Part I
Keeping Pace
1
The New Emperor and Wan Gangâs Eco-Wonderland
IT WAS something between a cotillion ball and a ritual war dance. Like the Beijing Olympics two years earlier, the Shanghai World Expo was a coming-out party for Chinaâs communist leadership. Over the summer of 2010, 72 million visitors flooded the Expo. The government spent more than $4 billion preparing for the fairânot including new rail lines, roads, landscaping, and other improvements to the city.
Chinaâs pavilion was a massive crown-shaped pagoda, which cost over $200 million to build and was packed with cultural treasures. The building loomed like a sovereign over the Expoâs international guests, and countries from around the world paid tribute in diverse currencies. The Swiss built a chairlift that suspended visitors on an aerial journey over Shanghaiâs sprawling metropolis, and in the Expoâs French quarter priceless Impressionist paintings hung on display. Elsewhere, corporate sponsors showcased the future of clean energy and âK-popâ megastars squealed, crooned, and gyrated for the new emperor.
To anyone with the faintest sense of context, the Chinese government was sending a clear message: the Middle Kingdom was rising; it was to be respected and shown deference; it was building a new world order and a sustainable empire.
The Expo also represented a significant symbolic victory for one man, an engineer named Wan Gang, Chinaâs enigmatic minister of science and technology. The entire fairground was a canvas for his lifeâs masterwork: securing Chinese dominance in the global auto industry. China was about to become the worldâs largest auto market, and Wan Gangâs obsession was to make its national champions internationally competitive.
Over the preceding decade Wan had enjoyed an improbable rise to power. Rather than joining the Communist Youth League as a young man or ascending the ranks through family connections, Wan had left China to study engineering in Germany, and made a career as an executive with Audi. After returning he had penetrated Chinaâs highest circles on the strength of his conviction that one day soon China could lead the industrial future. China, said Wan, could dominate the twenty-first-century market for electric vehicles (EVs). All this would have been impressive in its own right, but the fact that Wan was not even a member of the Chinese Communist Party made it truly exceptional.
Behind Wanâs enigmatic smileâand he almost always seemed to be smilingâwas an iron determination to break a century of dependence on foreign oil and Western technology. The ultimate goal was to leapfrog over Japan and the United States so that the worldâs big markets for automobiles would import cars and factories from China rather than the other way around. To a nation just emerging from a self-declared âcentury of humiliation,â the prospect was irresistible. The 2010 Expo was a powerful declaration of intent: China was in the race, and they intended to win.
Against this backdrop, the EV quickly became a national heroâand a focal point of Chinaâs technology ambitions. The Shanghai Expo was the culmination of a decade of engineering and imagineering under Wanâs research program at Shanghaiâs Tongji University. Two years earlier, Tongjiâs Beijing rival, Qinghua, had led a similar effort for the Olympics. But the demonstration in Shanghai was more than twice as big and vastly more complex. There were electric cars, fuel cellâpowered buggies, and buses that ran on fast-charging âultracapacitors.â Almost all of these were pre-commercialâmeaning they were more science project than store shelf product. But for now, China did not need to work out the messy details of building the industryâthe consumer technology, economics, and business plans that would help it grow. Wan Gang and the others seemed to believe that with enough money and political pressure, those would come. What China needed for the Expo was a declaration of its ultimate potentialâa road map and a compelling story.
General Motors and the Shanghai Automotive Industrial Corporation (SAIC, GMâs Chinese partner) were responsible for exploring the farthest reaches of this futuristic vision. As the countryâs largest automakers and prominent corporate citizens of the host city they were under intense pressure to perform. They delivered. The pair presented an ornate, dizzying, transformational spectacle. Chinaâs future cars would be smaller, smarter, faster, cleaner, safer, and sexier than anything that had previously existed.
Inside the SAIC-GM pavilion was the show to top all others. Visitors strapped into five-point harnesses as an IMAX-sized movie with computer-generated imagery flew them through a bright, crisp virtual reality. Electric pods raced through the streets at breakneck speeds. Stoplights, traffic jams, and even drivers were gone. By 2030, GM and SAIC promised, China would be animated by a living network of safe, efficient, zero-emission vehicles in constant communication with each other and the environment.
In this bold new world, a blind girl could race through the canyons of Shanghai in perfect comfort and safety, secure in her personal mobility pod. Rather than drive to work, the conductor of Shanghaiâs symphony reviewed his scores and made last-minute preparations for the dayâs performance. A pregnant mother made it to the hospital just in time thanks to a speedy autonomous ambulance. This was a machine as big as a city and intricate as a Swiss watch. After the ride, a curtain rose to reveal real-life EVsâwhich looked exactly like those onscreenâwheeling autonomously around the building. It was quite a spectacle.
For Expo attendees, this vision of 2030 was tantalizingly realâat least until they reemerged into the exhaust-laden smog swamps of Shanghai. Inside, skies were blue and the air was fresh. Futuristic robots rocketed silently down highways lined by space-age wind turbines. But outside, the air was chewy with soot and skies were gray. The phalanx of electric cars and buses commissioned for the Expo stopped at a chain-linked frontier demarcating the boundaries of Wan Gangâs eco-wonderland and China 2010. Real life meant navigating manic waves of oil-burning SAICs, VWs, Audis, and Buicks. Indeed, the 100 million automobiles on Chinaâs roads had become a distinctly mixed blessing. Chinaâs megacities were stifled by putrid smog and gridlocked.
No doubt, this is why in 2009 Chinaâs government announced ambitious plans to leapfrog the West in developing and deploying electric vehicles. In two short years, Wan Gang promised that China would deploy 500,000 domestically produced EVs.
But even in 2010, there were signs that this vision was faltering. Few analysts were ready to say that the emperorâor perhaps the debutanteâhad no clothes. But half a decade later, the contours of this failure were stark. Despite an intense government push to electrify Chinaâs cars, the countryâs industrial giants had fallen far short. China was the largest automobile market in the world, but its domestic EVs were a blush-inducing afterthought. China, with its double-digit economic growth rates, its 1.3 billion brains, and its $3.4 trillion in U.S. foreign exchange reserves, had aimed to âleapfrogâ into the vanguard of automotive technology and dominate the race to build the electric car of the future. Instead, it struggled to keep pace.
Leapfrogging Leviathans
Part of the allure of leapfrogging was the difficulty of simply catching up. The complexity of todayâs auto industry should not be underestimated. The modern automobile is one of the most sophisticated pieces of technology in the world. At the turn of the twentieth century, motorized cars were a noveltyâthey were finicky, dangerous, and there was a reasonable argument that the horse was a better piece of hardware. But within a decade or two this had changed. After World War II, the level of industrial specialization required to integrate ever more advanced automotive systems grew exponentially. The British futurist Arthur C. Clarke once famously wrote that âany sufficiently advanced technology is indistinguishable from magic.â And by the beginning of the twenty-first century, the complexity of an automobile had far outstripped the understanding of the common man.
Making an automobile that was strong, safe, durable, clean, and efficient enough to be globally competitive required legions of engineers, physicists, specialists in areas like fluid dynamics, harmonics, kinematics, materials science, and an increasingly large number of electrical engineers and computer scientists. A typical car had around 30,000 individual parts, and computing specialists were involved in everything from writing the software for the carâs new onboard computers, to building robots for factory automation, to honing the advanced computer-assisted design (CAD) tools that took the painstaking job of component design out of the physical hands of draftsmen and moved it onto digital screens. About 40 percent of the cost of a luxury vehicle was for electronics, computers, and software. A billion dollars might be spent on writing code before a single car left the factory floor.1
Building a modern automobile required ever-greater levels of precision. Sizing for pieces like fuel injectors and various control mechanisms had to be calibrated to the level of micronsâabout one-fiftieth the diameter of a human hair. Whatâs more, all these precision elements had to be designed to withstand enormous abuse, and integrated seamlessly into a package that could be shaken, rattled, crashed, frozen, and scalded for decades at a time over hundreds of thousands of miles. If one of these systems failed, the result could be fatal.
Although China had sent millions of students to the United States and flooded the American academy with aspiring engineers, programmers, and scientists, the countryâs leadership knew it might take decades to reach global standards. Anyway, that race was already decided. Why try to redo the past? Why not instead spend that effort on the car of the futureâan electric vehicle?
The âleapfrog narrativeâ was powerful, sensual, and compelling. But it was also hollowâlike the futuristic concept cars often displayed at auto shows. Underneath a Ferrari exterior, it had no guts.
Today, China is the worldâs auto behemoth. But it still lacks the expertise to be an industrial superpower. It is losing the technology race to smaller, better-organized, and more nimble rivals. Japan and America lead the world in developing the cars of tomorrowâa new generation of electric and autonomous vehicles. But that is only half the story, because China is not really losing to Washington or Tokyo. It is losing to tiny groups of strategically minded technologists and regulators in Sacramento and Kanagawa. In Californiaâa state whose entire population is smaller than commonly accepted rounding errors for Chinaâs citizenryâa clutch of indefatigable policy activists and techies have spent two decades grappling with Detroit, trying to force this revolution. And their efforts are finally paying off. In 2012, Tesla Motorsâ Model Sâconceived and built in California by the pugnacious visionary Elon Muskâwas anointed âcar of the yearâ by Motor Trend magazine. Consumer Reports called the âSâ the best car it had ever driven. The all-American Chevy Volt was similarly acclaimed as Consumer Reportsâ highest consumer satisfaction vehicle and repeatedly topped J. D. Powerâs consumer appeal survey.
On the other side of the world, in Japan, this revolution was sparked by a different sort of iconoclast: a nuclear engineer at the sprawling Tokyo Electric Power Company (TEPCO) named Takafumi Anegawa. It was Anegawa who laid plans for the worldâs first mass-produced consumer EVs. While Tesla has taken the crown for the worldâs coolest car, Japan has raced ahead in building and deploying a peopleâs EV. In 2012 Japan manufactured almost three-quarters of the electric vehicles sold worldwide. By 2013, an American could lease a Japanese EV for less than $200 a month and fuel that car for a small fraction of the cost of a gasoline- or diesel-powered vehicle.
Today in Japan and America, the futuristic world of transportation portrayed by Shanghaiâs GM-SAIC Expo is actually much closer than most realize. Not only electric but âdriverlessâ autonomous vehicles are within sight. The transition to electric and driverless cars will usher forth a step change in both quality of life and economic productivity and potentially be the most transformational social development since the World Wide Web. It will change the way we live and many of the fundamentals of the global economy. Thatâs why America, China, and Japan are in a white-hot race for the future of transportation. Indeed, the petroleum-free EV and what Forbes called the âTrillion-Dollar Driverless Carââthose autonomous mobility pods from the SAIC-GM Expoâare just around the proverbial corner.
Of course, there will be winners and losers. Some countries and companies will inevitably move faster than others. And part of this will depend on the sophistication of a countryâs car, battery, and technology companiesâit certainly does not hurt to have a giant like Google or Nissan as a national champion. The leadership of individual innovators, activists, inventors, and dreamers is also keyâand a focus of this story. But success also depends on the role that governments take in strategic planning, and their competence in executing policies to encourage investors, banks, entrepreneurs, and businessmen to build the economy of the future and invest in sunrise industries like EVs.
A Brief History of the Global Automobile
Few technologies have been as economically important and transformative as the automobile. Cars first appeared around the turn of the twentieth century, assembled from extra bits of the bicycle and carriage industries. These wheels were mated with electric motors, tube framing, and steam or spark ignition engines. For the first half decade or so, electric vehicles were actually produced in larger numbers than those powered by internal combustion engines. Electric taxi fleets trolled the streets of major cities across the United States.2 These taxi companies witnessed speculative run-ups in valuation that looked like something out of the dot-com bubble. Thomas Edison was also in on the game. Heâand many of his contemporariesâpoured a decadeâs effort and piles of money into developing a competitive EV. But by 1910 Ford had won. The advantages of liquid fuels had overwhelmed the battery, and for a century the history of the automobile was the history of oil and internal combustion. Oil and its derivatives, such as gasoline or diesel, could hold much more energy for...