Category: US Motoring Press

Chinese rideshare giant Didi Chuxing makes big move in driverless car race

A logo of ride-hailing giant Didi Chuxing displayed on a building in Hangzhou in China's eastern Zhejiang province.STR | AFP | Getty ImagesChinese ride-hailing giant Didi Chuxing ( “Didi”) has amassed more than 550 million users and 31 million drivers since taking to the streets of Beijing seven years ago. In the past three years, the global rideshare giant has devoted close attention to its autonomous driving unit. That unit became an independent company on Monday in a move designed to focus and designate more resources toward business development and product innovation.
The Uber-competitor established its autonomous driving team in 2016 and has since employed more than 200 people in China, as well as at its Mountain View, California research facility, where it has been working with various auto manufacturers like Volkswagen and Toyota Motors to test core innovative technologies.
Last month, Didi Chuxing received $600 million in corporate financing from Toyota, which includes directly establishing a joint venture with GAC Toyota, a joint venture between Toyota and a Chinese car maker. The new funds come as Didi continues heavy expansion in several new overseas markets, where it hopes to challenge Uber and other ride-hailing giants like India's Ola, Brazil's Easy Taxi and Singapore's Grab ⁠— a three-time CNBC Disruptor 50 company.
Didi Chuxing is also a notable Disruptor 50 company, breaking the top 10 at No. 4 in 2018 and No. 2 in 2019.
“Autonomous driving will greatly enhance the safety and efficiency of travel,” said Didi Chairman and CEO Cheng Wei in a release. “In the future, people's transportation needs … will be met by the combination of seamless autonomous driving technology and human driving services that are indispensable for their quality and warmth.”
To fund the new driverless car company, Didi is in new talks with SoftBank, according to a report from The Information. The Japanese tech and telecom giant has previously made multiple, large investments in the ride-hailing company. Based on the most recent funding round, Didi Chuxing has raised $22.74 billion and is valued at $57.6 billion.
In 2016, the same year that Didi's autonomous driving unit was established, SoftBank played an influential role in Uber's decision to sell its China business to Didi, notably pushing the U.S. ride-hailing giant out of the region and exposing Didi to their customer base outside of China for the first time.
Investors want clearer profit pathAsad Hussain, a PitchBook analyst and an expert in mobility, ride-sharing and autonomous vehicles, sees the company's decision as part of a broader trend consistent with the challenges that self-driving technology presents.
“Spinning out autonomous divisions enables these companies to raise outside capital and offers investors a more targeted bet on self-driving relative to investing in the parent entity,” he said. “We think this is a logical move for Didi and other ride-sharing companies facing pressure from investors to streamline costs and show a clear path to profitability.”
Didi went through a major round of layoffs earlier this year, according to multiple reports, as it continues to lose money, like its competitors. Uber recently announced 400 job cuts in its marketing team.
Waymo, Alphabet's autonomous vehicle unit, also announced that it would raise outside capital for the first time this past March, positioning itself to cut costs and limit downside risks.
Didi's Chief Technology Officer (CTO) will head the new autonomous driving company as CEO. In an email to CNBC, a communications representative for Didi said that the company does not currently have plans for an IPO.
Uber and Lyft, the U.S. rideshare leaders with heavy investments in driverless vehicles, have fared poorly after highly anticipated IPOs earlier this year as investors doubt how quickly they can become profitable.
VIDEO2:4902:49There will be consolidation in the driverless car industry: Pony.aiSquawk Box AsiaIn a recent survey, auto and tech industry experts predicted it will be at least 12 years before fully autonomous vehicles are being sold to private buyers. While Tesla CEO Elon Musk says 1 million Teslas capable of being robotaxis will be on the road by the end of next year, industry experts say robotaxis will not be ready for widespread public use until 2025.
Last week, General Motors subsidiary Cruise, postponed a planned launch of an autonomous ride-share service as it continues developing, validating and making sure its self-driving cars are ready.
“What's most important when we do launch this service is that we do it the right way,” Cruise CEO Dan Ammann said.

Automakers trim production as market weakens – but hope to avoid wholesale cuts of a decade ago

James O'Neal attaches a fender in the body shop at GM's Chevrolet Silverado and GMC Sierra pickup truck plant in Fort Wayne, Indiana, July 25, 2018.John Gress | ReutersGeneral Motors will trim production of the Chevrolet Equinox SUV at two North American car plants, a move that follows cuts announced by Ford, Honda and other manufacturers.
Automakers are facing what is only the second down market since the end of the Great Recession and the record sales that followed. How far down demand will go this time is a matter of debate, with analysts and planners warning that could depend on how the Trump administration handles disputes with China and other trade partners.
Industry officials, including General Motors CEO Mary Barra, say they learned critical lessons during the last recession and hope to be more proactive this time around, adjusting production early to stay in line with market demand while avoiding the sort of budget-busting incentives that devastated industry balance sheets a decade ago.
GM's latest cutback primarily targets the Equinox but also impacts two other SUVs, the GMC Terrain and Chevrolet Trax, and heightens concerns that the increasingly crowded list of new utility vehicles coming to market will create additional headaches for the industry.
GM plans to drop one of the three crews working at its San Luis Potosi plant in Mexico, spokesman Dan Flores confirmed in a telephone interview with CNBC. The factory produces the Equinox, GMC Terrain and Chevrolet Trax SUVs, all of which will see production cut. In addition, a factory in Ingersoll, Ontario that solely produces the Equinox will be idled for one week during late September.
The automaker is “focused on profitable sales and (we) want to do things that make good business sense. We're committed to running the business in a responsible manner,” Flores said. That echoes comments CEO Barra has made on several occasions that GM won't repeat a key mistake made in the run-up to the Great Recession. Rather than trimming production to meet demand, it relied on increasingly hefty incentives that ultimately ran up its losses and contributed to its eventual bankruptcy.
Ford echoed that approach in a statement, citing “long-standing practice of matching production with consumer demand” for its decision to curb operations at its Oakville, Ontario plant next month. The factory produces four SUVs — the Ford Flex, Ford Edge, Lincoln MKT and Lincoln Nautilus models. About 200 workers will be idled, and Ford cautioned further cuts could follow.
Honda, meanwhile, confirmed this week it has reduced production of its Accord and Civic models at its Marysville, Ohio plant. Nissan trimmed output in Canton, Mississippi, as well as its operations in Mexico in recent months, while also offering voluntary buyouts to an unspecified number of U.S. employees.
The second-largest Japanese automaker last month announced plans to cut production worldwide by 10% over the next three years, while eliminating 12,500 jobs. CEO Hiroto Saikawa told reporters during a news conference that “our situation right now is extremely severe.” A U.S. spokesman said Nissan has already made the necessary adjustments in the U.S., but several analysts said further cutbacks could be needed, pointing to the 8.3% decline in its sales for the first seven months of 2019.
Across the industry, the biggest cuts have focused on the passenger car side of the market. GM, for one, announced last November plans to close three North American assembly plants, while dropping an array of sedans including the Chevrolet Cruze and Impala, as well as the Cadillac CT6. The automaker's plant in Lordstown, Ohio has already been shuttered but one in Detroit is now scheduled to operate through at least early 2019.
The United Auto Workers Union has said the fate of the two U.S. plants will be a critical topic during contract talks with GM that began last month. During meetings on Capitol Hill last December, CEO Barra said the automaker has no plans to reverse its decision, however, and has already lined up a tentative buyer for the Lordstown factory.
What concerns industry observers is that there are signs demand for SUVs may be leveling off in some market segments, something signaled by recent cuts such as those of the four Ford utility vehicles.
Complicating matters, “While people are talking about fabulous SUV sales, the market is getting saturated with them and inventories are building while incentives are growing,” said Michelle Krebs, executive analyst with Autotrader.com.
Industry planners have been aggressively trying to manage inventories of unsold cars as sales have slowed this year. The numbers are now climbing up the high side of normal, ending July at a U.S. market average of around 67 days of stock, Krebs noted, up three days from May. The norm is closer to 60 days supply.
Traditionally, they've relied on incentives to hold down inventories and the numbers are rising. The average giveback in July was $3,911 per vehicle, according to research by Cox Automotive, a 4% year-over-year climb. On some pickups, meanwhile, the numbers have reached $10,000 or more.
But “this is an industry that remembers quite vividly what happened a decade ago,” said Stephanie Brinley, principal analyst with IHS Markit. Leading into the Great Recession, they kept ratcheting up the givebacks “to keep their plants running and production up. But they found there was a point where that eroded profitability to a point that couldn't be sustained.”
The challenge now, said Brinley, is to be “proactive,” and use production cuts to keep sales and inventories in balance, rather than waiting to be “reactive.”
Several industry executives, talking on background, said a key concern is what ongoing trade disputes could mean for the U.S. economy and, in particular, the auto market — a concern highlighted by the sharp downturn on Wall Street after the latest moves by the Trump administration and China.
There are other factors that could cause trouble. New car prices have reached record levels, at an average of around $33,000 for July, reported J.D. Power and Associates. Coming in $1,400 more than a year ago, that threatens to drive some potential buyers out of the market, Power said, at a time when there's a bubble of “nearly new” off-lease vehicles now flooding the market. Meanwhile, automotive interest rates have spiked to around 6%, according to data from tracking service Edmunds.
Barring an economic meltdown, analysts like David Andrea, a principal at Plante Moran, don't see more complete plant shutdowns in the works.
“Manufacturers are showing increased discipline going into the softening of the market,” he said, “but you'll see a lot more of these temporary reductions to keep inventories and incentives in check.”