As a nation, it’s time to seize emerging opportunities. Or sleepwalk into oblivion.
To Australia’s north, 1.5 million new electric vehicles (NEV) have just rolled out of Chinese production. China makes more cars and more electric cars than any other country.
With a population of 1.4 billion people, China’s objective isn’t so much to let everyone have a car, but to enable everyone to have access to mobility when they need it. Strategically, this makes sense.
According to an April 4th article in The Economist, China is also the largest producer of batteries. Moreover, emissions rules in western Europe are tightening. Britain and France have said they see no role for cars powered only by internal combustion after 2040.
In Shanghai, a city with a greater population than Australia (26 million), there are 6 million cars. To counter the traffic congestion, There are strict quotas on the number of license plates that can be issued each year. It has a lottery-style system where a winner gets the chance to buy a plate. You have a 0.2% chance of winning.
To alleviate exhaust pollution, median strips are planted with trees and flowering shrubs, each with distinctive white paint around the bottom to prevent boring insects. In Beijing, to ease both congestion and pollution, there is road space rationing. According to the last digits of a license plate, a car owner needs to use public transport one day a week. With unparalleled levels of data and surveillance, owners who contravene the restriction are fined every three hours.
After having spent time in both Beijing and Shanghai recently, I have to say the traffic congestion seemed not nearly as bad as Sydney’s.
The goal is not car ownership, it’s access to mobility
In Australia, we have seen the uptake of new services like Car Next Door and GoGet. These ride-sharing services mean that car owners can make money from their vehicles when they are not in use. It also makes accessing a vehicle simpler and more affordable to the many inner-city residents who do not have access to parking spaces or may not want the cost of registration and insurance. That was me a couple of years ago.
A much larger proportion of cars in China are used by more than one party, either as a taxi or as ride-sharing vehicles. That’s substantially more than is the case in the West.
Cooperation of different sectors
Didi Chuxing is a ride-sharing company. It dwarfs the size of Uber, with over 550 million registered users. According to an April 4th article in the Economist, the tech companies, Alibaba and Tencent, are both investors in Didi Chuxing, which has now spread into South-East Asia and will soon roll into India and Europe.
These technology juggernauts are also investing in cars. Plans are afoot for Didi Chuxing to build autonomous robotaxis. Autonomous taxis surely would rely on a strong Artificial Intelligence industry. Fortunately, along with green vehicles and electric cars, the AI industry is listed as one of the sectors for advancement in the Made in China 2025 Policy.
Made In China 2025
The Policy is a ten-year blueprint for industrial development in China. Released in 2015, the aim is to move China up the value chain and thereby reduce wage inequality and aid development.
Guangdong is a case where this is already evident. Martin Jacques describes it as once the place that made “cheap, mass-produced goods for the world.” It has already moved up the value ladder and into the services economy.
“Shenzhen and Guangzhou, like many cities in Guangdong, now look well maintained and prosperous, a far cry from the former days when they resembled China’s wild west.”
One US Think Tank called the Made in China 2025 policy “an existential threat to US technological leadership.”
Jacques attributes the turning point to the May-June 2010 strikes that saw massive wage increases. The strikes affected factories including Honda and Foxconn (the electronics manufacturer which employed 270,000 people). He writes, “It can no longer sustain its competitive advantage. Labour has become too expensive, too demanding, the expectations of its people transformed.”
The ten sectors listed in the policy for advancement up the value ladder including artificial intelligence, rail, green vehicles.
“The combined challenge of electrification and autonomy is stretching Western incumbents enough that some, maybe many, will snap.”
It is hard to see why there is resistance on Australia’s part when there is such a clear environmental need, it brings technological simplification, and there is global demand. One wonders whether it is a lack of strategic thinking or over-reliance on income from old money — fuel excise. As at October last year, this was 41 cents for every litre of unleaded petrol and diesel. In total, fuel excise generates $10 billion, or thereabouts, per year.
China is not the first country to have a national strategy which states a clear vision and the methods to achieve it. The Meiji Restoration saw Japan embark on a process of rapid modernisation after 1868.
Terrified of Western invasion, Japan systematically went about researching all the systems and processes used in industry around the world. It cherry-picked the systems and methods it thought were the best. They included a Navy based on Britain’s. Germany for railways. France for education. It then emulated these systems but infused them with distinctly Japanese characteristics.
Japan went from being vulnerable and isolated to becoming the second largest economy in the world. It happened with a speed described by Martin Jacques as “a remarkable historical phenomenon.”
Why a country strategy matters
It’s easy to see how technology, artificial intelligence, and car manufacturing can have shared benefits and symbiosis. Cooperation will help each sector thrive, and create a new gamut of sub-sectors. China has shown leadership in this regard.
China’s mandate to sell 4.6 million new electric vehicles (NEV) has had a ripple effect around the world. It has banned the sale of internal-combustion engine cars after 2040. Already, General Motors (GM) plans to have 20 models of NEV by 2030. Ford also has initiatives underway to compete.
With clarity of direction, businesses must rise to the challenge to remain competitive. This is the nature of business. But countries need to do the same.
Surely there are intelligent ways Australia could create fruitful scenarios from the emerging macroeconomic picture. It could choose to adopt and modify other good systems from around the world. New Zealand could be modelled upon for its broadband, for example, or indigenous relations.
Adapting other systems saves us reinvention. However, we need not borrow from anyone else. Australia could clear the slate and start from scratch. Made In Australia 2025 Strategy.
What does a strategy do?
A strategy allows us to think about what we want in the future. What is the vision? What would Australia look like in 2030, ideally? We look within to see our strengths. We look outside to see opportunities and threats.
Good strategy uses Strengths to take advantage of opportunities. Australia has abundant sunlight, a vast and mostly uninhabited interior. Could this not be used to harness solar energy? There are 25,760 metres of coastland. Could this strength not be used to generate wave energy?
Coal is at near complete obsolescence. Most developed countries have signed agreements that coal will not be part of their energy mix in one to two decades.
Australia has a strategic choice: to see and seize the powerful opportunities around it. Or to preserve the status quo and keep doing what it’s doing — sleepwalking into oblivion.
Originally published at https://mvmm.com.au on May 3, 2019.