The Modular Kingdom: Why the developer of a new type of vehicle believes China is the future
A global mobility startup has its sights on China as the first market to adopt modular vehicles. And whether the general population even knows what modular cars are is not really an issue, as all the signs are there to show that it won’t be individuals buying the cars. Open Motors has already secured Chinese investment and is currently in talks with major Chinese manufacturers, and companies involved in passenger transport and logistics. Research suggests China could well be the most receptive market.
Mobility as a Service (MaaS) is a fast-growing industry, expected to be worth $7 trillion worldwide by 2050 according to a report by Strategy Analytics and Intel. $3.7 trillion for passenger transport and $3.2 trillion for goods. But can an Italian-led company make enough headway in China? If so, will that be due to Open Motors’ technology or the state of the automobile industry in China? We spoke to the company’s founder and CEO, Tin Hang Liu, to find out why China is in the vanguard for modular cars–and what they actually are.
What is a modular vehicle?
It’s a server, not a MacBook, according to Liu: “A Macbook is designed for ownership. A beautiful object. You can’t run the banking system on a MacBook Pro.”
Whereas cars have been designed as products for end consumers, just like Apple’s MacBooks, Liu believes transport is moving away from ownership. Need more memory for your MacBook or a new battery in your smartphone? It’s possible, but a prohibitively expensive hassle. Need to upgrade a server? They are designed to be altered.
Modular vehicles are nothing new. Public transport is already reasonably modular. Buses, trains, and planes are generally repaired and upgraded or refitted easily. Airliners fly almost constantly for decades due to their modular design. Taxis, many of which are on the go nearly 24 hours a day due to drivers working shifts, show where typical car design gets into difficulty. They wear out in three or four years, despite maintenance along the way. “Cars are designed to be parked 95% of the time,” said Liu, “Constant use means a much shorter lifespan.”
It’s all about total cost of ownership (TCO) of a vehicle over its lifespan. “A normal car has modularity of around 10%, we’re pushing it to 90%,” said Liu.
Shifting gears
I remember as a child watching my dad repair our old cars, once even incorporating half a Guinness can into the engine of our 30-year-old Land Rover. By the time I learned to drive, in a much newer car, opening the hood presented you with a much more compartmentalized, sealed engine. The last time I looked, there were just a few options such as where to add new screen wash and the place for the garage to plug their computers in.
Car brands have moved towards low-cost consumer vehicles, with the aim of selling cars to then make their money on after sales servicing, parts, warranties, and financing. This shift has informed car design, making it difficult for owners to repair their own vehicles. “There’s a planned obsolescence of seven to ten years,” said Liu.
The Y Combinator startup has developed the car platform–the chassis, engine, and seats–which are all fully replaceable. Even the chassis can be replaced in parts in the event of a collision, reducing the need for vehicles to be written off (totaled). The rest of the vehicle can then be customized and configured as per the buyer’s needs. The platform part can be put together in an hour by two technicians, no soldering involved. (Watch a video of the mechanics proving to Bloomberg reporters that this was possible– the third video from the top.)
Open Motors promises its vehicles will last ten times longer, even when working 24 hours a day. This is where cars turn from individuals’ private transport to forming fleets of shared vehicles.
Not a manufacturer, not a ride-sharing platform
“What we’re doing is the next step after Tesla. We’re not making a beautiful SUV that you want to buy. Instead, we’re making the perfect vehicle for Didi or Uber,” said Liu who worked for Italy’s Giugiaro for seven years before quitting in part due to frustration with the slow-moving industry.
“The key part of our project is modularity. We have the most advanced modularity technology in the automotive industry,” he said.
“After seven years working in Giugiaro I said ‘OK, guys, we’re just making beautiful cars and even though we’ve developed a full EV, it’s not real innovation’ as everything is changing. I left in 2008 as I believed the real innovation was going to come from Silicon Valley”
The company is not developing its own AI or autonomous driving software or hardware and is not going to launch its own ride-hailing service. “We’re not even considering selling cars to final consumers,” added Liu.
Open Motors will focus on designing modular vehicles and maintenance for other companies. “When I book a Didi, I don’t care about the brand. I care about a reliable service,” said Liu to explain their white label approach.
Clients will be able to install their own autonomous driving sensors, all the way up to Level 5 (fully autonomous, with no driver input), and the build method means the hardware used in self-driving such as sensors and LIDAR can be easily updated, unlike in traditional car types.
The company is researching different ways to enter China. One option involves manufacturing with a local venture and selling the vehicles to corporate clients and providing servicing. The other would be for Open Motors to own the vehicles and lease them on a per kilometer basis.
Didi recently announced plans for Didi Alliance, a partnership with 31 automotive industry partners which would build cars that the ride-sharing platform would manage as a platform. The current plans were for standard EVs for the fleet.
Why China?
The Open Motors team is currently looking for more Chinese investors “for one single reason,” said Liu, “China is the number one market. It’s already the number one market for normal combustion engine cars, for electric vehicles and for mobility as a service”.
Recent reports support his claims. China is the largest vehicle market in the world for internal combustion engine cars, and its EV sales have grown the fastest making it the largest EV market too. Baidu has ramped up the testing of its open platform autonomous driving technology Apollo. Pony.ai, set up by Chinese entrepreneurs in California, is also testing in China. Authorities are allowing testing in more cities, with a further nine just announced.
“I believe China will be the first market to massively adopt self-driving cars–they’re more lean and flexible. Europe, forget about it,” said Liu. He also believes that China will not allow foreign autonomous driving software into the country. Reports already suggest authorities are not allowing foreign firms to test in China. Liu thinks any system would need to provide all data to the government and so Open Motors vehicles would be neutral and be able to support any version of the autonomous driving software.
China’s ride-hailing market is already bigger than the rest of the world’s combined at $23 billion, according to a study and survey by Bain and Company. Their survey found that 62% of respondents in China had tried ride-hailing, compared to 29% in Germany and 23% in the US. The analysis finds that the adoption of mobile payments in China is part of the reason for the uptake of e-hailing. But so is China’s terrible traffic. Bain and Company found that people are hailing rides to take some of the pain out of all the time stuck in jams.
50% of cars are hailed through apps that are not dedicated hailing apps such as Alipay, WeChat, and Dianping, according to the report. Perhaps one of the more compelling findings of the survey is the erosion of the car’s function as a status symbol. Half of the respondents said a car had decreased as a status symbol over the last five years.
The report predicts the emergence of new players in the mobility sector, threatening existing original equipment manufacturers (OEMs):
Long accustomed to keeping product development and other capabilities in-house, OEMs will need to partner with service providers and others in the value chain—to capture their share of the growing profit pool by finding new revenue streams to compensate for slower growth in car sales. By partnering with the likes of Baidu, Alibaba and Tencent, for example, OEMs could access vastly more consumer data. Knowing consumers’ profiles in great detail—who they are, what they like, where they go for meals and so on—will allow automakers to better understand consumers’ commute occasions and behaviors.
Customer data could be key, as tech industry players discussed at a sharing economy conference, as well as customizing the hardware–the vehicles themselves. “With mobility platforms such as Didi and emerging corporate car sharing companies about to make up a growing segment of the market for vehicles, more OEMs may soon be required to customize cars for these new and important customers—even as they learn how to sell to a different customer base,” states the report, matching the ambitions of both Didi and Open Motors.
As Liu found himself, the Bain and Company survey also established that “when e-hailing, consumers tend to care most about the cost, waiting time and driver ratings—and much less about the brand of the car in which they travel. This is a shift with huge potential implications for OEMs that for decades have worked hard to build and maintain differentiated brands.”
Open road?
Open Motors already has Chinese investors and manufacturers interested in building components for its white label Edit model. The general improvement in the quality of Chinese components means more of the parts are available here already. Big car brands seem reluctant elsewhere to trial new concepts as they would cannibalize sales. Whereas China’s big players have already seen rapid industry change with the rise of EV, plus the adoption of ride-hailing–Didi is now handling 30 million rides a day–makes the transition towards mobility as a service even more apparent here.