Tech companies drive closer to goal of producing their own cars

By Liang Fei Source:Global Times Published: 2016-1-6 21:28:01

A growing number of Internet companies in China, such as streaming video company Le Holdings (Beijing) Co - better known as Letv, have shown interest in getting into the auto industry. Unsatisfied with merely developing connected car technologies, they want to produce their own vehicles. But analysts said the auto industry's high barrier to entry makes it nearly impossible for an Internet company to succeed in such a venture - at least for the time being.

A crowd checks out Faraday Future's FFZERO1 electric concept car on Monday at a news conference in Las Vegas, the US. The car was developed by California-based Faraday Future, which is backed by Le Holdings (Beijing) Co, a leading Chinese streaming video company. Photo: CFP

Two days ahead of the International Consumer Electronics Show (CES) in Las Vegas, the US, Chinese streaming video company Le Holdings (Beijing) Co, or Letv, announced it had made a cooperation agreement with a Silicon-Valley start-up to produce cars.

The deal, which Letv signed with electric car start-up Faraday Future (FF), marks another step toward Letv's ambition of making electric cars of its own.

At a press conference late on Monday, FF showcased its first electric concept car - the FFZERO1, according to a statement that Letv released on Tuesday.

But the company aims to offer more than just a concept - FF announced on December 10 that it would invest $1 billion to build a factory in Las Vegas. It also announced that mass production was in the works.

FF, which is backed by Letv Chairman Jia Yueting, has been touted in some media reports as a rival to Tesla Motors Inc.

Many of FF's executives are auto industry veterans from companies such as Tesla, BMW and Chevrolet. For instance, FF's head of design Richard Kim helped design BMW's new electric models - the i3 and i8.

Cooperation between Letv and FF has prompted speculations. Some Chinese media regard the FFZERO1 as the debut of Letv's own car.

Are the planned FF car and Letv's electric "super car" one and the same? Or will FF produce electric cars for Letv in the future?

Letv told the Global Times on Tuesday that FF is only a strategic partner, and Letv will produce its own cars in the future.

Auto aspirations

Letv has never concealed its desire to get into the auto industry. The company established its own auto unit at the beginning of 2015. The company's auto team has more than 700 people, with around 400 in North America, Ding Lei, co-founder of Letv's auto unit, said at a press conference in October.

Ding also said at the October press conference that the company has finished designing its first model, called the Mule Car, which it will soon produce.

Although Letv has still not produced a prototype of its electric car, it has received a lot of attention from its several high-profile cooperation deals.

Besides its cooperation with FF, Letv inked partnership with British luxury sports car maker Aston Martin in December 2015. The first model produced from the deal, the Rapide S Concept, made its debut at the 2016 CES, which runs from Wednesday to Saturday.

The model showcases "Letv's latest connected car and its car entertainment technology," Aston Martin said in an e-mail to the Global Times on Monday.

Following the announcement of the partnership, Jia said in a microblog post on December 4 that Aston Martin would be the original equipment manufacturer (OEM) for the first batch of Letv's super cars. The post aroused a lot of media attention.

However, analysts said that this could be a misunderstanding - Aston Martin is not likely to produce cars for Letv because the luxury car brand targets a different customer than Letv does.

Feng Shiming, a senior analyst at consultancy Menutor Consulting Shanghai Co, said that it is also unlikely for FF to make cars for Letv.

"It goes against all business logic," he said. "Generally, companies name a less famous firm as their OEMs, not vice versa," he said, adding that the high cost of production in the US would also make it difficult.

As part of Aston Martin's memorandum of understanding with Letv, "one of the possible concept studies could be manufacturing consultation on new electric vehicles in the future," the UK auto maker said in the e-mail.

Rushing in

Letv is not the only Internet firm seeking to make cars. There have been others that have vowed to refine how people get around over the next few years.

NEXTEV is one. The company was founded by Li Bin, chairman of US-listed online auto marketing services provider Bitauto Holdings Ltd. It is backed by Internet moguls like Liu Qiangdong, founder of Inc, and Lei Jun, CEO of smartphone maker Xiaomi Technology, media reports said.

The company, headquartered in Shanghai, has also recruited top talents from major automakers like Ford and Volkswagen.

Media reported in September 2015 that the company was seeking to raise $1 billion to produce electric cars that can compete with Tesla's. By September, the company had secured $500 million.

But despite the enthusiasm and ambitious plans, analysts said that it is impossible for an Internet start-up to produce cars for real - at least for now.

"Cars are too complicated for a start-up. Internet firms don't yet have the capability," said Feng, adding that it is crucial to find an OEM and even with an OEM, success is not guaranteed.

Feng's view is shared by Zhang Yu, managing director of consultancy Automotive Foresight (Shanghai) Co.

"The auto industry has a very high barrier to entry and requires huge investments, so the Internet start-ups face a very slim chance of success," Zhang told the Global Times on Tuesday.

A 'more realistic path'

Letv also brought its connected car technologies to the 2016 CES. Connected car technologies, now a trend in the auto industry, have also drawn interests from leading Internet firms. China's search giant Baidu Inc told the Global Times on Monday that it will showcase its connected car technologies this year's CES.

"Internet firms enjoy advantages in developing the connected car technology, which is a more realistic path to get into the auto industry," Zhang said.

The evolving technologies are reshaping the auto sector, and Internet firms will certainly play a key role in the industry in the future, analysts said. 

"It's not that the auto industry can't be redefined," Feng said. "Just not now."
Newspaper headline: Internet + cars = a long, bumpy road

Posted in: IT, Insight

blog comments powered by Disqus