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The Next Automobile Revolution Will Happen in China not the U.S. or Europe

6/27/2020

4 Comments

 
Dr. Wordman

I wrote in 2015 about the consumer electronics show (Las Vegas) and auto show (LA) in the U.S. which had generated speculation about a major growth in auto industry. Separately, the well-known consulting company, McKinsey & Company had released a report, entitled Disruptive Trends That Will Transform the Auto Industry, written by Paul Gao, Hans-Werner Kaas, Detlev Mohr (Director of Hong Kong, Detroit, and Stuttgart Office respectively) and Dominik Wee (Principal in the Munich office) and contributed by nine other McKinsey staff. That report was signaling an ‘automotive revolution by 2030’ stimulated by four disruptive technology-driven trends: diverse mobility, autonomous driving, electrification and connectivity, so claimed. As a typical good consulting report, this long article made perceptive observations on the rise of technology that has disrupted other industries and so will the auto industry. That report pointed out the shared mobility (for example, Uber model), connectivity services (telecommunication and computing supported services), and feature upgrades will bring as much as 30% more business revenue in addition to its traditional auto-units growth which was estimated to be at 2% considering the changing business model for new cars (increasing demand) and consumer behavior shifts (decreasing demand).

The above study report touched upon an important fact that automobile consumers in the cities will have changing individual mobility behavior because of multiple modes of transportation modes available, thus preferring to have car services rather than car ownership. E-hailing (Uber) have already demonstrated some success, demanding ten percent of new cars as shared cars in 2030 and possibly making cities replacing countries as the most relevant segment to determine mobility behavior and scope of automobile revolution. This paradigm shift to "mobility as a service" will change and force the auto industry and new players to compete on multiple fronts as well as to cooperate in exploiting the technologies to realize advanced driver assistance system (ADAS) to auto-auto (self-driven AA cars) and to focus on software based differentiation in new features. The new companies Tesla, Apple, Google and Uber are new players and Chinese car manufacturers will have a significant role. However, the old report did not answer my title question where the auto mobile revolution will take place, in the U.S., Europe or China?

The automobile industry has sustained a steady growth since the invention of gas engine by Gottlieb Diamler (1885) and a gas fueled car by Karl Benz (1886), although combustion engines were invented many centuries ago. Gasoline has dominated the auto industry as the principal fuel. Fossil fuel was plentiful enough to support car growth. Over the 130 years of automobile history, from 30 car manufacturers producing 2500 cars in 1899, it went through mass production process introduced by Henry Ford (1913) eventually resulted in the domination of the US Big three in car manufacturing post WW II. However, by 1980, Japan had become the no. 1 car manufacturer. In the past three decades, more competitors entered the industry; by 2011, the ranking has changed to be China (14.5M), Japan (7.2M), Germany (5.9M), S. Korea (4.2M), India (3M) and U.S. (2.5M) with China becoming the largest automobile market and producer today. That explains why Tesla would have its factory built in Shanghai expecting the electric automobile revolution to take place more likely in China not in the U.S. or Europe?

The diminishing supply of fossil fuel and its carbon emission creating global warming are causing the disruption of auto-industry by the rapid technology-driven trends.The U.S. used to be the number one contributor to carbon emission, now China has become the number one. With China’s 1.4 billion people moving upward economically, it puts a tremendous pressure on the demand for cars. If China ever let her population to own 2-3 cars per family like the U.S. does, the consequences is unthinkable. So China is very much motivated to do something about it as seen by her effort in electric bus application in her cities and exporting abroad. It is a good thing that China is conscientious about environment. The COVID-19 pandemic may have added a serious impact on city dwelling and created a somewhat unpredictable preference of using crowded public transportation over Uber like services, but in either case going electric is quite certain.

China has had foresight and made significant progress in her national high-speed rail infrastructure in many parts of China and developed advanced mass transit systems in her major cities. However, the mobility problem remains as a challenge. What will China do? Will China seize the new automobile revolution and develop a holistic solution to solve the mobility problem of her vast city-urban population? In the following, I present an 'imagined' government-supported plan regarding a technology-driven Auto Industry Revolution. The plan is more visionary than the McKinsey report with challenges in implementation. However, if any country could implement this plan, it would be China, judging on her success on mega-projects in the past, The essence of the plan is as follows:

  1. Twelve major cities in China are selected to participate in this Horse-Dragon (HD) Plan covering a total population of 0.2+ billion. Without this plan, the population may need 10 times more cars (one hundred million).

  2. The city 'shared-bicycle' model is elevated to automobiles between mega-cities after a mathematical analysis. Citizens with valid ID can take out a HD car from a depot station and return to another depot station in the same or other city. Depots are designed with fully automated parking, maintenance and service system functioning 24 hours per day easily accessible from mass transit.

   3. The process of reserving a car and return a car is done with smart phone. Commuting routes are automatically matched and offered with priority.

   4. The HD cars are designed with most advanced technologies providing navigation and driver assistance (ADAS) moving to all electric within one decade.

   5. Citizens can purchase car service contract based on miles to be driven and time to possess the car. A fee algorithm is worked out based on a sophisticated model of efficient utilization formula and all HD cars are self-insured with self-fault detection system (accidents will be auto-recorded by a “black box” camcorder to be used in forsurance settlement).

   6. Governments of the participating cities will design highways with designated HD priority lane(s). Central government will implement such highways between the participating cities.

  7. Car models are provided by manufacturers meeting government specifications, modular design with parts standardized and replaceable at all depot stations by trained technicians. Different models will satisfy different private car needs for pleasure, business and vacation requirements. Car reservations can specify model and accessories needed including boats, bikes, camping and fishing equipment etc) with 12 hours notice.

   8. All car maintenance will be performed by technicians at car depots. Car owner must bring the car for maintenance according to specified schedule.

   9. Private car manufacturers, electronics and technology companies, appliances, auto parts and online service companies, can bid to participate in the HD enterprise. The total number of depots (about twelve thousand) will provide 3 million employment self-supported by the enterprise using a modified McDonald franchise model..

   10. The first trial of the plan will start at Guangzhou and Shanghai before 2024. The net savings is an ultimate reduction of cars needed from 100 million to 10 million (conservatively based on HD cars driven 20 hours/day vs private cars driven 2 hours/day).

Although the above plan is speculative, the technological trend and post-pandemic social change are likely to kick off such an automobile revolution with huge economical benefit than the 'City Bycicle' revolution.



4 Comments

Who Protects Hong Kong's Security and Its Future?

6/20/2020

0 Comments

 
Dr. Wordman
 
The answer to the title question is obvious: China has the national responsibility to protect Hong Kong's security, especially against any threat or interference from foreign country or organization. As for Hong Kong's future, Hong Kong is principally responsible for its own future under the One Country Two Systems (OCTS) agreement (established in 1997 when Hong Kong was returned to China  from British colonial rule) which allows Hong Kong to maintain its economic system and local government to maintain its current internationally recognized corporate, commerce, finance and civic laws (The basic laws for governing Hong Kong's daily operation as a financial center). Naturally, Hong Kong as a part of China may receive national support to enhance its economic competitiveness in the global arena and its future development. The recently completed mega project – the Zhujiang-Hong Kong-Macao cross-ocean bridge (This new world wonder certainly adds another jewel on Hong Kong and Macaw's crowns and expands their competitiveness through Zhujiang linking to Mainland China) is an example of such national support.  So, why is there fuss about Hong Kong getting a National Security Law established and unanimously (2878 yes: 1 no: 6 abstain) passed by the Chinese National People's Congress? What is comical in the mainstream media is that they sought the opinion of former Hong Kong Governor, Christopher Patten, as if he should know better about Hong Kong's security than a Chinese! In this article, we will analyze in this article the security issue for Hong Kong from Hong Kong people and Chinese points of view.
 
What is National Security and Who Provides It?

In the U.S., we Americans know very well that anything our government considering it damaging to the interest of the country and/or its people is a national security matter, from a foreign country flying a missile or plane over our territory to terrorists bombing our streets. Naturally, we expect our Federal Government to provide our national security whether we live in New York City, Buffalo or a far away island, Honolulu. So it is without doubt, China is responsible for Hong Kong's security and anything that threatens Hong Kong and/or its people  is a national security matter to China, regardless how much Hong Kong or its people is tied to the nation's economy just like New York City, Buffalo or Honolulu would expect the same national security protection.
 
What is the Nature of Hong Kong's Recent Unrest?

Hong Kong had many protests when it was ruled as a colony under the U.K and after its return to China. The U.K. would quash any protest especially against the British rule under British law and/or Hong Kong law British had set up. Prior to returning Hong Kong to China, the U.K hastily expanded Hong Kong's Civic Laws but no national security law. Of course, it makes no sense for the British to define national security law for Hong Kong. When recently Hong Kong's unrest became more violent involving external interference (such as unpatriotic behaviors beyond vocal expression to burning, destroying properties and hurting people, carrying the flag of the U.K. and the U.S.), it naturally calls for national security law to protect Hong Kong and China. Thus, the passing of the Hong Kong security  law by the National People's Congress is necessary and timely.
 
National Security under One Country and Two Systems (OCTS)
OCTS clearly defines one country which means that all regions and systems are governed under one constitution and one sovereignty. The two systems may be different but certainly can not be two opposing systems challenging the one country rule. In Hong Kong's situation, it is not difficult to understand that OCTS allows Hong Kong to maintain a different system, most importantly its economic system with laws and government mechanisms to maintain its free trade status, internationally competitive corporation laws, commerce laws and financial, including monetary, laws. These laws and additional civic laws can make Hong Kong to function as a free trade city and as a financial center. However, if Hong Kong is threatened by any unrest (such as any color or flower movement as instigated by external and/or internal forces) then its special free trade status will collapse. Hence, China's National People's Congress must establish a national security law for Hong Kong.
 
What Is Wrong with Hong Kong ? Can National Security Law Cure the Problem?
Historically Hong Kong was not only a heaven for free trade but it was also a heaven for intelligence operations. It was not all fictions in Hollywood movies to feature Hong Kong as a spy city where MI6, CIA, SVR RF etc. are active. Should Hong Kong let that continue after it was returned to China? Of course not, since most of the spy agents are spying on China in addition to each others. Spies were underground, covered or hidden, so it was not simple to get rid of them. During the recent Hong Kong unrest last year, the external influence became obvious when the protests became more organized, trained, equipped and more violent and vocal with anti-national security behavior. The national security law is expected to be applied to prevent and punish these offenses and having no effect on law-abiding Hong Kong citizens.

What Can Be Expected from the Hong Kong Security Law?
The national security law certainly will be a deterrent for foreign anti-security operations in Hong Kong. China and Hong Kong have all the rights to implement and apply the national security law. Perhaps, there will be a little more unrest instigated by the vulnerable and concerned foreign organizations, but in due time, the law will have its full effect. With the existence of this law, we may also expect two things to happen. The first is that the Hong Kong educational system will begin a self-cleansing process to remove some of the teachers and teaching material deemed to be unpatriotic and worse anti-national security. This practice is maintained in every country, certainly in the U.S. public schools. The second is that the Hong Kong judicial system will be served by Hong Kong citizens rather than by foreign nationalities, an anomaly that would never be accepted in the U.S. or U.K.. This is also critical for the security law to be effective, since the judges will interpret and apply the law.  
​
Following the above analysis, it is clear that the foreign countries have no right to criticize China for implementing a needed national security law. When the U.S. raises a threat to not granting Hong Kong the free trade status over the national security law issue, it is almost laughable since the U.S. currently enjoys a ludicrous trade surplus with Hong Kong ($31 Billion in 2018) and the national security law is designed to protect Hong Kong's stability and her trading system benefiting the U.S. and hundreds of her trading partners. As for Christopher Patten's comment: China's authoritarian government may impact the freedom of Hong Kong citizens, it is more than laughable since the Hong Kong citizens know very well what kind of second citizenship they were under the British rule. If the U.K. would dare to offer all Hong Kong people British citizenship to prove her claim that Hong Kong people preferred British rule, I bet that only a handful of applications would take place, an humiliating immigration event that would clearly indicate that the days of sending undesirable people away from England to Australia is over. The Aussies would not go back to Britain today even if bribed!  
 
So, please do not make waves to hurt Hong Kong, it will hurt the U.S. and U. K. more with humiliation!  



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G7 to GN’s Agenda, Location, Timing, Invitees and Fate

6/13/2020

0 Comments

 
Dr. Wordman
 
When the world had first experienced the energy (oil) shortage in the70’s, its impact was a world financial crisis (recession) . Upon initiation by French President Valéry Giscard d’Estaing and German Chancellor Helmut Schmidt, the heads of the six leading economies and industrial nations (with U.S., U.K., Italy and Japan) met in 1975 for the first time to discuss how the global economy could be managed to maintain its stability, and more importantly. to maintain the prosperity of the rich G6. The G6 summit meeting was held at the Chateau de Rambouillet, 50 kilometers southwest of Paris where they declared a Fifteen Points Communique. In 1976 G6 became G7 included Canada. In 1977, the President of European Commission attended the summit and now the President of European Council also attends. In 1998, Russia was invited in but following the Russian annexation of Crimea, the G7 nations decided in March 2014 to meet without Russia essentially excluded Russia indefinitely.
 
Interestingly, China had never been invited to G7, even after her economy has surpassed six of the seven members’ economies. This certainly has to do with the U.S. dominated leadership in G7, maintaining an ‘anti-China Rising’ policy. This year, the rotating host of G7 turns to the U.S., that means, President Trump will be the host. Due to the Pandemic COVID-19 infection occurring world-wide, this year’s G7 must take special precaution. That is why the selection of location and timing of the 2020 G7 Summit becomes so uncertain. Of course, the invitee list and agenda (purpose of meeting) are always important for G7 each year. In the past, many developing and underdeveloped countries were invited as guests. Only Russia, invited in 1997, ever became a member in 1998 making the group known as G8, but G8 ended in 2014.
 
The selection of a hosting site for 2020 G7 was somewhat controversial. The U.S. secret service has researched ten sites and recommended four choices, Hawaii, Utah, California and North Carolina but Trump suggested Trump National Doral Resort in Miami and was announced by his Chief of Staff on October 1, 2019. There were immediate bi-partisan criticisms (some people raised the issue of violating constitution and conflict of interest) on that choice, then Trump scratched that idea through Twitter blaming the media. On December 3rd, it was then announced that the 46th G7 would be held at Camp David, the same place for 38th G7. Then COVID-19 pandemic broke out sweeping the world with the U.S. being a severely affected country. Trump canceled the G7 replacing it with a video conference, but later said a physical meeting could still be held in the White House or at Camp David. On May 31st, German Chancellor Merkel declined Trump’s invitation citing COVID-19 concern. Then Trump delayed G7 at least to September. In the meantime, Macron of France called and emphasized all seven members should be attending a physical meeting in person and so agreed Boris Johnson of Britain.
 
Last year, the G7 was held in August in Briartz, France. It now appears that the 2020 G7 will be held at the White House but at a delayed date. It is just impossible to hold a physical meeting with seven world leaders plus a number of guests during a pandemic. On the invitee list, Trump named India, Australia, Brazil, South Korea, and Russia as potential invitees to the summit, according to a CNN report by Kevin Liptak, May 31, 2020, quoted Trump saying, "I don't feel that as a G7 it properly represents what's going on in the world. It's a very outdated group of countries." According to an article by Chidanand Rajghatta, Times of India, May 31, 2020, “Trump revealed the idea of an expanded group wanting to expand G7 to G10 or G11 or GN and India was included.” Liptak further reported: “Later, aides indicated he was seeking a larger group that could act as a counterweight to China, whose relationship with the United States reached a nadir last week amid disputes over corona virus and Hong Kong.”...”Trump intended to use the summit to build an anti-China bloc.”
 
Trump made calls in early June 2020, extending invitations to guests to join the G7 summit; they were accepted by Australian Prime Minister, Scott Morrison, Brazilian President, Jair Bolsonaro, South Korea President, Moon Jae-in, and Indian Prime Minister, Narrendra Modi except the Russian President, Vladimir Putin. It is understandable the former four leaders would accept Trump’s invitation, Australia and South Korea being allies of the U.S., Brazil being a close neighbor in the continent of America, and India being always eager to seek opportunities to shine on the international stage. But Russia has very little to gain in joining G7 to face strong oppositions from European countries. Indeed, UK, Canada and EU have all expressed opposition to Russia’s reentry to G7.
 
in 2019, the G7 Summit reached a five-point communique: 1. WTO to resolve IP dispute more swiftly to eliminate unfair practices. 2. G7 commits to simplify regulatory barriers and modernize international taxation within the framework of the Organization of Economic Co-operation and Development (OECD). 3. G7 shares objectives to ensure that Iran never acquires nuclear weapons and to foster peace and stability in the region. 4. G7 supports a truce in Libya that will lead to a long-term ceasefire. And 5. G7 reaffirms the existence of the 1984 Sino-British agreement on Hong Kong in respond to Hong Kong riots and France and Germany will organize a Normandy format summit in the coming weeks to achieve tangible results regarding Russian intervention in Ukraine. These statements do appear a little feeble, don’t they?!
 
This year the COVID-19 Pandemic is making the planning of G7 very difficult wherever the location in the U.S. may be chosen. Thus, the meeting has to be delayed into the Fall. President Trump most likely would like to have the G7 before the U.S. Presidential election, November 3rd, to harvest some benefits for his election. But if Trump won his second term, he might have more credibility to suggest a more meaningful agenda for G7. If he wanted to build an anti-China bloc out of GN, his chance of doing so before his election appears nil. If the GN would be held after November 3rd, it might get eclipsed by the G20 Summit (November 20-21, Saudi Arabia), regardless whether Trump got re-elected or not. Since G20's establishment in 1999, it has gained more attention over the G7. G20 represents over 80% world trade and 90% of gross world product (GWP) (41.5% of world GDP in 2018 projected rising to 47.2% by 2024 vs G7 30% in 2018 projected to decline to 26.8%). The G7 had been regarded as the rich “country” club but its influence over world financial system and trade had been diminishing.
 
G7 or G8 had little impact on China’s growth in the past, neither would GN. China is now playing a very significant role in G20 and has a good trade relationship with Germany, Italy, UK, France and many other countries. In the U.S. strategy of building an anti-China bloc soliciting Australia, India and other Asian countries, there is little sign of sure success. Therefore, it is doubtful, a GN hastily collected under a Pandemic will succeed in targeting China. In fact, since G20 membership overlaps with GN members, most likely they would realize that more benefits and accomplishments could be achieved in G20 with China present.
 
Perhaps, this year would be the historical year to seal the fate of G7, either merging with G20 or convincing China to join.


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