Good morning.
If technology transformation and the energy transition are the two driving forces in business today, then the superpower competition between the U.S. and China could be deemed a draw. The U.S. has clearly taken the lead in the development of AI, but China dominates when it comes to producing the equipment needed for energy transformation.
That point was driven home in Macau this week, where I had the chance to interview two of the leading designers of electric vehicles in China: Frank Wu of Ji Yue, a joint venture between Geely and Baidu, and Zhang Fan of GAC, one of China’s largest state-owned car makers. Both men cut their teeth in the West– Wu at Cadillac and Zhang at Mercedes. But both now believe that–excluding Tesla, which manufactures in China and is sui generis–U.S. and European car makers will eventually lose the EV race to their Chinese competition.
Why? First, it’s the sheer competition in China. By one count, there are as many as 600 electric vehicle makers now in the race. And second, wage costs are still lower. But when I asked Wu and Zhang why they would win, they gave another answer. Here’s Zhang:
“I sum it up with two keywords. One is speed, another is willingness to change. Speed-wise, the international OEMs have six to eight years of lifetime for products and take three to five years for development. For us, everything becomes half.”
And here’s Wu:
“At the legacy giants, there’s a lot of chain of command, a lot of different needs, review levels, when you are trying to make a decision and trying to react to the market. The speed is definitely much slower than a startup.”
Both companies aspire to eventually sell their products around the world. But both may be thwarted in the U.S. by rising protectionism. The IRA provides significant incentives to electric vehicle buyers and makers, but with strict domestic content requirements. That may help U.S. manufacturers in the short run. But denying American consumers access to the world’s best products will slow the energy transition–and could lead to further declines in competitiveness.
Technology transformation and the energy transition, of course, can’t be easily separated. Ji Yue’s plans depend on state-of-the-art AI–everything in the car will be controlled by voice. And the very process of design, which was the subject of our conference in Macau this week, is being transformed by the new technology. At the event, architect Keith Griffiths, the founder of Aedas, demonstrated stunning generative AI technology that instantly translated his rough sketches into beautifully articulated buildings.
More news below. And by the way, if China and the U.S. are decoupling, it’s not affecting Chinese demand for Kentucky Fried Chicken, Taco Bell, and Pizza Hut. While in Abu Dhabi last week, I had a fascinating interview with Yum Brands China CEO Joey Wat, who said her business is booming. You can listen to it on this week’s Leadership Next podcast, available on Apple or Spotify.
Alan Murray
@alansmurray
alan.murray@fortune.com
