Question 3 Lewis
How do you envision the future of smart (tech-enabled) mobility with the democratization of advanced technology?
Technology abhors inefficiency
First of all, technology doesn’t discriminate. What technology does is it disrupts and finds ways to make things more efficient. Internet abhors inefficiency, and internet companies seek to disrupt inefficient business models, whether that’s publishing, or music, or just pick a thing that required a physical product to be manufactured and sold in a retail way. The internet took out the inefficiency. If I had to physically print a book, sell it through a distributor to a book retailer, and then have you go to the bookstore, which we like to do. I certainly like to browse through physical books and I still do. But all of that inefficiency of the physical print, the factory to do that, the handling and intermediaries in between who each took a little bit more profit, at the end of the day, something that should cost a few dollars ends up costing $30 to buy a hardcover book from a bookstore. Amazon threw that business model away and said I’m going to sell books online. I could do that with no physical factory to build the book, no distribution channel, just put the information online and you just download it and consume it through Amazon Kindle. But the bookstore still exists and there’s still people still want to go have coffee. The bookstores became coffee shops, we like to hang out to see people and sometimes you want to touch it physically the leaf pages. I still liked reading the flaps. Some people even young people might still do it that way. But it’s gonna get challenged by the new. That’s where we are with the automotive industry.
What we are pointing out is the inefficiency. The inefficiency was there all along. It was the 5% utilized car. If the way we become personally mobile, not public transport, but personally mobile, to get in our own personalized mobility experience, we had to physically buy a device, a bicycle, a car, we had to free ourselves up from the bus and the train, by physically buying hardware. The internet said no, I can give you that. Even if you’re a taxi hailing person, you don’t have to stand in the border and get elbowed out by somebody else who jumps in front of you and grabs that taxi. You just tell the app and that’s your ride. There’s no more competition on the street. When I lived in Beijing on Changanjie, and I had to position myself in a way where I was able to not get on the taxi line, because you’re going to have 15 people waiting at the taxi stand in front of you. So you end up standing maybe 20–30 meters in front of the taxi line and try to grab the taxi before everybody else. This is China, we’re all competing for space and there’s no such thing as Pai Dui (waiting in line); wherever there’s Pai Dui, there’s a Jia San (cutting in line) and there’s somebody who will come in and say “okay, I’m gonna grab that spot”, whether it’s waiting for a taxi or Uber, or applying for college or anything else that you might do, there’s always five other people that want to do it in front of you. [
chuckles] The Internet sees the inefficiency and says I can serve and give you a more personalized experience, and you don’t have to stand in line anymore. You might have to outbid someone online but that’s the profit of the internet company. So it sees that and recognizes mobility as a service.
Tech companies think differently
I had the experience of meeting Cheng Wei
. And I brought a car company to meet him in 2015. It was the CEO of Ford China that went to Beijing with me. After they shook hands, he (Cheng Wei) said, it’s great to meet a famous company like Ford, we are in the same business. And the Ford CEO said: “really? We’re a manufacturing company and you’re an app. How are we in the same business?” Cheng Wei said:
“Well, Henry Ford democratized mobility with mass production, and we’re democratizing mobility with an app. ”
Figure 6: DIDI’s founder and CEO, Cheng Wei
And I thought, wow, that defines what the internet’s doing. This is the automotive industry, I’m not in the business of the utility, I’m in the business of the product. I’m making a mobility device but I’m not profiting from its movement. So the internet economy sees the inefficiency and says, I’m going to blow that away. I don’t need a factory. You can be the factory for me. Like Ford, you can build a car, and I tell you what a person who I put in the car might want to do when they’re in it and build me that car. Or maybe we can help the cars that are in service use your dealership network or some type of service network. So you have to come at the problem thinking differently. And that’s what the internet companies are doing. When you look at NIO, when you look at at Apple, when you look at Waymo, they’re solving a different problem. First question you have to ask is why are these companies experimenting mobility? What did they want? And the answer most people give, which is the wrong answer, is maybe they want to become car companies. No, I don’t think so. Who wants to be a manufacturing company? They want they see what human beings do every day. And they say, how can I make that better?
From problems to tech-enabled solution
What Didi did is they see what human beings do everyday, they move around every day, they don’t necessarily like to go on the train, they don’t necessarily want to go on a bus, they don’t like standing in a taxi queue, and I have a technology solution for that. So if you’re Apple, or if you’re Waymo and you say, I’m in the business of monetizing online services. If you are Google, what do people do every day? They move around. How do I capture that user as part of my Android operating system? I’m Apple. What do people do every day? They listen to music, they make phone calls, they they take pictures, and they move around. So mobility is always on the list of what we do every day: we order food, there’s Alibaba; we cook, there’s Hema
. The internect company sees what we do every day, and it monetizes us with a service that makes it easier for us to do that. And if there’s an inefficiency in the business of delivering that service to us, they attack it. What’s the inefficiency in transportation today? Fuel cost, maintenance cost and driver cost. How do you mitigate that? Electric and autonomous vehicles. So you get quickly to the answer if you think in the in the digital context.
Self-driving technology, connectivity, and operating systems
The first wave of disruption of the automotive industry was mobility as a service; the second wave of disruption is electric and connected vehicle technology. We’re in that era right now. We’re in the advent of electrification and early stages of self-driving technology. It’s called ADAS — Advanced Driver Assistance System. China likes to call it ICV — Intelligent Connected Vehicle. Same thing but different names. But it brings the idea of connectivity into the equation. And when you bring connectivity into the equation, you bring the operating systems into play. IOS, Android, Harmony OS, that’s why Huawei is in the game; Duer OS, that’s why Baidu is in the game; Ali OS, that’s why Alibaba is in the game; MIUI, that’s why Lei Jun
 is in the game. Pick a device, and then say is the automobile a device? What operating system should power it? Mine, if you’re an internet company. So it’s only a matter of time until all of the tech companies are in some level in the future of mobility. The car is the most sophisticated computer that we will interact with on a day to day basis.
Who wants to be the operating system that powers the apps that are presenting the applications to the users in the everyday computer that they’re being transported in? The answer is
every single tech company. [ chuckles]
Figure 7: NIO OS and its center console Prof. Luyao Zhang
This sounds interesting, because we were doing research about the decentralized finance application on the blockchain. But you help me see another user case: a car is also like a platform.
Not only is it a smart device, it’s probably one of the most personalized and immersive spaces outside of our living room. It’s probably going to be the most personalizable space. Even our workplaces is less personalized, because we share it with with others. But when we’re in that vehicle, that’s our box, that’s our cave. And it doesn’t have to be ours for the time that we’re in it. The technology is sophisticated enough to know who we are with facial recognition, you just have to sit in it for the device to know who you are. What’s the difference between shared mobility and personal mobility? The difference is there’s somebody driving a car where I have never met before. The other thing is, I’m never going to remember this car 10 minutes after I get out of it because they didn’t personalize. But you will remember it when it’s personalized. That’s what the internet knows how to do. They know how to make the services sticky. The successful internet companies are the ones that you miss when you don’t have it. The reason why people buy a device is because of the operating system and because they know their cloud storage, their photos and music, whatever they prefer, whether it’s harmony OS or IOS. You will be making a decision of what car to get on the basis of what operating system it has. I posted something online on LinkedIn about BYD. Somebody said I would want a BYD, but it doesn’t have Harmony OS. I’ve been saying this a long time, people will make a decision of what car to either own or use based on what experience they’re going to have in it, and the operating system is what defines the personalized experience of mobility.
Transportation device as an experience Prof. Luyao Zhang
I feel like it’s similar to the thing you mentioned about parking lot. Because right now we are taking Didi for the convenience of doing something else, but the process is actually redundant.
What if the process of transportation is also itself a valuable experience?
Think about your hospitality industry. If we’re in business traveling, you book a hotel because it’s in the city that you’re going to. It just happens to be convenient for you to be going to that particular place. But there were destination hotels, you go there because of what it is. It is something very popular here in China, people go on weekend trips in their home city. It’s become very popular even now during COVID because of the travel restrictions. I don’t want to be in my home all the time. I’ll go book a weekend in Chongming
I went out to Thousand Island with my daughter and we never really left. There’s this beautiful lake there. We went outside once and we spent the rest of time in the hotel, because there’s a children’s play area and there’s a lady making syrupy angels. [
chuckles] There was so much to do she never left. And till this day my daughter was three years old and she was two years old when we went. She still calls it daddy’s hotel. The funny thing is we may think of mobility that way, not too far in the future, where you can create an experience and make that the reason you got in it. You just need another space.
Community / Brand culture is the game-changer
I think there’s a seed of that in the NIO’s business design. A lot of people buying NIO are not buying just because of the car. It’s an EV, but it’s also a community. William Li
 did something with NIO day. I went to one of them, the one that they had here in Shanghai with Bruno Mars. It was a cult. It was like we were all NIO enthusiasts. And then he builds this NIO house, which is basically a club. So when you’re thinking do I buy a Tesla or a NIO, and you’re Chinese, and you’re thinking, “that one’s got a more famous multinational brand, but this one has people I can meet, I can socialize with, I get invited to go see Bruno Mars or whomever”. So you’ve created a community. You’ve created a culture. We did that a little bit at Chrysler with Jeep, the Camp Jeep where if you own a Jeep, you can go and take it out in the off road experience. Thousands of people every year would go to Camp Jeep. I think there’s a bit of that in the DNA of the internet company, because it’s social communities and it’s online attachment. If I can build that feature around my mobility experience, then I have a reason to stay with the brand. It’s no longer just having a physical device but there are things that the physical device enables in my lifestyle that I can let go of. That’s the part that I think the digital economy will invent a way for people to remember the mobility experience more than they remember the hardware itself.
They need to attach it somehow to the hardware, and they need to make the experience so unique,
where I can’t not have that.
Apple enthusiasts sometimes are called Apple fanboys, that they’re so devoted to the brand where they have to have all the latest and greatest stuff, and they are constantly looking for upgrades. Or you’ll even go to the store not intending to buy anything, but rather just enjoy going to the store. You’re sucked into this community of people that like to brag about all the cool technology. And I think that’s where you’re going to see this industry evolve is these smart device companies, who, by the way, have stores. For traditional cars, you’d never go to the dealership. The most horrible experience about ownership is buying the car and getting it serviced. So the dealership is not a fun place to go. It’s like going to the dentist. [
chuckles] You are like: do I really have to do this? I got to get my teeth cleaned every now and then but do I really get excited about the idea of going there? No. That’s the car dealership to the car owner. However, that’s not the Tesla store. That’s not the NIO store. It’s like people just want to go in there because it looks like: hey, people are having some fun and cool stuff in there. If you go over here on Corporate Avenue five, go to the HiFi store. I put my little girl in there and it’s got this wacky vehicle design. It’s got these goldwing kind of doors that fly up. But when you get in the car, it’s got this, and this is what the Chinese brands I think are very different than the foreign companies is they got these gigantic screens in front of you. And I put my three-year-old daughter in the passenger seat and she knew how to tap, swipe, and find what she wanted. She found Paw Patrol and it was just lots of watching. I can’t get her out of the car. It’s like she knows how to do this. I put her in a Tesla. She got behind the wheel. And within two seconds she’s tapping and she’s learning how to turn the radio on. I didn’t tell her to do any of this stuff. I put her in the NIO car. If you want to see how the future is going to be like, take a little child and put them in a car and look at what they do. They go right for the screen. The other thing NIO did is they put a little robot sitting there called Nomi, which you can talk to. And when you ask it to play music, not only does it blink and smile at you, a little guitar comes out. It’s got a little animation of the guitar playing while the music is playing. I got her out of the car and I went to another shopping mall and it was a Ford. I’m not downplaying Ford but I put her in the Ford. She didn’t want to stay in the car. There was no screen. And she asked me where’s Nomi? Where’s the little face? Where’s my little robot that I can talk to? And I’m thinking the traditional car companies are not in sync with where this world is going.
Figure 8: NOMI-NIO’s cute in-car AI assistant
Customer segmentation leads to multi-brand strategy
I was invited to Ningbo by Geely to experience their new car, Zeeker. They put me into the new Zeeker car. Also, mind-blowing performance and giant screen. You can have a comfortable ride, you can have a performance ride, you can change the driving experience. That’s a neat idea. It also had a giant screen. So I asked him first of all, why do you have so many brands. He said in China, there’s so many different segments in the market so you need to be able to speak to the customers in a more granular level. Having one brand to cover everything is not appropriate. That’s counterintuitive logic to the way the multinational car companies have thought. They approached multi-brand strategy in a different way. They saw it as a way of standardizing on the manufacturing line with a common set of technologies and then creating prices and life stage brands with different levels of content for different lifestyles. So if you’re GM, you start with a Chevrolet and then maybe you graduate to a Pontiac, a Buick, Oldsmobile, and a Cadillac. Basically, it’s the same car. It just had different top hat and different interior. You might have leather, you might have something else. You had something that differentiated it, but everything under the covers was the same. The chassis was the same. Even today you see a Toyota has Lexus, but the Lexus cars are basically the same as Toyota cars but just with more leather in it. In China, these brands are targeting totally different customers. The GreatWall brand has TANK, they even have a pickup truck brand. Now they have HAVAL, they have WEY and they have ORA
. And the ORA brand is totally targeted at young, 20 to 35 years old buyers. EV in China is going to be sold to the younger technology savvy population. The way it’s being done elsewhere is through price premium. You can get a Volkswagen, or you can get a Volkswagen electric. The latter is going to cost more. You got the world upside down here. If you price it higher, you’re not going to appeal to the younger buyer. You’re trying to sell it to the older buyer because they have more money. You don’t want to be that cheap ( referring to the previous Wuling EV that’s priced at RMB 30k). That’s too democratized. You want to make money at it. But take the Geely approach. Let’s create a brand. Let’s call it something that you’ll notice. What is a Zeeker? So I asked them what Zeeker is. “Z” for Generation Z, “eek” is geek, what’s the Generation Z geek? It’s a Zeeker. So they’re basically saying to you, “I’m selling EVs to the younger population”, which is exactly the way you should be doing it. Because the younger people are going to be more tech savvy. They’re going to not want to have what their mom and pop had, if their mom and pop even owned a car. If they didn’t own a car, they’re definitely going to want to have an EV. Anybody who’s probably born in this century is probably far less likely to buy a combustion engine powered vehicle than an EV. So let’s name a brand after them.
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