A tri-fold automotive renaissance, led by technology, has been playing out over the past few years. Electric vehicles finally have been embraced by mainstream consumers — and elevated by Tesla with long range and luxury quality. Meanwhile, rides on demand from Uber and Lyft have become a global movement that’s liberated personal mobility (and briefly snared China’s Didi the title of most valuable unicorn).
The third dimension, and most significant catalyst of this renaissance, is autonomous driving. Already, more than 15 million vehicles feature fundamental, Level 2 autonomy, thanks to Mobileye, and Waymo is within reach of commercializing fully autonomous, Level 5 driving.
These innovations have earned enough momentum to draw luxury brands Mercedes and Cadillac into the fray. Yet vehicles combining all three aspects of this renaissance remain a niche market; EVs, for instance, last year accounted for only a little over 300,000 of the 18 million cars and trucks produced in North America.
It is China that will push this market into overdrive, guided by the Five Year Plan the country passed in 2016. It mandated 1 million electric vehicles be sold domestically by 2020, and 3 million by 2025. In the past year alone, China made itself the world’s largest EV market by a wide margin: Sales in the country reached 777,000 vehicles, more than doubling North America’s results.
A massive flood of capital is being directed toward this Five Year Plan, both from incumbent automakers and investors funding hundreds of new Chinese automakers. The incumbents — global brands such as GM and Volkswagen, and Chinese leaders such as SAIC and Dongfeng — face tremendous pressure from the army of investors at the gates. Powered by this new funding, as many as a dozen Chinese companies are on the verge of scaling, in the next three to five years, to a level it took Tesla a decade to reach.
Suddenly, every global automaker has a strategy for electrification, high-level autonomy and rides on demand, with products available to consumers now or in the next year. GM, for example, bought Cruise Automation and released Super Cruise on the Cadillac CTS 6; started mass producing Chevy Bolts and planning more than 20 new EV models in the next five years; invested in Lyft; and created Maven, its own ride-on-demand service, with autonomous rides due to start this year.
Without pressure from China, these new vehicles wouldn’t be arriving so soon, especially in an affordable offering.Sure, global automakers had already started heading down this path once Tesla proved there was a market. But I’d argue that without pressure from China, these new vehicles wouldn’t be arriving so soon, especially in an affordable offering. When you look at the volume China is able to drive, prices go way down for crucial items like electric vehicle batteries and LIDAR. China’s scale has become the greatest accelerant to mainstream adoption of the next-generation vehicle.
In addition to pushing down the cost curve, the emergence of new Chinese companies eyeing the market (such as NIO, Byton, Faraday Future, Xiaopeng and WM Motors) has provided opportunities for promising new technical talent to emerge. As a result, the barriers to high-level autonomy and electrification may well become more easily surmounted.
Let’s take two major barriers for electric vehicles: The time required to charge them and the general shortage of charging stations. Now EV makers are pushing to establish charging networks: NIO is implementing battery swap stations, while Porsche is adding chargers to all its dealerships. In addition, wireless charging looms on the horizon: Dan Bladen, CEO of our portfolio company Chargifi, believes Apple’s decision to embrace wireless charging in the latest iPhone will pave the way for ubiquitous wireless vehicle charging.
The more people we have attacking these problems, the faster we’ll have mass-market solutions. This is a seismic shift in the automotive industry, and it couldn’t be more exciting.
Even further down the road, the innovation explosion in China’s automotive sector is poised to disrupt the entire U.S. automotive market. Much as we saw Germany, Japan and Korea make major headway versus Detroit in the late 20th Century, I believe it’s just a matter of time until Chinese brands take to American highways.
