Up, Down, and Sideways: Innovation in China and the Case of Plug-in Electric Vehicles

Transcription

1 Up, Down, and Sideways: Innovation in China and the Case of Plug-in Electric Vehicles 1 Erica Fuchs 1 Valerie Karplus 2 Yanmin Wang 3 Department of Engineering and Public Policy 1. Engineering & Public Policy, CMU 2. MIT Sloan 3. Beijing Normal University

2 Research Questions 1. Is innovation happening amongst firms developing, producing, and selling PEVs? If so, what type? 2. Why are we observing such different forms of technological and business model innovations amongst firms developing, producing, and selling PEVs? 2

3 Scholars suggest innovation in China is limited to mass production Government push for more 自主创新 (indigenous innovation) Scholars suggests China s primary role is the scale-up of products and their production. Trapped in lowest value segment in global production: o Innovations focused on product imitation, modularization, cost reduction, and otherwise the commoditization of products (e.g. Brandt et al., 2010; Steinfeld, 2004; Ge et al., 2004) o Incremental process innovations (e.g. Puga & Trefler, 2005) Emerging, more complex role in global production: o Joining globalized production in different value chain segments (Ernst & Naughton, 2008, 2012) o Downstream innovation involving technology commercialization and redefinition (Breznitz and Murphree, 2011; Herrigel, 2010; Nahm, 2012) 3

4 Institutions and Markets: Lenses into innovation in China Institutions (North, 1990) Markets General National innovation systems can create institutional competitive advantage (e.g. Freeman, 1995; Nelson, 1993) Can impact innovative performance of: Firms (e.g. Kafouros et al., 2013) Entrepreneurial outcomes (e.g. Armanios et al., 2012; Eesley et al., 2013) Rate and direction of innovation (e.g. Scherer, 1980) Larger vs. smaller market size (e.g. Acemoglu et al., 2003) More vs. less competition (e.g. Arrow 1962; Schumpeter, 1942) China Conflicting interests between regional and national institutions: Local interests undermining national goals for technology upgrading Detrimental to innovation (?) or enabling new forms of innovation centered around mass manufacturing capabilities (e.g. Nahm, 2014; Heilmann et al., 2013) Market shift towards domestic consumption is deepening technological upgrading amongst domestic firms (e.g. Brandt et al., 2010) 4

5 Inductive grounded theory-building Vehicle Sales Data: (Jan Dec. 2014) o o CAAM annual sales (make, model): Hand-copied from annual automotive year books Gasgoo.com monthly sales (make model): Web-scraped using custom-built Python scraper Archival data: o o >30 news reports (Automotive News China, China Auto Web) >30 published Chinese papers (subjects: historical accounts of domestic automotive firms, innovation in China) 5 Interviews ( ): 37 in-depth interviews using snowball technique Case Study Firm Organization Position Interviews JV Auto Firm Manager 7 JV Auto Firm Engineer 3 Independent Auto Firm Founder 1 Chery Independent Auto Firm Manager 4 Independent Auto Firm Engineer 5 Haike Independent Auto Firm Co-Founder/Engineer 1 Independent Auto Firm Co-Founder 1 Jiayuan Independent Auto Firm Founder/CEO 1 Independent Auto Firm Engineer 1 Kandi Independent Auto Firm Manager 2 Consulting Firm Consultant 2 Government Analyst 2 Non-profit Consultant 2 Non-profit Researcher 1 University Researcher 3 News Outlet Reporter 1 37

6 Joint Venture policy goal: technology transfer from foreign to domestic Technology upgrading strategy since 1978: 以市场换技术 = Exchange market for technology JV Parent Shanghai Motors Independent JV JV SAIC-VW SAIC-GM 6

7 Maxus Benz BAIC New Energy JV firms have relied on foreign brands/technology to gain market share Dongfeng 3.24 Nissan SAIC 5.22 Wuling Volkswagen 2014 Passenger Vehicle Sales in China (Total = 19.7 million) Dongfeng Kia Skoda Honda Peugeot Baojun Chevrolet Buick Luxgen Ciimo Venucia Citroen MG Cadiallac Roewe Chang'an 2.08 Chang'an FAW 2.94 Audi Toyota Suzuki Volkswagen Ford Mazda DS Volvo Mazda Xiali FAW Besturn Haima Geely 0.46 Geely Volvo Chery 0.48 GAC 1.18 Chery Honda BAIC 1.78 Trumpchi Hyundai Lifan 0.17 JAC 0.20 BYD 0.44 BYD Mitsubishi Fiat Toyota Lifan JAC Changfeng Everus GAC Gonow Youngman Lotus Hawtai Hawtai Auto Jiangling Jiangling Honda Zotye 0.16 Zotye Suzuki Mercedes Benz BAIC SG Changhe Yema Jonway Fujian Mitsubishi Soueast Great Wall 0.61 Foton Qoros ZX Great Wall Haval Brilliance 0.43 Zhonghua BMW Jinbei Beijing Huansu Box size indicates market share OEM Sales Brand Joint Venture (JV) Firm Type JV Parent Independent Data Source: Chinese Association of Automotive Manufacturers (CAAM), China Automotive Industry Yearbooks. 7

8 Plug-in sales dominated by independent, non-jv brands BYD 18, Plug in Vehicle Sales in China (Total = 59,143) Chery 8,605 Chery SAIC Springo 1, SAIC JAC BAIC JAC Tesla* 5,234 3,831 Dongfeng Venucia BYD Kandi 12,592 BAIC Tesla Kandi Zotye 7,542 Zotye *Imported *Imported Selling gas cars makes money! The business case (for EVs) is weak. Margins (for CVs) in the west are only 3-5%, but in China they're around 10%! - Former manager for JV firm Data Source: EV Sales Blog ( 8

9 Overview of Case Study Firms Jiayuan (Nanjing) eq BEV Flywheel Transmission 1 Lingzu LSEV BEV Car Share Tower Chery (Wuhu) Kandi (Hangzhou) Haike (Changzhou) 9 Ownership & Funding: Chery Haike Jiayuan Kandi Wuhu Gov t Private Investors Private (Crowd sourced) Private Investors (KNDI) Year Est.: Tech. Origins: Auto parts Formula racing BEVs Products: 2014 Domestic Sales: CV, BEV, PHEV 357,585 CVs 8,605 BEVs Flywheel Hybrid Transmission NA LSEV, BEV NA Batteries, CVs, BEVs BEV, Car Share Service BEV Car share: Hangzhou (20k), 9 other cities (14k) BEV Sales: 11k 2014 Exports: 108,238 CVs NA 500 BEVs NA 2015 Milestones: 5,337 BEVs Jan. Jun. Begin pilot production Obtain license, begin LSEV sales ~20k BEV sales, car share in 9 cities 1:

10 Innovating Up / Down (Technology) and Sideways (Business Strategy) Organizational / Business Strategy Technology UP Advancing the technological frontier of the industry to enter new markets SIDEWAYS Combining technology with new organizational and business strategies to enter new markets DOWN Combining / redefining older technologies in innovative ways to enter new markets 10

11 Chery Auto: 脚踏实地 (Stepping on Solid Ground) Innovating UP with BEVs Institutions : Markets: Early protection critical for transitioning from parts supplier to automaker Began PEV R&D at founding in 2001 to capture the opportunity Assistant Manager to CEO Organizational / Business Strategy Chery Tec hnology eq BEV Price: $15k QQ5 CV Price: $6k - $8k 11

12 Haike Technologies: 巧若拙, 道 简 ( Dumbing down is the way up ) Innovating DOWN with low-cost flywheel hybrid transmission Institutions : Markets: Chose Changzhou as headquarters for it s strange level of support (free office space, low pilot production facility rent) Haike Co-founder Virtually no HEV competition in China (JV requirements & patent block) Organizational / Business Strategy Tec hnology Differential Flywheel Planetary Gear Electric Control Motor Haike 12

13 Jiayuan EVs: 存在就是合理的 ( If it exists, it must be reasonable ) Innovating DOWN with low-speed EVs Institutions : Markets: Organizational / Business Strategy Unable to acquire automotive production license without producing CVs An EV must be something that there is a real market for, that people are willing to purchase so that s why I aimed this product towards this market segment. Jiayuan Co-founder Lingzu LSEV $3,000 - $4,500 Real car conveniences Tec hnology Jiayuan 13

14 Kandi Technologies: 异曲同 (Different Tune, Equally Melodic) Innovating SIDEWAYS with BEV car-sharing Institutions : Markets: Grew out of multiple Hangzhou government-sponsored demonstration and R&D projects Solves PEV parking and charging infrastructure constraint by developing BEV vending machine Organizational / Business Strategy Tec hnology Kandi Vertical BEV vending machine 14

15 Multiple firms innovating in a wide variety of directions Organizational / Business Strategy Chery UP Advancing the technological frontier of the industry to enter new markets Technology Haike Kandi SIDEWAYS Combining technology with new organizational and business strategies to enter new markets Jiayuan DOWN Combining / redefining older technologies in innovative ways to enter new markets 15

16 Chinese firms innovating in variety of directions in PEV sector Existing Theories China s primary role is the scale-up of products and their production: Trapped in lowest value segment in global production (e.g. Brandt et al., 2010; Steinfeld, 2004, 2010; Ge et al., 2004) More complex role in global production (Ernst & Naughton, 2008, 2012l; Breznitz et al., 2011; Herrigel, 2010; Nahm, 2012) Contributions Chinese firms innovating in variety of directions in PEV sector: UP: Advancing the technological frontier DOWN: Combining / redefining older technologies in innovative ways SIDEWAYS: Combining technology with new organizational and business strategies 16

17 Contributions to Theory: Innovation & the Co-evolution of Institutions & Markets National Institutions Regional Institutions Markets Existing Theories JV system leads to passive learning mode, leaving innovation capabilities undeveloped in Chinese JV parent firms (Nam, 2011; Howell, 2016) Conflicting interests between regional and national institutions, enabling new forms of innovation centered around mass manufacturing capabilities (e.g. Nahm, 2014; Heilmann et al., 2013) Market shift towards domestic consumption is deepening technological upgrading amongst domestic firms (e.g. Brandt et al., 2010) Contributions JV system may be inadvertently protecting independent firms from tough foreign competition, enabling market opportunities Local protectionism may be serving as an incubator, allowing a wide variety of innovations to emerge PEVs meeting different market needs; size and heterogeneity of China s domestic market may be enabling demand for the large variety of innovations 17

18 Institutions may need to evolve to support future expansion 2014 Domestic Sales: Strong national innovation systems require firms to be exposed to global competition (Nelson, 1993) As domestic firms grow beyond protected regional markets, institutions may need to evolve to support future expansion. o Chery Haike Jiayuan Kandi 357,585 CVs 8,605 BEVs NA e.g.: Implementation of current national charging standard differs by location, often favoring local charging infrastructure suppliers. NA BEV Car share: Hangzhou (20k), 9 other cities (14k) BEV Sales: 11k 2014 Exports: 108,238 CVs NA 500 BEVs NA 2015 Milestones: Plug-in vehicle sector still young 5,337 BEVs Jan. Jun. Begin pilot production Obtain license, begin LSEV sales ~20k BEV sales, car share in 9 cities 18

19 Acknowledgements This work was funded by: Contact Info Website: Wechat ( 微信 ): jhelvy 19