Freeman Shen spent more than a decade studying and working in the U.S. More recently, half of his time was spent in Europe. But when the Chinese businessman decided to found his own electric car company, he placed the headquarters and manufacturing facilities in China.
Not traditionally known as a hotbed of car manufacturing, China is the world’s largest auto market. In 2018, roughly 28 million automobiles were sold in China.
But Shen was interested in something else: Thanks to strong government support, China is also the world’s largest market for electric vehicles, or EVs. Over 1.25 million EVs were sold in China in 2018 – more than in the rest of the world. In 2018, although the sales of overall automobiles dropped by 2.8%, in the Chinese market, the first negative growth in 28 years, sales of EVs increased by 61.7%.
Shen spent most of his career at car manufacturers, from Fiat and Volvo to the Chinese brand Geely. After completing an advanced management program at Harvard Business School, Shen decided to start his own business. In his mind, there weren’t many differences between working as a professional manager at Fiat and serving as the CEO of his own electric car start-up.
“Even though I worked for cross-national corporations, my work had always been something new. When I joined Fiat China, the company was restructuring its business; when I started my work at Geely, the company was experiencing hardships too,” Shen said.
Years in the business convinced Shen that conventional cars have reached a plateau. EVs, on the other hand, are still in their infancy. Certain that he could not compete with world-famous conventional carmakers, Shen decided to focus on EVs.
EVs have a different propulsion system than conventional vehicles. And they don’t use a complex, multi-gear transmission. This, however, does not at all mean that it becomes easier to manufacture electric cars.
“Many companies underestimated the difficulty of making EVs. EVs employ different sets of key components and software. For established car companies, the transition to making EVs is the most difficult challenge,” Shen said.
Shen should know. The entrepreneur’s father was an architect and his mother was a civil engineer. Shen applied to study architecture. However, his red-green colour blindness betrayed him: He was assigned to a mechanical engineering major. In 1991, he was admitted to the University of California Los Angeles to study structural engineering.
After graduating, Shen went to work for the US powertrain manufacturer Borg- Warner, later jumping to Fiat. In 2009, Shen accepted a job offer from Geely, a Chinese car maker. Not long after, Li Shufu, chairman of Geely Holding, gave Shen a mission impossible: purchase Volvo Cars, which at that time was losing money.
Back to Black
Shen led an acquisition team made up of over 30 people. Together with his colleagues, Shen made a plan for post-acquisition Volvo, including steps the company would take one year and five years after the acquisition. For over half a year, Shen lived and worked in Europe. Finally, all the hard work paid off: The acquisition was completed in August 2010. Geely Holding paid USD 1.5 billion for the Swedish company, and Shen was later appointed as the head of Volvo Car China.
Shen helped build two car plants and one R&D center. Two years after the acquisition, Volvo Car Group began making profits. Volvo’s Chinese subsidiary alone contributed half of the profits.
After working for Geely for more than five years, Shen resigned and went to Harvard for an Advanced Management Program. When he finished, he decided to launch his own company. He called it WM Motors, a deliberate dig at his colleagues in the German car industry. “Germany is the world champion of cars. The name came from the German word Weltmeister [meaning world champion] because we want our German friends to know our goal,” Shen says. He hopes the company will be a world leader in the fast-growing EV sector.
Basing the company in China was a strategic decision. The Chinese government has been a strong supporter of electric vehicles, providing manufacturers with subsidies of up to USD 9,600 per vehicle.
In the past ten years, central and local governments have paid over USD 30 billion as subsides on EVs. Local governments have also been replacing conventional taxis and buses with electric ones. For example, Beijing’s government stipulates that new taxis have to be electric. Shenzhen, where BYD, another leading EV company in China, is located, electrified its entire fleet of 16,000 buses, a global first.
China’s government, Shen says, sees EVs from a national security perspective. China is the world’s largest importer of crude oil and natural gas: In 2018, over 70% of China’s oil was imported. One third of its oil was consumed by vehicles. By 2020, experts say, vehicles will consume more than half. “The most important reason China develops electric cars is to decrease its reliance on imported oil,” Shen says, “which is critical for national security.”
Electric cars may alleviate China’s environmental problems as well. Air pollution has been an issue in China for years. Using electricity rather than gasoline might help return Beijing’s skies to blue.
The technology has its critics. For example, manufacturing EVs is emissions-intensive, perhaps even more so than making conventional cars. Also, electricity generation has a carbon footprint too.
To Shen, environmental protection is a welcome side benefit, but not the main point. “China lacks oil but is rich in electricity,” he says. And EVs can be used as batteries: In China, as in most places, electricity usage spikes in the daytime. At night, electricity usage drops – and much of the electricity generated by power plants is wasted. Electric cars can help power plants balance electricity usage and utilize energy which otherwise would have been wasted.
Supporting EVs is also a way for China to become a global auto power. EVs provide a way to leapfrog more established players. With a smile, Shen uses one more automotive metaphor: “Overtaking on curves and corners is impossible for China; it has to change lanes,” Shen said. “In fact, overtaking on curves or corners might cause rollover.”
Conventional car companies in China have also tried their hands at making electric cars. However, Shen said that these cars are very different from what his company is producing.
“They are still based on conventional cars, and drivers don’t feel many differences. In contrast, we designed our EVs from scratch,” Shen says. “We invested much more in software than conventional cars.”
In Shen’s eyes, EVs are not just electric cars. They are smart cars connected to the internet – like Shen himself, who has over 100 apps on his phone. He has so many
apps, in fact, that he takes another phone from his pocket while browsing through his first phone. “I have two phones – and it’s more than 100 apps,” Shen says, proud of feeling at home in the digital world.
Even though there are dozens of EV companies, Shen said that only three are capable of mass producing smart EVs: Tesla, based in the U.S., and NIO and WM Motor, both based in China. These three companies target different segments of the market. “Tesla and NIO are doing ‘Audi’,” Shen says, “but we are trying to be ‘Volkswagen’.”
Beginning next year, the Chinese government will stop subsidising EVs. Shen says that this will provide a necessary shake-out in the market: Poorly made electric cars won’t find buyers, and only the best manufacturers will survive. Shen hopes to be among them: In the next few years, WM Motor will adopt WLTP, a new harmonized global standard for determining the quality of driving vehicles. And WM hopes to build cars with a range of 600 kilometres, comparable to Tesla’s .
Shen said he, his wife, and all his senior executives drive WM cars. “We can provide feedback on the driving experiences to produce higher-quality cars,” Shen said.
China is the world’s largest market for both conventional and electric cars. The Chinese government is supportive of the EV industry, motivated by both national security and environmental interests.