From Copycat to Innovator: How China Plans to Win the Transport Race
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From hyperloops to flying cars to 3D-printed vehicles, China is building the future of transportation — with a dramatically new strategy.
A conventional car is made up of more than 2,000 parts. But when the LSEV enters the Chinese market in late 2019, it will consist of just 57 separate plastic parts. Announced initially in early 2018, the joint venture between Chinese plastics manufacturer Polymaker and Italy-based X Electric Vehicles (XEV) is the world’s first 3D-printed car. It’s also an example of a larger shift in the global auto industry.
For years, China’s transportation upgrade has relied on huge state-owned firms reverse-engineering foreign brands and selling them in the Chinese market for a fraction of the price, frequently inviting lawsuits and ridicule for its approach at overcoming a shortage of homegrown innovation talent. Now, as China turns from a copycat to a leading technological innovator, the country is embracing a dramatic new strategy.
Chinese firms — including the state behemoths — are increasingly collaborating with foreign companies and educational institutions through joint ventures or are simply acquiring niche international firms to get the external expertise they still need. This is allowing them to legally diversify into innovative hi-tech corners of the sector that promise to shape the future of transportation.
In late 2017, Chinese automotive giant Zhejiang Geely Holding Co. — whose transportation portfolio includes Swedish carmaker Volvo and the historic English brand Lotus — acquired Boston-based transportation company Terrafugia. Zhejiang Geely’s financial clout and diverse portfolio have helped accelerate a project called TF-2, Terrafugia’s modular road and air multiplatform system — essentially a new generation of flying cars.
After releasing footage of the first successful test flight of their autonomous passenger drone in early 2018, Guangzhou-based EHang, Inc. announced a strategic partnership with Austrian aerospace group FACC to further develop the technology and establish a route to market. Powered by twin rota engines strutting out from all four corners of the one-man cab, the drone can transport a passenger for 25 minutes at up to 100 mph.
It’s increasingly domestic competition that is acting as rocket fuel for advancing technical capacity.
Dr. Robyn Klingler-Vidra, King’s College London
This approach is helping China establish itself in the race to develop the hyperloop — the fast, zero-friction tubular transportation system first developed by Elon Musk. In July 2018, Tongren Transport Tourism Development Investment Group entered into a $300 million joint venture with California research company Hyperloop Transportation Technologies to develop a six-mile hyperloop track in southern China. Genertec America Inc., a subsidiary of the state-owned China General Technology Group, has invested $1 billion in American hyperloop development group Arrivo.
In July 2018, the Aviation Industry Corporation of China launched a joint research lab with Airbus to develop nano-composite materials for future aviation projects. Industry giants Ford and Baidu are working together to develop self-driving cars for the Chinese market. And the LSEV will bear the joint stamp of China and Italy when it hits the road later this year.
“The research and development work for the car and the initial prototypes were all created in Turin, Italy,” says Luke Taylor, marketing manager at Polymaker. “The 3D printers are being manufactured in Jiangsu, China.”
This kind of cooperation simply didn’t exist four years ago, when Jaguar engineer Ian Cullum tweeted photos pointing out the remarkable similarities between the Jaguar Land Rover (JLR) Evoque and the Chinese-made Landwind X7, both unveiled at the Guangzhou International Motor Show in November 2014. The X7 was made public just months after JLR had launched a factory in Changshu, China, to manufacture the Evoque, and hit the market at a fourth of the Evoque’s price. JLR approached Chinese courts to bring a case against Jiangling Motors, the Chinese maker of the X7, but its complaints of intellectual property theft were dismissed.
It was hardly the only such instance. In 2008, BMW took Chinese manufacturer Shuanghuan Auto to court, accusing it of copying the BMW X5 in designing the Chinese SCEO. A Chinese court backed Shuanghuan, but German authorities agreed with BMW, and the SCEO was banned in Germany. Also in 2008, the Lifan 320 released at the Beijing Motor Show instantly gained notoriety because of its design that mimicked the Mini hatch. And in 2016, U.S. marshals closed down stalls of Chinese auto manufacturers at the Las Vegas SEMA Show, after tip-offs suggesting the firms were looking to steal designs.
Beyond cars, Japan has accused China of copying its Shinkansen model for high-speed trains that now race between major Chinese cities. And European companies that shared designs of their high-speed train coaches with China before bidding for the project found Chinese firms entering the contest against them with offers that were copies of their plans.
But since then, China has unleashed dreams of emerging as a leading technological innovator. That’s exhibited by ambitious plans like the $2.1 billion artificial intelligence (AI) development park in Beijing and “Made in China 2025.” A strategic plan first released in 2015, the Made in China road map lays down targets requiring the domestic manufacture of core contents, especially in high-tech fields, to reach 40 percent by 2020 and 70 percent by 2025.
And till these investments yield fully homegrown innovations in industries like the auto sector, China is assisting its domestic firms in finding global partners instead of simply copying from them.
Legislation is one way in which the state helps. In May 2018, China relaxed its rules on auto sector investment to encourage more cooperation between Chinese and foreign companies. State support through bilateral pacts is another tool in China’s arsenal.
China and the European Commission are partnering under the latter’s Horizon 2020 research and development initiative that has aviation and transport as key focus areas. The project earmarks €80 billion in investment capital over a seven-year period, pairing European and foreign R&D entities. More than 350 Chinese entities have already signed up under this project. Both sides benefit from such agreements with Chinese players bringing a lot to the table, including “vast amounts of user data, market-specific knowledge and infrastructure,” says Dr. Philippe Vialatte, head of the Science and Technology Section at the Delegation of the European Union to China.
The benefits are mutual in the company-to-company deals too. A year and a half ago, Boston’s Terrafugia had 20 employees. Now, after its partnership with Zhejiang Geely, it has more than 200 globally, says Danielle Kershner, marketing manager at Terrafugia. “While Geely gives Terrafugia bankability and a plethora of companies to collaborate with, Terrafugia has been able to provide Geely with innovation and top-of-the-line engineering in return,” Kershner says.
For the moment, it’s China’s domestic market that is driving the country’s expanded interest in transportation innovation. Launched in May 2018, the National New Energy Vehicle Technology Innovation Center is tasked with coordinating tech advances to capitalize on the growing popularity in new energy vehicles (NEVs) in the country, up 53 percent in sales in 2017 from 2016. By mid-2018, Baidu had produced 100 autonomous buses to be rolled out in tourist spots and airports. “It’s increasingly domestic competition that is acting as rocket fuel for advancing technical capacity,” says Dr. Robyn Klingler-Vidra, lecturer in political economy at King’s College London. And it is unclear how soon China will develop sufficient domestic expertise to need foreign partners less in transportation innovation or whether it will completely dump its traditional practice of reverse-engineering.
But China’s major advances in clean-energy vehicles, and more broadly in cutting-edge areas such as AI, show what it’s capable of. If its new recipe for the transportation sector works out, China could redefine the way we get around.