Thursday, October 29, 2009

Plenty of Lithium Outside China


Following up on yesterday's post about electric cars in China, an astute observer pointed out the possibility that China may have already cornered the market on the rare earth metals necessary for hybrid and battery technology. (See comments below this post.)

I just happened across this short photo essay at ForeignPolicy.com about Bolivia's supplies of lithium which are estimated to be 50 to 70 percent of the world's known reserves (a figure that surprised even me!). Lithium is, of course, a major component of the lithium-ion batteries used in mobile phones, laptops and most of the electric cars currently in development.

So it appears that China will not have anything near the "monopoly" on lithium that is causing the China-haters to wring their hands. Then again, Bolivia's president Morales is close pals with Venezuela's Chavez, so we can be certain they won't be giving their lithium away either.

Also, Bolivia doesn't exactly have the best record of extracting natural resources for the benefit of its citizens. Despite abundant sources of petroleum and natural gas, Bolivia suffers from a "resource curse" which is partly responsible for making Bolivia the poorest country in South America.

So, while it does appear that China's sources of rare earth metals will give it somewhat of an advantage, it doesn't have a monopoly on them. And, of course, even a monopoly on these metals is still no guarantee that the most successful EV technology will ultimately come out of China.

10 Rules for Successful Outsourcing Relationships

“History shows that great economic and social forces flow like a tide over communities only half conscious of what is befalling them. Wise statesmen foresee what time is thus bringing, and try to shape institutions and mould men's thoughts and purposes in accordance with the change that is silently coming one. The unwise are those who bring nothing to the process, and who greatly imperil the future of mankind by leaving great questions to be fought out between ignorant change on one hand and ignorant opposition to change on the other.” - John Stuart Mill

Courtesy to Russell Pang / CEVALOGISTICS...

Load it all down at http://www.ulikaiser.de/afg/10Rules.doc

Wednesday, October 28, 2009

BANGKOK POST: Malaysia's auto revival 'no threat'

The local automobile industry is unconcerned by the Malaysian government's bid to unseat Thailand as Southeast Asia's manufacturing hub for the sector, says the Thailand Automotive Institute.

Malaysia's auto industry is still a long way behind Thailand's, said Vallop Tiasiri, the director of the TAI.

Kuala Lumpur yesterday announced a decision to resume issuing carmaking licences with an aim to spur investment and employment. It will also seek a strategic partner to revive its national car company, Proton Holdings Bhd.

What is a "Preferred Bidder"?

News outlets are reporting today that Geely, a HK-listed, "private" Chinese automaker, is the "preferred bidder" for Ford's Volvo unit. (Stories at Bloomberg and WSJ.)

I'm a little confused by this announcement. What exactly is a preferred bidder? What is it about the bidder that would lead Ford to approve Geely over another?

Correct me if I'm wrong, but when you're trying to unload a money-losing asset while taking as small a loss as possible, wouldn't you be more focused on the bid than the bidder?

If I were a Ford shareholder (and I probably am through mutual funds), that's where my concern would lie.

Electric Vehicles: China can do no Wrong. Right?

Think Again.

This past week, columnists Anil Gupta and Haiyan Wang published an opinion piece in Business Week that dares to go against the flow. While the rest of the world seems ready to declare China the winner in electric vehicle technology, Gupta and Wang explain why China has no real advantage -- a position with which I agree. They make two important points that are worth highlighting:
  1. Despite the apparent importance of battery technology for cars in the future, batteries are merely one component among many others. The apparent early success of China's BYD in battery technology (which is also questionable) does not mean that BYD is certain to enjoy success in other important factors such as "performance, safety, reliability, comfort, styling, dealership network, service quality, and price". In an article in the Wall Street Journal this week, Norihiko Shirouzu quotes the tech chief of a global automaker who had test-driven BYD's E6 as calling it "half-baked".
  2. First mover advantage ain't what it used to be. Gupta and Wang give plenty of examples in which non-first movers eventually came to dominate an emerging technology, leaving first-movers in the dust.
Gupta and Wang don't dismiss the importance of battery technology, and indeed, BYD seems to have somewhat of an advantage because, after all, they've been a battery company since the early '90s. But when you put the whole package together -- battery, auto body, electric motor, etc. -- BYD's success has been less than stellar. Through the first eight months of 2009, they only managed to sell 100 of their F3DM plug-in hybrids.

They also seem to speculate, as have I before, that Buffet's consolation prize with BYD may very well be the battery technology itself. Even if they cannot manage successfully to assemble the entire package for a mass market, BYD's battery technology -- if it is advanced as they claim -- could be licensed to dozens of global auto manufacturers. Indeed, Volkswagen has already partnered with BYD on battery technology.

I would add to this argument the fact that, among all of the auto specialists and insiders I have interviewed in China this year, I have yet to find anyone who believes that BYD -- let alone any other Chinese automaker -- has a lock on EV technology. They all see it as very experimental, and while they believe China is finally on a level playing field with developed countries in this emerging technology, they all acknowledge that the solution is just as likely to come out of Japan, Europe or North America. (I have yet to interview anyone at BYD, so perhaps this will change once I make it to southern China.)

I don't want this post to be interpreted as attempt to knock BYD. In fact, I admire BYD's CEO, Wang Chuanfu, for his courage and optimism and I wish the company every success. However, I think the rest of the world (i.e., all three people who still read my blog) deserve to read views contrasted with those of non-Chinese speaking foreign correspondents who fly first class, ride in limousines, stay in 5-star hotels, then return home to tell everyone China is the new land of milk and honey and BYD will own the future of electric vehicles.

Malaysia opens up auto sector to woo investors

KUALA LUMPUR, Malaysia—Malaysia unveiled plans Wednesday to open up its auto sector, including allowing 100 percent foreign ownership and offering a 10-year tax break for carmakers to produce hybrid and electric vehicles as it seeks to catch up with Thailand as a regional auto hub.

NOW THAT'S AN INTERESTING ARTICLE. CHECK IT OUT.

Sunday, October 25, 2009

Bangkok Post: B1bn firm to target US auto parts market

A Thai-owned auto parts distributor in the United States will join with Thai aftermarket auto-parts producers to set up a holding company worth 1 billion baht to purchase 30 auto repair centres in the US within two years.

The move is part of a strategy by the Cluster of Thai Automotive Parts to expand its members' markets to improve industry performance when local demand is weak because of the slump in vehicle sales and production.

"We have been trying to enter the US market for more than 10 years, but were unsuccessful because we didn't use the right channels," said Samart Deebhijarn, the president of the cluster.

REUTERS: ASEAN gearing up to be global green auto hub

HUA HIN, Thailand (Reuters) - Southeast Asia is gearing up to become a global hub for the production and sale of environmentally friendly cars, a Thai deputy cabinet minister said on Thursday.

Friday, October 23, 2009

"What you pay is what you get" – but then .... sometimes not

Wrapped in the psychedelic surroundings of the Fillmore Room at the HARD ROCK HOTEL, a strong audience of 20+ AFG members and guests enjoyed a thorough and creative panel discussion on the in and outs of logistics.

Senior speakers from DHL, Katoen Natie, CEVA Logistics and VPack & Move explained the several levels of logistics services – the higher the level, the higher the integration with the customers business processes.


The feedback and discussion was very interesting, with logistics specialists from GM and Michelin actively involved.

A main point was the creation of "shared services" so we don't have 2 half empty truck carrying goods from the same A to the same B at the same time.

An excellent session sure to benefit everyone in the audience.


After the meeting, most of the participants enjoyed a beer and roast pig at the joint German and British Chamber function in the Hard Rock Cafe.

Wednesday, October 21, 2009

AFGMeeting November

AFG Meeting Information for November 2009:


Date: Friday, 13 November 2009
Time: 17.00 - 18.30
Location: dusitD2 baraquda pattaya

Speakers: Representing GM and AAT

Discussing:
* Thailand outlook for of the auto industry in 2010 and beyond?
* What segments of the Auto Industry may see growth and what may see reduction?
* New regulations if any on export that will impact suppliers?
* What is the take on OEM and supplier relationship in these difficult times?
* Do the manufacturers expect hard negotiations this year and what should suppliers and public be ready for?

To book this meeting, please contact:
Maurice Bromley
Secretary
Email: Maurice.Bromley@go-dove.com

Forging Meeting Summary

James Beeson provided this summary of the Forging Sector Meeting from 14 October 2009. It contains market analysis and forecast data - check it out:

http://www.ulikaiser.de/afg/ForgingMeeting.pdf

Tuesday, October 13, 2009

Mr. Hu, tear down this wall!

On a day in which China has taken further steps to block social networking applications, I think it appropriate to explain why I use Twitter, and why China is doing itself a disservice by blocking these applications.

Twitter is one of those applications that people either love or simply don't understand. I've found few people who remain on the fence about Twitter for long. When I first tried it, I did so because Business Week was raving about it, and I wanted to see what all the fuss was about. After playing with it for a few minutes, I failed to get the point and didn't touch it again for about eight months.

Fast forward to now, and though I'm certainly not the most active of Twitter users, I follow nearly 300 people, most of whom are interested in topics about which I am most passionate: China, the automotive industry, finance and alternative energy.

Some Twitter users like to follow as many people as they possibly can, and I think that's great if that is how they get the most out of Twitter. I prefer to follow a smaller group, all of whom I feel, in some way, make me a smarter person. I may not necessarily agree with all of them all of the time -- in fact, I often disagree -- but they make me think harder about what I believe, and that, to me, is what any friend should do.

Many people like to make fun of the fact that people on Twitter often tweet about the most mundane details of their lives. And I will admit that I also occasionally tweet about what I had for lunch, or a particularly bad customer service experience. In this respect Twitter is actually a mirror of our real-life, every day conversations, but the beauty of Twitter, is that it is a 24-hour-a-day, nonstop conversation among people scattered all over the world. When you have time, you jump in the stream.

We all have friends whom we admire because we find them to be smart or clever or funny, but when you think about it most of your conversations with them do in fact consist of the mundane. The reason we keep hanging around them is for their gems of wit and wisdom. We listen to the mundane, not because it's necessarily interesting, but because it gives us a sense of who that person is -- the real person behind the wit and wisdom. This is why I follow people on Twitter.

Twitter is like a virtual water cooler conversation, except that, unlike at work, you get to pick those with whom you stand around the water cooler. And I can say without a doubt that, having been an avid user of Twitter for nearly a year, I have a broader perspective than before. I have considered ideas I would have never considered before. I have met more than 20 of my Twitter acquaintances in real life, and quite a few of my virtual Twitter relationships have led me to many valuable resources for my dissertation research.

Twitter is like a big university campus for me. While it's hard to point to a particular class you attended, or a particular interpersonal interaction you had that contributed to your betterment, after four (or five, or six...) years on campus, you know that you're better for it. And indeed you are.

And this is where China is missing out. China's leaders are so paranoid about their lack of legitimacy that they are depriving their people of a fantastic tool for innovation. Rather than taking steps to legitimize their leadership they instead try to prevent their people from being able to discuss it.

Yes, China does have a few Twitter-like clones, and I think a few of them may actually still be in operation, but what these clones don't have that Twitter does have is a world-wide following. I am very thankful that at least a handful of Chinese go to the trouble of circumventing the "great firewall" in order to join in the global conversation. And when they aren't tweeting about the inconvenience of getting around the blocks, their perspectives are very valuable for me as a non-Chinese who wants very much to improve his understanding of China.

If China's leaders insist upon keeping themselves walled off from the rest of the world, they will always find themselves playing catch-up in terms of innovation.

As for me, I will pay whatever I have to in order to keep the information flow turned on. This world needs people who aren't afraid to have their beliefs challenged, people who aren't afraid of the truth. I hope my friends, and my followers on Twitter, will think of me as that kind of person.

Thursday, October 8, 2009

Reciprocity or Market Principles?

A story appeared in Bloomberg today that China Minsheng Bank, the largest "private" bank in China, intends to raise its stake in a US-based bank to as much as 50 percent. The company, UCBH Holdings runs the United Commercial Bank of San Francisco which has about $13 billion in assets.

Minsheng made its initial purchase of 4.9 percent of UCBH in 2007 and then increased its holding to 9.9 percent in 2008.

Assuming Minsheng meets the Fed's requirements in terms of its management capability and the health of its balance sheet, the purchase will probably be approved. It seems only fair that a Chinese bank should be allowed to purchase a share of an American bank. After all, American banks own shares of Chinese banks, right?

Well, yes, but there's a catch. Foreign banks are not allowed to own more than 20 percent of a Chinese bank. These terms were agreed upon when China joined the World Trade Organization in 2001, but I wonder whether US negotiators gave even a moment's thought to whether China would someday want to buy shares in foreign banks as well.

Here's the question: When reviewing the proposed purchase of UCBH, should the US demand reciprocity -- that if Chinese banks can buy a controlling interest in a US bank, US banks should have the same privilege in China -- or should the US just stick to "market principles" and allow Minsheng to go through with its purchase?

All governments intervene. It's only a question of how.

Yesterday, the Wall Street Journal's "China Journal" published a short interview with Justin Yifu Lin, the World Bank's Chief Economist. The interview itself is interesting, and you should read the whole thing, but here is what I believe to be the key revelation.

Lin says: "Common people put their money into the financial system and their earnings from it are relatively low. So they are subsidizing big corporations. That’s the reason why big corporations have such high profit. They are subsidized through lower wages and lower capital costs."

In very simple terms, Lin explains why China's big corporations have not been hit as hard as those of the West during this economic downturn. Due to a lot of the uncertainties of life in China, Chinese save a lot. These savings are kept in banks where they earn an abysmally low rate of interest. Because interest rates on savings are so low, banks can afford to funnel cheap loans to state-owned corporations at a below-market cost of capital.

Granted, there are some problems with this scenario too. It would be nice if a lot of the uncertainties of life in China were better addressed by the government (through social safety nets) so that people would feel comfortable spending more of their incomes. And it would be nice if the government would allow the banks to make market-driven, rather than politically-driven, lending decisions so that capital could find its way to the most efficient uses.

On the other hand, unlike the United States, China seems to get the fact that big corporations are huge drivers of economic activity. While the United States, particularly Congressional Democrats, seem, bent on punishing corporations for their very existence with even higher taxes, China seems to understand the necessary role corporations play in generating employment. While the United States, along with its labor unions, seems determined to fight a losing battle of keeping wages high while manufacturing flees to lower cost regions, China keeps wages depressed, further subsidizing the corporations and attracting foreign investment.

Though this may seem overly-critical of the United States, my point is that, in the cases of both China and the US, our economic systems are determined by government intervention. People in the US who accuse China of excessive government intervention need to take a look in the mirror.

Both of our systems are what they are due to decisions made by political leaders. The question isn't whether governments intervene. Rather, it's how they intervene.

Which one seems to have performed better in recent years?

Tuesday, October 6, 2009

Now, It's Personal

Last May, China's regulators decided to block all blogs being hosted on the blogger.com/blogspot domain. Because that's where this blog is hosted, it has been inaccessible in China, except to those who use a proxy or a VPN.

That's a shame because, up until the block, the second largest number of visitors to this blog came from China. At the time, visitors from China were about 3/4 the number from the US. Though my general topic, business-government relations in China, is aimed primarily at informing an English speaking audience, I was happy that there were at least a few readers in China, and presumably, some of them were not expats. My original hope had been to draw in both English speaking Chinese and non-Chinese who were interested in this very important topic, and to help Westerners have a little better understanding of how things work in China.

While the block bothered me, it wasn't of major concern. It's not my innocent little blog they have a problem with, I figured: there are probably a few dissident blogs on blogspot that directly challenge CCP rule, so they're blocking them all just to be safe.

And you really can't blame them. After all, former leaders of dictatorships have historically not fared too well under new democracies. (The name "Ceaucescu" probably still keeps dictators up at night.)

To counter the block, I even went to the trouble to buy the domain www.chinabizgov.com so that I could eventually migrate my blog away from blogspot.

Today, I read a piece in The Guardian by Jeremy Goldkorn, keeper of the excellent Danwei.org blog which has been blocked in China since July 3. In the article he draws a connection between China's paranoia of censorship and its lack of innovation.

Goldkorn's article reminded me that I needed to start the process of migrating my own blog away from blogspot to chinabizgov.com, but when I tried to access my domain without the aid of a VPN, I was shocked to find that it has also been blocked. While there's nothing there but a link to my blog on the blogspot domain, apparently I didn't just get caught up in the massive blocking of blogspot, but someone somewhere took exception to something in my blog. Someone, or something decided that anything with the name "chinabizgov" in it needed to be blocked.

As Goldkorn lamented in his article, I too have no idea what in my blog caught the censors' eyes, nor even whether the block was put deliberately in place by a person, or merely by a piece of software designed to block objectionable material. And if there is indeed objectionable material, I have no idea what it was, nor do I know whom I could ask in order to find out.

Before, I was willing to believe I was an innocent victim of the Party's paranoia. Now, it's personal.

And it's also very lame. If they're afraid of a little guy like me, maybe their grip on power is even more tenuous than I had previously thought.