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.