at a significant cost in reliability and operational flexibility.

However, as technologies mature, we don’t only see a slowing of development. We also see a better understanding of what is being developed. The risk involved in developing a new car’s suspension is far lower than it would have been in 1922 when the Lancia Lambda created the first independent front suspension (interestingly, Pharaoh Tutankhamen’s chariots had a suspension system based on springs and shock absorbers – and that was 1300 BCE).

Furthermore, with CAD and CAM systems, the risks involved in designing less-innovative products has been greatly lowered. You can accurately predict how components will behave and interact. These is doubly true in electric car systems, in which component interactions are less mechanically complex and thus even easier to model. It is only when pushing the envelope of understood technologies (as WheelTug has done) that you return to the higher risk and slower – almost scientific – process of design, physical test, and redesign.

With all this in mind, what the Chinese electric car manufacturers have achieved is not a revolution in the management of car design. Instead, it is a fundamental change in what is being developed. Instead of cutting-edge mechanical systems, the Chinese auto manufacturers are building the F-35s of cars. They are building mechanically functional (but unexciting) vehicles using well-established design methodologies and technologies. Their bleeding-edge development has shifted from the world of mechanical engineering to the world of software. Systems like in-car entertainment and driver assistance systems are the real focus.

Put another way, in an era when any EV manufacturer can choose their mix of power, range and capacity using known inputs based on common technologies, what distinguishes vehicles is their software. For traditional car companies, saddled with the legacy of traditional engineering departments, development remains mired in the age of innovative hardware design (although some major American manufacturers remain saddled with far older issues). Their management structures and processes are appropriate for that reality. When it comes to mechanically less interesting electric cars, there is a mismatch between traditional automotive management structures and the differentiators that actually bring in consumers. In the electric car world, the Chinese aren’t playing the game better, they are simply playing a different game.

At this point, the Chinese would seem to have a massive and growing lead in the future of automotive design and manufacturing. However, they still face a singular and major risk. It is a risk that is amplified by the feedback lag of top-down technocratic decision-making. Put simply: the Chinese government has decided that electric cars will dominate the future. If this fails to be true, then not only will there be a frightful loss of capital investment, but the fundamental management systems on which the Chinese auto industry is built could prevent them from competing in whatever comes next.

As Toyota has shown with the ever-improving Prius and its hybrid technologies, the rebirth of electric propulsion may have extended the era of mechanical innovation in the automotive space.

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  1. Nohaaj Coolidge
    Nohaaj
    @Nohaaj

    In general,  my level of cynicism associated with the integrity of anything the media in US reports about topics in the US ranges from Lie, to Propaganda,  to Believe Nothing. 

    When glowing stories are written about life,  technology,  culture being superior in China,  my level of cynicim grows algorithmicly.

    Google e-car graveyards in China. You can find any number of videos which purport that the industry was built on a complete scam,  with hundreds of thousands of cars “sold” and abandoned in huge lots as part of a Ponzi scheme.

    Here’s one. 

    • #1
  2. The Notorious E.K.G. Moderator
    The Notorious E.K.G.
    @EKentGolding

    Industrial espionage is quite agile.    You can copy and steal much quicker and with fewer resources than it takes to actually develop something.

    • #2
  3. JosephCox Coolidge
    JosephCox
    @JosephCox

    The Notorious E.K.G. (View Comment):

    Industrial espionage is quite agile. You can copy and steal much quicker and with fewer resources than it takes to actually develop something.

    That is true to get to baseline, but not beyond. Since 2000, the entire world outside China (including Vietnam) has produced 55 new all-electric models. The Chinese market has produced 104 models. This suggests development beyond stolen baselines. As the article suggests, in terms of hardware, it may not be far beyond baseline – because baseline was all that was needed.

    • #3
  4. JosephCox Coolidge
    JosephCox
    @JosephCox

    Nohaaj (View Comment):

    In general, my level of cynicism associated with the integrity of anything the media in US reports about topics in the US ranges from Lie, to Propaganda, to Believe Nothing.

    When glowing stories are written about life, technology, culture being superior in China, my level of cynicim grows algorithmicly.

    Google e-car graveyards in China. You can find any number of videos which purport that the industry was built on a complete scam, with hundreds of thousands of cars “sold” and abandoned in huge lots as part of a Ponzi scheme.

    Here’s one.

    Sure. This is not necessarily a scam though. It can also be a side effect of central-planned decision-making lags/overcorrections.

    • #4
  5. Seawriter Contributor
    Seawriter
    @Seawriter

    What is Chinese for “Potemkin Village?”  Sounds like the glowing coverage of the “New Soviet Man” back in the 1930s.

    • #5
  6. DonG (CAGW is a Scam) Coolidge
    DonG (CAGW is a Scam)
    @DonG

    I think China is ahead on batteries–both design and production.  Lax environmental and health regulations probably help there.   With some of these new cars, they are really just a battery on wheels and gives China an edge.   Americans still expect cars to last a long time and provide interesting style.  The market will decide.

    • #6
  7. Front Seat Cat Member
    Front Seat Cat
    @FrontSeatCat

    “Put simply: the Chinese government has decided that electric cars will dominate the future.”

    Your title and comment above reminded me of this Chinese Hi-Tech person that on stage and part of a major discussion at the WEF (with Klaus……). This was during Covid and the discussion was included in a you tube documentary that showed what was taking place in all the cities with the lockdowns, the arrests, the fire hosing in Britain, and how this pandemic was the perfect time to hit the “Reset” button for how the world runs.

    The Chinese speaker was very bold and confident, and said all electric will replace gas soon, very soon…..The interviewer said when – 10 to 15 years? And he said no no – much sooner – within 5 years.  This is part of the plan, including driverless and the whole you will own nothing and be happy. They are very involved in this global flip.

    • #7
  8. Internet's Hank Contributor
    Internet's Hank
    @HankRhody

    JosephCox: For example, by using simulation, software control systems can begin development to physical testing being complete (or perhaps even being carried out at all).

    Very interesting article, however I think you’re missing a word in the quoted sentence.

    I’m on board with the thesis that the major innovations in electric vehicle design are going to be software based rather than mechanical, and that you probably want a development cycle that’s less cautious about the mechanical side. However I’m wondering about how much of the software side is needed.

    I had a discussion with my brother about this this weekend. When Elon Musk builds his first Tesla he realizes that, as long as you’ve got all this power, what else can you do with it? Also and quite reasonably he targets the luxury market with the idea that they’ll be willing to pay the higher prices that his initial development necessitated. And so we see software innovations like adaptive cruise control. 

    What I’m wondering is if that might not open up a cheaper segment of the market, one where you cut out as much of the software as you can. I can use my phone as a GPS; I can also use it to play music. The idea here is that there might be an opportunity such as Volkswagen took advantage of in the 60’s; while Detroit was competing to make the best steel juggernaut the Europeans slid in with a tiny, efficient, and most of all cheap alternative. It seems to me that there might be an opportunity available in an electric car that eschews as much as the software as it can.

    • #8
  9. kedavis Coolidge
    kedavis
    @kedavis

    Doesn’t China have even bigger problems with electric vehicles catching fire and even exploding?

    • #9
  10. DonG (CAGW is a Scam) Coolidge
    DonG (CAGW is a Scam)
    @DonG

    kedavis (View Comment):

    Doesn’t China have even bigger problems with electric vehicles catching fire and even exploding?

    Side note, in NYC last year about as many died from their electric bikes/scooters/… catching fire in their apartments as from traffic accidents. 

    • #10
  11. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    DonG (CAGW is a Scam) (View Comment):

    kedavis (View Comment):

    Doesn’t China have even bigger problems with electric vehicles catching fire and even exploding?

    Side note, in NYC last year about as many died from their electric bikes/scooters/… catching fire in their apartments as from traffic accidents.

    Citation?

     

    A very quick google search shows more than 200 traffic deaths in NYC in 2022, with fewer than 100 deaths by fire (all causes).

     

    • #11
  12. JosephCox Coolidge
    JosephCox
    @JosephCox

    DonG (CAGW is a Scam) (View Comment):
    I think China is ahead on batteries–both design and production.  Lax environmental and health regulations probably help there.   With some of these new cars, they are really just a battery on wheels and gives China an edge.   Americans still expect cars to last a long time and provide interesting style.  The market will decide.

    I’ve heard this, about the batteries. But two Chinese companies dominates the battery business. The individual car companies (except for BYD, which started as a battery company) aren’t distinguishing themselves here, they are just producing from a standard battery base.

    On the other hand, I’ve also heard that ‘ahead’ on batteries sometimes involves just allowing tradeoffs. Rather than the highest capacity (and higher cost) batteries, they’ve gone for far cheaper LFP (iron) batteries with less range and capability. It ends up with a product that may be far more attractive overall.

    • #12
  13. Steve C. Member
    Steve C.
    @user_531302

    I agree about the importance of software.

    But let’s not forget there’s still the minor challenges of bending metal, coordinating the actions of hundreds of suppliers, sales, service and warranties.

    These are areas where the institutional capabilities of Japanese and American car makers provide an edge. The Chinese advantage seems to be they are not saddled with legacy costs and methods. And a unionized work force.

    The list of foreign failures is long. Hyundai offers the best warranty on wheels because 30 years ago the phrase Hyundai quality was equivalent to military intelligence. Will the Chinese fail? Who knows?

    And I submit, Volkswagen’s success had more to do with the odd appearance of the Beetle than anything else. It wasn’t the only small economy car available. It did have the advantage of an air cooled motor. Fewer parts, simpler and easier to DIY repair. Having spent many hours as a passenger, I can assure they were cramped, noisy and not very comfortable. But they were cheap to operate and reliable. 

    • #13
  14. JosephCox Coolidge
    JosephCox
    @JosephCox

    Steve C. (View Comment):

    But let’s not forget there’s still the minor challenges of bending metal, coordinating the actions of hundreds of suppliers, sales, service and warranties.

    These are areas where the institutional capabilities of Japanese and American car makers provide an edge. The Chinese advantage seems to be they are not saddled with legacy costs and methods. And a unionized work force.

    Ah, that’s the key. A traditional ICE car has twice as many parts as an EV. There is a significant amount of assembly time involved, but a lot of it comes prior to the assembly of the vehicle (e.g. creating the batteries, motors etc…).

    So the calculus does change and the number of suppliers etc… at the top of the chain is lowered. Especially with a highly common parts bin.

    • #14
  15. DonG (CAGW is a Scam) Coolidge
    DonG (CAGW is a Scam)
    @DonG

    Miffed White Male (View Comment):

    DonG (CAGW is a Scam) (View Comment):

    kedavis (View Comment):

    Doesn’t China have even bigger problems with electric vehicles catching fire and even exploding?

    Side note, in NYC last year about as many died from their electric bikes/scooters/… catching fire in their apartments as from traffic accidents.

    Citation?

     

    A very quick google search shows more than 200 traffic deaths in NYC in 2022, with fewer than 100 deaths by fire (all causes).

     

    From NYT  there were 19 bicycle deaths in 2022 and 30 in 2023.  Sorry, I was not clear that I mean bicycle traffic deaths.    This June 2023 article says ” lithium battery fires have killed 13 people so far this year”. 

    The trend is up on both.  E-bikes are getting faster and people are dying more from accidents.  At the same time all those cheap batters are starting fires in peoples homes.   My advice is to pay extra for battery that won’t burn your house down.

    • #15
  16. CarolJoy, Not So Easy To Kill Coolidge
    CarolJoy, Not So Easy To Kill
    @CarolJoy

    Did the WSJ article mention the huge EV grave yard where the failing products of new Chinese technology are now stored?

    Apparently the auto market in China is suffering the same slump as is being experienced in the USA.

    In the video below, it is explained that many EV companies go bankrupt each week:

    https://www.youtube.com/watch?v=vyjfb5NocxA

     

     

    • #16
  17. iWe Coolidge
    iWe
    @iWe

    DonG (CAGW is a Scam) (View Comment):
    The trend is up on both.  E-bikes are getting faster and people are dying more from accidents.  At the same time all those cheap batters are starting fires in peoples homes.   My advice is to pay extra for battery that won’t burn your house down.

    It is not clear that higher quality batteries do not catch fire. There are some expensive gun lights that are famous for it.

    • #17
  18. Steve C. Member
    Steve C.
    @user_531302

    iWe (View Comment):

    DonG (CAGW is a Scam) (View Comment):
    The trend is up on both. E-bikes are getting faster and people are dying more from accidents. At the same time all those cheap batters are starting fires in peoples homes. My advice is to pay extra for battery that won’t burn your house down.

    It is not clear that higher quality batteries do not catch fire. There are some expensive gun lights that are famous for it.

    Anything can catch fire. Auto makers have over 100 years of accumulated experience dealing with causes and prevention of fuel fires. EV makers have 15 years? And it was  probably not a top 5 concern until there were headlines.

    Even with all their knowledge, Pontiac managed to introduce a sporty model named the Fiero. A car true to its name.

    • #18
  19. CarolJoy, Not So Easy To Kill Coolidge
    CarolJoy, Not So Easy To Kill
    @CarolJoy

    Front Seat Cat (View Comment):

    “Put simply: the Chinese government has decided that electric cars will dominate the future.”

    Your title and comment above reminded me of this Chinese Hi-Tech person that on stage and part of a major discussion at the WEF (with Klaus……). This was during Covid and the discussion was included in a you tube documentary that showed what was taking place in all the cities with the lockdowns, the arrests, the fire hosing in Britain, and how this pandemic was the perfect time to hit the “Reset” button for how the world runs.

    The Chinese speaker was very bold and confident, and said all electric will replace gas soon, very soon…..The interviewer said when – 10 to 15 years? And he said no no – much sooner – within 5 years. This is part of the plan, including driverless and the whole you will own nothing and be happy. They are very involved in this global flip.

    Yes the CCP sits at the top of the apparatus that is driving the future.

    To whom do The WHO, the WEF, the United Nations, the Open Foundation and other Soros orgs owe allegiance?  When  a person looks at what is happening across Western societies, it does seem like each of the above orgs is partnering with the others.

    The coming New One World Order using the model of a social credit score  does not seem to be an important matter that we can vote ourselves out of.

    With the Chinese behind many policies of the UN, it is important to realize how the mission statement of the UN’s Commission on Migration, offered up on its own webpage  the vast assurance some 7 years ago that every effort would be made to install some 350 million economic, weather crisis, and war refugees from developing nations into Western societies.

    At a round table panel where 6 or 7 white men sat in conference in Switzerland, circa 2017 or 2018, the discussion turned to how the need to flip the EU nations from being white and Christian to that of a recently arrived immigrant and Muslim population was easily  succeeding beyond their wildest dreams.  The goal that had been set by the UN was for 2030, but it was clear from demographic patterns that Muslims would outnumber Europe’s Christians by some time in 2025. (It is not only the raw numbers of Muslim people migrating in, it is that their birth levels are 3 to 5 times that of  those whom they are replacing.)

    • #19
  20. CarolJoy, Not So Easy To Kill Coolidge
    CarolJoy, Not So Easy To Kill
    @CarolJoy

    So by how much of a factor is the Chinese government subsidizing the EV movement? Since that government is as corrupt as hell, it could be that the difference between a Chinese Ev business that goes bankrupt and one that doesn’t has to do with which firm has the better governmental relationship, right?

    It should also be worth while to examine how much in terms of subsidies that the  EV developers in the USA receive from the government. There now seem to be ubiquitous arenas of funding for any ventures that lean toward pleasing the “sustainability” principles.

    With so much governmental backing, it also seems to follow that financial firms and financial planners will throw even more money at buying stocks of those firms that have received the financial backing of the USA.

    Meanwhile at our EPA, there is an investigation into whether or not certain  byproducts of driving an EV mean that for instance, more rubber and other components of the cars’ tires will be hitting the pollution index.

    https://www.dailymail.co.uk/sciencetech/article-13164421/government-investigate-ev-toxic-gas-cars.html

    I imagine the real polluting effects of the EVs in America, that is the short expected life span of an EV, will be ignored. So the EPA won’t at all look into that end of things. (After all, the biggest polluting footprint that any item causes surely  involves the mining and raw materials as well as what happens to manufacture the item.)

     

     

    • #20
  21. kedavis Coolidge
    kedavis
    @kedavis

    CarolJoy, Not So Easy To Kill (View Comment):
    I imagine the real polluting effects of the EVs in America, that is the short expected life span of an EV, will be ignored. So the EPA won’t at all look into that end of things. (After all, the biggest polluting footprint that any item causes surely  involves the mining and raw materials as well as what happens to manufacture the item.)

    And to dispose of those items later.

    • #21
  22. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    CarolJoy, Not So Easy To Kill (View Comment):
    short expected life span of an EV

    Explain please.

     

    • #22
  23. JosephCox Coolidge
    JosephCox
    @JosephCox

    CarolJoy, Not So Easy To Kill (View Comment):
    So by how much of a factor is the Chinese government subsidizing the EV movement? Since that government is as corrupt as hell, it could be that the difference between a Chinese Ev business that goes bankrupt and one that doesn’t has to do with which firm has the better governmental relationship, right?

    As I understand it, the subsidies have subsided.  As these companies spread their product internationally, I think the local relationships will begin to matter less. That said, only two companies in the entire world make money on EVs: Tesla and BYD.

    Traditional car companies see the EVs as existential. The terrible thing is that they might be right, but in the wrong way. The amount of money they lose on EVs is colossal. 

    • #23
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