FDG Electric Vehicles : Establishing a Model Brand in China’s New Energy Vehicle Industry - ...

Establishing a Model Brand in China's New EnergyVehicle Industry

- An Interview with Chairman of Changjiang Automobile Mr. Cao Zhong

Development of New Energy Vehicles (NEV) industry will go through 4 stages,currently at its first stage, (stage of learning from traditional auto industry and the innovation of NEV). We must respect and revere the traditional auto industry, more than 130years of history of automobile development has made the traditional vehicle aperfect machine. In the coming 10 to 15 years, there will be great changes to thelandscape of global auto industry. The developing window opened by the NEVindustry will give NEV companies in China the opportunity to be ranked amongstthe world's top 10. To achieve this goal and vision, Changjiang Automobileworks hard and focuses on independent R&D in the core techniques to establish acomplete industry chain.

Changjiang Automobile is located in the Yangzi Delta, where the privateeconomy is the most developed in China. The success of G20 Summit not only upgraded Hangzhou into a first-tier city in China, but also made Changjiang Automobile one of the hot topics within China's auto industry, by being the only designated pure EV provider in G20 core area. What is Changjiang Automobile? Why is it isthe only Pure EV brand that enters the core area of G20 Summit? What isChangjiang Automobile's view of the future of NEV market? With all of thesecuriosities, the Globe Magazine had an interview with the Chairman ofChangjiang Automobile Mr. Cao Zhong on Oct 20th.

'Globe Magazine': People in the auto industry are quite unfamiliar withChangjiang Automobile, while obtaining the 2 NEV license was thefirst impression to the public. The G20 Summit is a big hit for Changjiang,would you please introduce the reason why Changjiang Automobile has been growing so fast from an infant who just got the license to the only designated Pure EV providerto G20 summit core area in just afew months? What kind of company is ChangjiangAutomobile?

Mr. Cao Zhong: There's no shortcut for developing electric vehicles, we should stick to forward engineering, achieving solid progress, making less mistakes,but never taking the shortcut. Changjiang Automobile is not coming out ofnowhere, we've been devoted in the auto industry for 6 years. The world's vehicleshave developed for more than 130 years, which have achieved satisfactory perfectionas mechanical products. There has been a great progress in China's traditional autoindustry, yet a long way to become a first-class vehicle brand in the world. Therevolution of world's auto industry trigged by technical advance has provided a newdeveloping opportunity for China's auto industry. With the revolution intechnology, vehicles are transforming from mechanical products to electronicproducts. We have devoted ourselves to the pure EV industry, because we seethis great opportunity. The foundation of pure EV industry is the technology of3 core components which replaced the traditional vehicle components, includingthe engine, gearbox and the chassis. Since 2011, R&D of the core electrical technology has been our priority, and we established our own power battery factory, core technology factory,whole-vehicle factory. As of today, Changjiang Automobile owns the core components techniques with independent intellectual property rights include: batteries, electricmotor and vehicle control unit, it also owns the whole-vehicle factory with allfour major techniques, covering the complete industry chain. It is the solid work in the past 6 years that made us the first enterprise whichobtained the NEV license in the true sense. Also for the same reason, we were able toprovide safe and stable pure EV which successfully served in the core area ofthe G20 Summit. During the Summit, the accumulated total mileage was over 100,000kilometres with zero accident or malfunctions. All these achievements areresulted from our continuous pursuit and strict requirements on the pure EVtechnology. Six years devotion in making vehicles, we avoided all sideways, which led to the success ofour services in the G20 Summit.

'Globe Magazine': Talking about NEV, the 'subsidy fraud' is one popular topic. As a business insider, what's your view on this issue? How does Changjiang Automobile's see the future development of NEV?

Mr. Cao Zhong: The subsidy should be given to consumers directly. Inthis way, the vehicle companies will be pushed to make more competitiveproducts, to provide better choices for the consumers. We entered theindustry in 2011, when there was no subsidy provided, our goal was to build apure EV brand belongs to our own country. In the NEV field, Chinese autocompanies will have chances to compete on the global stage and make a leapforward in our views. In coming 10-15 years, Chinese NEV companies will certainlybe able to rank among the top in the world. Changjiang Automobile is movingtowards this goal step by step.

We think that the development of NEV will go through 4 stages. The current market share of NEV is around 1%, as long as it is below 5%, NEVindustry is considered to be in Stage I. This is a stage of learning from thetraditional companies and innovation. It's too early to overturn thetraditional auto industry, we should revere and learn from the traditionalcompanies in pursuit of safer, higher quality control and better body design.The Stage II is when the market share reaches 20%. We define this stage as asupplement to the traditional vehicle market, which is also a stage of growth.The Stage III, when the market share reaches 40%, parallel running and competitionswith the traditional vehicle market will come into being. The Stage IV is whenthe NEV market share is over 50%, and it will be the time when NEV industrysurpasses the traditional auto industry, which will gradually withdraw from themarket. We know that the timetable for the withdrawal of traditional vehicleshas already been made in many European countries. Therefore, people are positive about the future of NEV industry. What we need now is solid work, establishing a sound foundation. We can't aim too high or too fast, but we should create the new based on the old.

'Globe Magazine': You mentioned four stage of the NEV, whatis your basis for this analysis?

Mr. Cao Zhong: Technological Revolution resulted inIndustrial Revolution. The EV industry provided a golden opportunity to China's auto industry. If we look at theworld's industrial revolution, we can see a very interesting phenomenon thatwhenever there was a revolution in the energy resource, there would be a change inthe global landscape. There has been a great progress in China's traditional autoindustry after 60 years of development, but still incomparable with world's toptechnology within the industry. But does it mean there will be nofuture for China's auto industry? No. We think the new energy revolution hasprovided agolden opportunity to China's auto industry. In the coming10-15 years, there will be a process that NEV develops fast and then gradually replacetraditional auto industry. And China will have its own world class NEV companies.China is the world's largest automobile nation but not a powerful automobilenation. Under the background of vehicle electronization, there's no big gapbetween Chinese companies and international companies. Bothare at the same starting line. Given some world class companies are constrainedby the huge fixed assets and investments of traditional vehicles, they won't be able to achieve a quick transformation. Thus, at thecurrent stage, we can see that all the world class companies are promoting hybridpower vehicles, as limited by the financial condition, those companies cannotbare the significant asset loss. New Chinese automobile companies, especiallythe NEV companies are free from this kind of burden. They can start from EVdirectly, use of electrification to directly define NEV. Based on this, weintroduced the development of NEV in 4 stages.

'Globe Magazine': You mentioned about revering thetraditional vehicles, so what's your view on the competitions between the NEVand the traditional vehicles? What are Changjiang Automobile's advantages?

Mr. Cao Zhong: Practical and solid R&D, key breakthroughon techniques, strict quality control. As I mentioned earlier, there was noshortcut for NEV. We have been devoted in this area for 6 years and wehave done millions of times of experiments and verifications. Forexample, there is a requirement from National Development and Reform Commission(NDRC) and Ministry of Industry and Information Technology (MIIT) of PRC- companies which would like to obtain the production admission of NEV have toprovide 3 years of R&D and experiment data records. So there's no way youcan survive in the industry without a long term goal, solid work and years ofaccumulation. We must fully respect the natural evolution of the auto industry, andlearn from the traditional automobile companies about product safety andstability, which requires us have practical R&D, achieve breakthroughs intechniques by massive experiments, and improve the reliability of the products bystrict quality control. These are the market competition's basic elements, andalso what Changjiang Automobile is striving on.

The former Vice Premier of the State Council Mr. Li Lanqing has a high expectation on the development of ChangjiangAutomobile. When Mr. Li Lanqing visited Changjiang Automobilein May 2016, he said, 'After visiting your Company, getting to know yourtechnology, Ibelieve Changjiang Automobile is likely to become an EVcompany with leading technology in China. I've visited many companies who also make EVs, andas by now, Changjiang Automobile isthe one doing the best. I'm confident that in thefuture global competition, Changjiang Automobile is likely to be a Chinesebrand in future's international EV market.

'Globe Magazine': I can see that you are very confident aboutthe future of pure EV industry.For the G20 Summit, what did the participation of ChangjiangAutomobile bring to you and the company?

Mr. Cao Zhong: Behind the product is years of accumulationand solid hard work. It is known to all that the importance of the G20 Summit,participating in such event made everyone from Changjiang Automobile feelproud. In the core area of the G20 Summit, only 2 vehicle brands were allowedto enter, one is Hongqi, the other one is Changjiang. This is a national honorfor China's auto industry. Hongqi represents the highest level of traditional vehicletechnology in China, it is a symbol of Chinese national auto industry. ChangjiangAutomobile was designated to enter the core area, representing China's NEVindustry. It's not only an honor for Changjiang, but also a pride for the wholenew energy industry.

'Globe Magazine': Last question, is there any relationbetween Changjiang Automobile and Mr. Li Ka Shing's Cheung Kong Group? There are alwayssome rumors.

Mr. Cao Zhong: It is a coincident. Our shareholders are CiticGroup, China Innovation Foundation Limited and the core management. Mr. Li KaShing gave support at the growing stage of our company. The reason we named ourcompany Changjiang Automobile was that the automobile brand was 'Changjiang'when we restructured the Hangzhou Changjiang Coach Co., Ltd. The brand wasnamed then as 'Changjiang'. We believe 'Changjiang' represents China, andit also reflects our original goal of making EV and future visions, that is whywe kept it.