Chinese automaker SAIC's Yez prototype is the first with a negative carbon footprint. Expect more firsts from this growing company
By Mike Hanlon
A few days ago, I managed to get up close and personal in Shanghai with one of the most interesting concept cars the world has yet seen. SAIC's Yez concept car is the first automobile, concept or otherwise, that's ever been conceived to have a negative carbon footprint. That is, it removes more pollution than it creates.
SAIC is an acronym for Shanghai Automotive Industry Corporation and is a name almost no-one outside China has heard before, yet last year it slipped quietly into the top ten manufacturers of automobiles in the world. SAIC owns 50% of China's leading car producer, Shanghai Volkswagen, and 51% of the second largest producer, Shanghai General Motors. It is currently seeking to increase its stake in the three-way GM-SAIC-Wuling joint venture that sold more than a million minivans in 2009.
It recently acquired 50% of General Motors India, and the famous British sportscar marque MG. It owns at least a controlling interest of a dozen other automotive companies in China, including bus, transport, construction and earth-moving equipment and electric motorcycle companies.
Now, it has raised USD 1 billion specifically for building its own automotive brand names, so that in addition to making and selling brands such as Volkswagen, Skoda, Chevrolet, Buick and Cadillac, it . The SAIC Yez is just the start of envisioning sustainable personal transport on a massive level, and the background to it all is as interesting as the Yez itself.
In the China, the scale of almost everything is an order of magnitude greater than we've seen before, and understanding what's happening in China right now is key to recognising the importance of the Yez. Not only does the Yez power itself from renewable energy sources, it completely redefines the relationship between the motor vehicle and nature by removing pollution from the environment.
Using a combination of power sources such as mains power, the sun and the wind, the Yez also employs some very novel technologies such as photoelectric conversion (man-made photosynthesis), making the Yez akin to a leaf in the good deeds it performs for a choking global environment. Yez is a construct of a Mandarin word that means "leaf" - the word LEAF was already taken by another important vehicle about to hit the market around the world, including China.
So the Yez is a landmark automobile concept. It also comes from somewhere we're not accustomed to seeing concept vehicles come from — China, a land with more people than anywhere else, unparalleled growth for a large country, and the largest quantity of realistic optimism the world has ever seen. There are some massive changes afoot in the automotive industry and they all surround the extrapolation of China's remarkable rise. To understand why the Yez is such an important statement from SAIC, and from the Chinese automotive industry, it's necessary to take in a bit of history.
The Decline of American Auto Production
In 1950, the United States accounted for more than 80% of world automotive production.
Germany and France may have been the first to explore the combination of the internal combustion engine and the automobile, but as the country that made the automobile its own, America fashioned it in the image of the American dream. The freedom machine of the fifties was big enough for an extended family. There was plenty of space, parking wasn't a problem, the supply of oil was much greater than demand, so it was plentiful and cheap. The motors were huge so they could easily push around the massive automobile of the day and no-one really thought much about what was coming out of the exhaust pipe. Awareness of the automobile's negative contribution to society did not even begin to awaken until the mid-fifties when smog first became an issue in America's largest cities. The accumulation of carbon dioxide in the atmosphere was first documented a decade later by the Scripps Institution of Oceanography.
As automotive production around the world scrambled to meet post-war demand, and grew dramatically during the fifties, America's world share declined steadily, though its output continued to rise. Detroit produced so many cars during this period that it still maintained close to 50% of world output until the mid-sixties when Germany and Japan began to produce in quantity.
China did not produce its first automobile, the Jiefang truck, until 1956 and its first automobile took a further three years on top of that. Fellow Communist state Russia supplied the technology for the Jiefang truck, which was a copy of the Soviet Zil.
For a country that had led the world technologically for at least a thousand years at one stage, it was late and very modest start to the age of personal transportation, but the beginning of a significant technological resurgence. Within fifty years of China producing its first car in 1959, it was to become the world's most important automotive market and the world's largest auto producer - quite some feat. That's Chairman Mao inspecting that particular car just 51 years ago.
As auto production facilities around the world grew in number and sophistication, America's manufacturing lead and hence global market share steadily declined, dipping below 10% of the world's passenger cars for the first time in 2004 and reaching 7.2% in 2008.
In late 2008 though, the Global Financial Crisis slowed automotive production in all countries except one, precipitating a fundamental change in where the world's automobiles are manufactured.
In 2009, America's share plummeted below 5% for the first time and China completed a decade long charge from producing just 1.4% of the world's cars in 1999, to 22% in 2009 and from producing 7.7% of the world's commercial vehicles a decade ago, to 24.8% in 2009. America and China now both have a quarter share of global commercial vehicle production.
China becomes the biggest consumer and producer of automobiles
2009 was a landmark year in automotive history - China finally wrested the global heavyweight consumer auto sales championship crown from America, selling 13.6 million vehicles to become the world's largest car market. Everyone had known that China would eventually take the crown America has held since automobiles were invented, but that had not been expected to happen for another decade.
As the Global Financial Crisis subsided during 2009, and vehicle production in most countries tentatively began to regain lost ground, China continued to surge due to economic stimulus packages, carrying its momentum into the 2010 and when the score is tallied at the end of this year, China will be producing somewhere between a quarter and a third of all automobiles globally.
When the global financial meltdown threatened, U.S. vehicle sales plunged 21 per cent to 10.4 million and in a chicken-egg situation, China became at the same time, the biggest producer and the biggest consumer of automobiles in the world.
It is not about to end there however as several factors will propel China's automotive consumption to much greater heights over the next few decades, changing the shape of the global automotive market substantially.
China's astonishing urbanization
China is urbanising faster than any country in history. In the last three decades, its urban population has grown from 170 million to 600 million — that's an increase in urban dwellers almost twice the population of the United States - and is currently growing by 40,000 citizens per day. China already has 122 cities with more than a million people — compared with 35 in Europe and just nine in America. By 2025, there will be 220 cities over a million in China.
In the next 15 years the rate of urbanization will increase, with another 350 million joining the city dwellers. McKinsey's 2009 report "Preparing for China's Urban Billion" is compulsory reading in understanding the adversities faced by the Chinese Government and the opportunities which will result.
In short, the report concludes that 5 billion square metres of road will need to be paved, 170 mass transit systems built, and 40 billion square metres of floor space created in an additional five million buildings, 50,000 of which will be skyscrapers — the equivalent of building ten New York cities.
China's GDP will multiply by a factor of five in the next 15 years according to McKinsey, and the Chinese Government is actually planning on increasing the GDP per capita faster than that.
For China's citizens, the future looks very promising indeed. In the last three decades, the quality of life for more than a billion people has improved immeasurably. Since 1978, when Deng Xiaopeng came to power, China has averaged annual growth of 9.9 percent — extrapolate those figures and China should surpass the United states to become the world's largest economy around
More than 250 million people have been removed from abject poverty. In 1978, one in every 500 Chinese homes had a refrigerator — by 2008, 94% had refrigerators. In 1978, one in 200 Chinese homes had a television — now there are 1.3 televisions per household.
In the same period, per capita living space has quadrupled to 27 square metres, the number of mobile phones per household has reached 1.72 and the consumer price index has risen by a factor of six.
Total retail consumer goods sales in China now exceed 10 trillion dollars — that's 70 times greater than it was three decades ago, and per capita disposable income has increased by a factor of 46 in the same period.
And just as the citizens of the rest of the world have done as their countries developed and they grew individually wealthy, China's citizens aspire to owning an automobile.
China's domestic automotive market potential
The Chinese automotive marketplace is a very different marketplace to those of North America and Europe as it's 1.3 billion citizens are now developing enough discretionary expenditure to be able to afford automobiles for the first time.
Most developed countries are now saturated with cars and have massive automotive industries competing fiercely for the natural turnover of replacement vehicles. America still leads the world in per capita vehicle ownership with 765 vehicles for every thousand people (0.765 vehicles per capita), while most first world countries measured this way get above the 1 vehicle for every two citizens ratio: Luxembourg (0.697), Iceland (0.658), Australia (0.619), Puerto Rico(0.617), Italy (0.571), Canada (0.563), Italy (0.566), Germany (0.546), France (0.491), U.K. (0.426) and Japan (0.543). The domestic markets of these countries have been purchasing automobiles for decades and are largely already saturated.
So China, with per capita vehicle ownership of 128 per thousand people (0.128) is a virgin market with massive potential. If it had the same per capita car ownership figure as the US currently has, there's be nearly double the number of cars on the planet. Remarkably, China's per capita vehicle ownership levels are the same as America's were in 1923.
Being the biggest auto manufacturer in China, SAIC's ability to grab the lion's share of this market going forward is unequalled. Similarly, it's acquisition of 50% of General Motors India — that's the other developing country with more than a billion people who don't already own cars — indicates the long-term strategic positioning of the company in its quest to become the biggest auto maker the world has ever known. India's vehicle ownership ratios are currently the same as America's were in 1912 — when the Model T Ford was top seller.
Forecasting consumer sales accurately in a country getting rich this quickly is very difficult as the Chinese Government's macro economic policies can have such massive effect on public buying and because slight variations in demand from a population base of 1.3 billion people can make a huge difference to total sales.
Five years ago, the State Councils' Development and Research Center predicted that China's annual demand for autos would reach 21.8 million by 2020 and 32.4 million by 2030. But the explosive growth of the last two years now makes it likely that somewhere around 17-18 million autos will be sold in China in 2010 and 30 million by 2020. In effect, forecasts have moved forward ten years in the space of just five years.
As we've previously mentioned, China's citizens aspire to owning an automobile, and as China's urban population grows richer and heads towards a billion in number, the Government recognizes that powering those cars with oil is unsustainable. There's not enough oil, and it will cost too much and it will create pollution on a scale we can't handle.
So it is now incentivizing the electrification of mobility on a scale far beyond any other government.This is all designed to help China reduce its "carbon intensity" or carbon emissions per unit of GDP by 40-45% by 2020 based on 2005 levels. This is one of a number of commitments China has made and not surprisingly, the car companies it owns are leading the charge.
There are more than 50 environmentally friendly cars that qualify for a subsidy in China. The Toyota Prius, the champion of clean emissions in America, doesn't qualify for a subsidy in China because its 1.8 litre engine is considered too large.
China owns SAIC — it might be run like a publicly owned car company but it will play out the Chinese Government's green agenda and the billion dollars earmarked for development of its new brands will ALL go towards the development of electric and fuel cell and supercapacitor vehicles, all networked to each other and the infrastructure so the transport system in total can be intelligent and efficient.
SAIC is destined to be a brand with impeccable green credentials — smart personal transport — beyond anything we have seen from an auto company or a forward-thinking government to date.
Starting a new brand can have its advantages when you have this much money and momentum.
The World Expo 2010
Which brings us back to Shanghai for the world's largest ever event. Shanghai has emerged as the new gateway to the middle kingdom. It's one of the most modern cities in the world, has a long standing and thoroughly deserved reputation as the Paris of the East, and it is China's showcase city, not just for the rest of the world, but as an example to the people of China of the promise of the long march to commercial success.
The expo is currently underway in Shanghai and it is a showcase of sustainable technologies in every way. The site of the expo is vast — twice the size of Monaco — 20 times the size of the last world expo.
Comprehending how big it is really is a stretch because it is just too big to walk. People attempting to visit for a week or two quickly realise the futility of their efforts. Not only is it the biggest world expo ever, with the exception of wars, it the biggest single event the world has ever seen. China has spent the equivalent of USD$60 billion dollars on the expo.
Previous world expos have been about showcasing the future to the world. Expo 2010 is not aimed externally, but internally. Expo 2010 is the Chinese Government promising the future to the Chinese people — the figures say that 95% of the 70 million visitors will be its own people, but as an easily identifiable western visitor, I was indeed a curiosity — people frequently asked to have their photograph taken with me, or their children. Check the footage in the video which accompanies this article and you will indeed be hard pressed to spot anybody who isn't Asian and in my experience, almost certainly Chinese. My guess is that the number of Chinese visitors is closer to 99.9%
China's message — optimism, patriotism and national pride
The wisdom of painting a clear picture of the future is obvious. China is changing so fast that the Government has produced a massive 3D real world road map designed to help envision the future for the Chinese population at the same time as engendering patriotism and pride.
China's progress of the last three decades is emphasised constantly and almost universally throughout China using promotion of the Expo as the platform. Those who bother to go see a display of awesome size and expertise.
"Better city, better life" is the main theme of Expo 2010 and "sustainability" is also common across the entire communication agenda, but the absolutely indelible message that came across time and again, was "here's how far we've come in the last few decades, and here's where we'll be in another few decades — get on board."
Numerous times across the expo, this was paraphrased in Chinese presentations — massive presentations with a central theme of being "all under the same roof" or that China was the "land of hope."
Ironically, as effectively as the message is delivered, the Chinese people don't need much help in developing an optimistic outlook as they are already more optimistic about the future than any other country - 29 percent more con?dent in 2009 than the world average, and that was prior to the Expo opened in SAIC's home town on May 1.
Chinese wages are growing at quite a rate and a significant rise in discretionary income each year is obviously a key antidote for pessimism. Despite the Global Financial Crisis, average earnings for urban Chinese rose 8.8 percent in 2009 to CNY 17,175. That's more than average US earnings have risen in the last decade.
So the Expo 2010 will have somewhere between 65 million and 70 million Chinese visitors before it closes on October 31 and the message will have been delivered to most of China's key influencers and in automotive terms, the big winners will be SAIC brand and 51% SAIC-owned GM brand.
Expo 2010 and the public transport system of 2030
Apart from the only automotive-only pavilion at Expo 2010, SAIC had another massive opportunity for showing its expertise — the Chinese Government wanted a futuristic transport system for the massive expo site and entrusted it to SAIC. SAIC was given the monumental task of ferrying half a million people a day around the site with the strict provision that there be NO local emissions.
So it had to build a futuristic public transport system of the year 2030 for 500,000 daily commuters TODAY.