Shanghai and more than a dozen other cities in China are now under full or partial lockdown as the country faces its most significant spike of COVID-19 cases yet in the pandemic. But amid rapid increases in cases from the ultratransmissible omicron variant and China’s relatively low vaccination rate among its elderly, some experts are left scratching their heads over the lack of reported deaths.
In Shanghai, a city of around 26 million that functions as the country’s financial hub, residents’ patience has run out as they enter a second week of full, draconian lockdown. Videos have circulated online of people screaming from their apartments and berating officials over food shortages. There are reports of people being denied medical care and forced into crowded quarantine facilities. At the beginning of lockdowns, officials were widely criticized for separating parents from young children, including breastfeeding infants.
China reported more than 200,000 infections in Shanghai since the outbreak began last month. The vast majority of those are said to be mild or asymptomatic. So far, Chinese officials have reported that only one case in the city has been considered severe, and no deaths from COVID-19 have been reported.
Coronavirus cases in China are spiking to record highs, leading officials in the Chinese financial hub of Shanghai to make the snap decision late Sunday to lock down the city of around 26 million people. For weeks, officials denied that they would institute lockdowns in response to rising cases.
But this month, the spread of the ultratransmissible omicron variant has driven China’s highest case rise in the pandemic, and Shanghai has seen some of the highest numbers. On Sunday, the country reported more than 6,000 new cases, with 3,500 of those in Shanghai. According to data tracking by The New York Times, the number of daily new cases has increased 233 percent in the past 14 days. The current case count is the highest yet for the country, which saw its previous peak in February 2020 when new cases reached just above 3,000 a day.
Starting March 28, Shanghai residents on the east side of Huangpu River entered a four-day home lockdown and mass testing campaign. From April 1 to 5, people on the west side will take their turn locking down and testing. Officials are aiming to test the entire population during the sequential lockdowns, sending health workers in white hazmat suits to residents’ front doors.
Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.
This week, China gets serious about breaking down the walled gardens that its internet giants have formed for decades. Two major funding rounds were announced, from the newly established autonomous driving unicorn Deeproute.ai and fast-growing, cross-border financial service provider XTransfer.
Tear down the walls
The Chinese internet is infamously siloed, with a handful of “super apps” each occupying a cushy, protective territory that tries to lock users in and keep rivals out. On Tencent’s WeChat messenger, for instance, links to Alibaba’s Taobao marketplace and ByteDance’s Douyin short video service can’t be viewed or even redirected. That’s unlike WhatsApp, Telegram or Signal that offer friendly URL previews within chats.
E-commerce platforms fend off competition in different ways. Taobao uses Alibaba’s affiliate Alipay as a default payments option, omitting its arch rival WeChat Pay. Tencent-backed JD.com, a rival to Alibaba, encourages its users to pay through its own payments system or WeChat Pay.
But changes are underway. “Ensuring normal access to legal URLs is the basic requirement for developing the internet,” a senior official from China’s Ministry of Industry and Information Technology said at a press conference this week. He added that unjustified blockages of web links “affect users’ experience, undermine users’ rights, and disrupt market orders.”
There is some merit in filtering third-party links when it comes to keeping out the likes of pornography, misinformation and violent content. Content distributors in China also strictly abide by censorship rules, silencing politically sensitive discussions. These principles will stay in place, and MIIT’s new order is really to crack anticompetitive practices and wane the power of the bloated internet giants.
The call to end digital walled gardens is part of MIIT’s campaign, started in July, to restore “orders” to the Chinese internet. While crackdowns on internet firms are routine, the spate of new policies announced in recent months — from new data security rules to heightened gaming restrictions — signify Beijing’s resolution to curb the influence of Chinese internet firms of all kinds.
The deadline for online platforms to unblock URLs is September 17, the MIIT said earlier. Virtually all the major internet companies have swiftly issued statements saying they will firmly carry out MIIT’s requirements and help promote the healthy development of the Chinese internet.
Internet users are bound to benefit from the dismantling of the walled gardens. They will be able to browse third-party content smoothly on WeChat without having to switch between apps. They can share product links from Taobao right within the messenger instead of having their friends copy-paste a string of cryptic codes that Taobao automatically generates for WeChat sharing.
Autonomous driving startup Deeproute.ai said this week it has closed a $300 million Series B round from investors including Alibaba, Jeneration Capital, and Chinese automaker Geely. The valuation of this round was undisclosed.
We’ve seen a lot of publicity from Pony.ai, WeRide, Momenta and AutoX but not so much Deeproute.ai. That in part is because the company is relatively young, founded only in 2019 by Zhou Guang after he was “fired” by his co-founders at the once-promising Roadstar.ai amid company infighting.
Investors in Roadstar.ai reportedly saw the dismissal of Zhou as detrimental to the startup, which had raised at least $140 million up to that point, and subsequently sought to dissolve the business. It appears that Zhou, formerly the chief scientist at Roadstar, still commands the trust of some investors to support his reborn autonomous driving venture.
Like Pony.ai and WeRide, Deeproute is trying to operate its own robotaxi fleets. While the business model gives it control over reams of driving data, it’s research- and cash-intensive. As such, major Chinese robotaxi startups are all looking at faster commercial deployments, like self-driving buses and trucks, to ease their financial stress.
Cross-border trade boom
The other major funding news this week comes from Shanghai-based XTransfer, which helps small-and-medium Chinese exporters collect payments from overseas. The Series C round, led by D1 Partners, pulled in $138 million and catapulted Xtransfer’s valuation to over $1 billion. The proceeds will go towards product development, hiring and global expansion.
Founded by former executives from Ant Group, XTransfer tries to solve a pain point faced by small and medium exporters: opening and maintaining bank accounts in different countries can be difficult and costly. As such, XTransfer works as a payments gateway between its SME customer, the party that pays it, and their respective banks.
As of July, XTransfer’s customers had surpassed 150,000, most of which are in mainland China. The company of over 1,000 employees is also expanding into Southeast Asia.
While business-to-business export is booming in China, more and more products are also being directly sold from Chinese brands to consumers around the world. Some of the most successful examples, like Shein and Anker, use a different set of payments processors for their direct-to-consumer sales, which tend to be in bigger volume but smaller in average ticket value.
The rush to back lidar companies continues as more automakers and robotaxi startups include the remote sensing method in their vehicles.
Latest to the investment boom is Hesai, a Shanghai-based lidar maker founded in 2014 with an office in Palo Alto. The company just raised over $300 million in a Series D funding round led by GL Ventures, the venture capital arm of storied private equity firm Hillhouse Capital, smartphone maker Xiaomi, on-demand services giant Meituan and CPE, the private equity platform of Citic.
Hesai said the new proceeds will be spent on mass-producing its hybrid solid-state lidar for its OEM customers, the construction of its smart manufacturing center, and research and development on automotive-grade lidar chips. The company said it has accumulated “several hundred million dollars” in funding to date.
Other participants in the round included Huatai Securities, Lightspeed China Partners and Lightspeed Venture Capital, as well as Qiming Venture Partners. Bosch, Baidu, and ON Semiconductor are also among its shareholders.
Lidar isn’t limited to powering robotaxis and passenger EVs, and that’s why Hesai got Xiaomi and Meituan onboard. Xiaomi makes hundreds of different connected devices through its manufacturing suppliers that could easily benefit from industrial automation, to which sensing technology is critical. But the phone maker also unveiled plans this year to make electric cars.
Hesai, with a staff of over 500 employees, says its clients span 70 cities across 23 countries. The company touts Nuro, Bosch, Lyft, Navya, and Chinese robotaxi operators Baidu, WeRide and AutoX among its customers. Last year, it kickstarted a partnership with Scale AI, a data labeling company, to launch an open-source data set for training autonomous driving algorithms, with data collected using Hesai’s lidar in California.
Joor, an online marketplace that connects fashion brands and retailers around the world, has opened its first China office in downtown Shanghai as it eyes growth in the region.
The 11-year-old New York-based company works as a virtual showroom for brands, which traditionally would meet with their retail partners in physical venues to showcase the latest collections. With Joor, showrooms become live videos, a feature that has no doubt proven useful during COVID-19.
The company also gives brands a set of data tools to analyze their sales that can inform future productions. For buyers, the benefits are similar — they are able to see which brand or product is trending and make better forecasts.
The expansion into China follows a robust year for Joor in APAC and the opening of its offices in Melbourne and Tokyo. Joor’s wholesale volume ordered by retailers in the region grew 139% year-over-year in 2021, and wholesale volume for APAC-based brands was up 419%, the company said in an announcement.
“The establishment of JOOR Shanghai will allow us to provide frictionless wholesale management to the range of fine brands and retailers across the country,” said Joor’s CEO Kristin Savilia in a statement. “It builds on our existing leadership position in North America and Europe, and we expect continued expansion across the Asia-Pacific region.”
Joor’s marketplace boasts more than 12,500 brands and over 325,000 retailers around the world to date. The company has raised over $35 million in funding, according to its disclosed rounds. Its investors include venture capital firms Battery Ventures and Canaan Partners as well as the 71-year-old Japanese trading house Itochu.
The handling of user data in China has become a delicate matter for American tech companies operating in the country. Apple’s move to store the data of its Chinese customers in servers managed by a Chinese state-owned cloud service has stoked controversy in the West over the years. A recent New York Times investigation found that the setup could give the Chinese government easy access to Apple’s user data in China, compromising”, but Apple said it “never compromised the security” of its customers or their data.
Tesla, one of the few U.S. tech heavyweights that generate substantial revenues from China, is working out a similar data plan. The electric carmaker said it has established a data center in China to carry out the “localization of data storage,” with more data facilities incoming, the company announced through its account on microblogging platform Weibo. All data generated by Tesla vehicles sold in mainland China will be stored domestically.
Tesla is acting in response to new requirements drafted by the Chinese government to regulate how cameras- and sensors-enabled carmakers collect and utilized information. One of the requirements states that “personal or important data should be stored within the [Chinese] territory.”
It’s unclear what level of access Chinese authorities have to Tesla’s China-based data. In the case of Apple, the phone maker said it controlled the keys that protect the data of its Chinese customers.
Tesla recently fell out of favor with Chinese media and the public after a customer protested the carmaker’s faulted parts at an auto show in Shanghai, earning her widespread sympathy. Tesla also faces fierce competition from Chinese rivals like Nio and Xpeng, which are investing heavily in world-class designs and autonomous driving technology.
The American firm clearly wants the government’s good graces in its second-largest market. It appeared a few days ago at an industry symposium along with Baidu, Alibaba, research institutions, and think tanks to discuss the new vehicle policy proposed by the country’s cybersecurity watchdog.
“Important data” generated by vehicles as defined by the Chinese internet regulator include traffic conditions in military and government compounds; surveying and mapping data beyond what the government discloses; status of electric charging grids; face, voice, and car plate information; and any data deemed as affecting national security and public interest.
The regulations also urge car service providers to not track users by default, as well as inform them of the kinds of and reasons for data collection. If gathered, information should be anonymized and stored for only “the minimum period of time.”
B Capital Group, the six-year-old venture capital fund formed by Facebook co-founder Eduardo Saverin and Bain Capital veteran Raj Ganguly, is doubling down on China as it looks to allocate $500 million to $1 billion of its fund into Chinese tech companies over the next few years.
With $1.9 billion assets under management, B Capital is going after enterprise software providers in China, an area that has seen “explosive growth” but is still only a “fraction the size of the U.S. SaaS market,” Ganguly said in an interview with TechCrunch.
The idea that Chinese companies are reluctant to shell out for software is “very backward-looking thinking”, he added.
One force fueling the boom of B2B companies in China is surging labor costs. As such, B Capital is hunting down software that could make labor and business operations more productive, and subsequently, give companies a competitive edge. Covid-19 accelerated the shift, as well-digitized companies had proven much more resilient to disruptions caused by the pandemic.
B Capital is able to discern what enterprises need thanks to its close partnership with Boston Consulting Group, which has a raft of customers ranging from healthcare, finance to transportation looking to digitize.
These large corporations “understand that their internal technology can’t be the only solution and they have to look to the outside and be willing to partner with early-stage, high-growth, or late-stage tech companies,” Ganguly suggested. They are also more willing to pay for software compared to scrappy, cash-strapped startups.
B Capital began deploying capital in China early this year and has already closed three deals. It’s stage-agnostic — though growth-stage startups are the focus — and plans to back 15-20 projects in China over the next few years. About 15 of its investment and operating employees are based out of Hong Kong and Beijing. It has around 110 staff worldwide.
Ganguly declined to disclose the names of its Chinese investees at this stage but said they include a biotech company, an automotive parts business, and an e-commerce enabler. Leveraging BCG’s expertise, the biotech company is learning how it can bring actual drugs to market faster. And the automotive business is similarly working with BCG to figure out its pricing and go-to-market strategy.
Overall, B Capital looks for opportunities in healthcare, fintech, industrial digitalization, and other horizontal enterprise services. Chinese startups that interest B Capital most are also those with the intention and ability to cross borders.
“Biotech is the area that we’ve been the most impressed by what’s happening in China and how that technology can be exported to other countries,” Ganguly said. B Capital has backed one biotech startup with offices in both Shanghai and Cambridge, Massachusettes, and is on track to close a deal with another that also straddles China and the U.S.
The other target is e-commerce, which Ganguly described as “cross-border by its nature” because a product is often sourced in one country, made in another, and then sold in a third market.
China is also in a good position to export its enterprise software, similar to how Indian counterparts have succeeded overseas, said Ganguly. The difference is that few Indian corporations are willing to pay big bucks for software, which forces B2B entrepreneurs to seek market abroad, whereas China’s domestic companies have an increasing demand for SaaS.
Despite ongoing geopolitical complications, Ganguly is optimistic that the world “is still moving towards globalization” over the long term.
“Certain innovation cycles have started in Silicon Valley and spread to places like China and Southeast Asia. But frankly, other innovation cycles have started in China and gone to South and Southeast Asia and the U.S. We think that China’s enterprise [software], artificial intelligence and biotech are some of the best technology that we’ve seen.”
But these globalizing companies must be able to adapt, hire talent outside their core market, get regulatory approvals, and build the right distribution networks, the investor suggested.
“I think that there are aspects of globalization that have become very politicized, and I think that’s unfortunate but understandable. Our belief is that businesses that we invest in have the ability to cross borders. Sometimes that means going from China to South and Southeast Asia, and sometimes that means extending to the U.S. Sometimes it just means the ability to import or export their products or software, and even staying in China where they can sell their technologies overseas.”
More investors are joining the wave to bet on lidar, the remote sensing method that uses laser light to measure distances and has garnered ample interest from automakers in recent times. But it’s also a technology that has long been scorned by Elon Musk partly due to its once exorbitant costs.
Innovusion, a five-year-old lidar company and a supplier to Chinese electric car upstart Nio, just landed a Series B funding round of $64 million. The new proceeds boost its total investment to over $100 million, not a small amount but the startup is in a race crowded with much bigger players that have raised hundreds of millions of dollars, like Velodyne and Luminar.
Temasek, the Singaporean government’s sovereign wealth fund, led Innovusion’s latest financing round. Other investors included Bertelsmann Asia Investment Fund, Joy Capital, Nio Capital, Eight Roads Ventures, and F-Prime Capital.
Innovusion runs core development teams out of Sunnyvale, California and Suzhou, an eastern Chinese city near Shanghai that the robotaxi unicorn Momenta also calls home.
“They were designing things more like a college student designing in their labs,” Bao said of Velodyne.
Lidar was a niche market up until about five years ago, the founder explained, for the technology was mostly used by a small community of amateurs and areas such as military, surveying and mapping. These were relatively small markets in terms of shipping volume and Velodyne filled the demand.
“They were not thinking about industrialization, volume manufacturing, or roadmap extensibility. They were a pioneer and we [Baidu] recognized their value… but we also knew their weakness.”
In fairness, Silicon Valley-based Velodyne today is a $2.2 billion company supplying to some of the world’s largest automakers, including Toyota and Volkswagen. It also pocketed a hefty sum of cash after going public via a SPAC merger last year. Innovusion’s strategy is to make sensors for automakers that are “good enough for the next five years,” according to Bao. The startup chooses “mature components” so it can quickly ramp up production to 100,000 units a year.
Its biggest customer at the moment is Nio, a Chinese challenger to Tesla which has backed Innovusion through its corporate venture fund Nio Capital. For mass production of its auto-grade lidar, Innovusion is partnering with Joynext, a smart vehicle arm of the Chinese auto component supplier, Joyson Electronics.
For now, China is the largest market for Innovusion. The startup is scheduled to ship a few thousand units this year, mainly for smart transportation and industrial use. Next year, it has a target to deliver several tens of thousands of units to Nio’s luxury sedan, ET7, which is said to have a scanning range of up to 500 meters, an ambitious number, and a standard 120-degree field of view.
Price is similarly important to Innovusion, which sells lidars to automakers for about $1,000 apiece at the volume of 100,000 per year.
“Adding a $1,000 upfront cost plus another couple thousand dollars for a car that’s selling for $30,000 or $50,000 is affordable,” Bao suggested.
With the fresh capital, Innovusion plans to increase the production volume of its auto-grade lidar and put more R&D efforts into smart cities and vehicles. The company has over 100 employees and plans to expand its headcount to over 200 this year.
What will China’s answer to Estée Lauder look like in the digital age?
According to Ushopal, it will provide a seamless online and offline shopping experience, where China’s savvy beauty shoppers get to discover niche, tasteful brands and learn their stories.
Ushopal was founded in 2017 by J&J veteran Lu Guo as an “omni-channel” partner for luxury beauty brands at a time when online and offline consumption were increasingly merging in China. Unlike traditional import distributors, which simply puts goods on the shelves, Ushopal offers a holistic solution that helps brands develop their digital and brick-and-mortar retail channels as well as marketing content through its network of 2,500 influencers.
Ushopal felt that patnerships weren’t enough, so in 2019, it took a step further by adding a strategic investment arm to seek deeper operational influence on brands. Check sizes range from $10 million to $100 million, and for the larger rounds, Ushopal says it can leverage its own investors such as Cathay Capital, a private equity firm focused on global companies.
For instance, Cathay Capital bought a minority stake in the Paris-based, high-end fragrance brand Juliette Has A Gun. As its investor and partner, Ushopal helped the brand, which was founded by the grandson of the legendary couturier Nina Ricci, grow its gross merchandise value in China from zero to over 70 million yuan within a year.
To boost its capital pool, Ushopal raised $100 million in March that lifted its total fundings to $200 million. Aside from Cathay Capital, its past investors also include FountainVest Partners, a Chinese private equity firm that recently acquired the Canadian premium outdoor clothing label Arc’teryx, and Chinaccelerator, SOSV’s China-based accelerator focused on cross-border businesses.
Chinese consumers are hooked to e-commerce today, but there is still much of the shopping experience that Alibaba’s marketplace and WeChat mini-stores can’t offer. As such, Ushopal opened its first multi-brand store in an upscale mall in Shanghai last year, carrying brands that are normally found in Neiman Marcus in the U.S. and Le Bon Marché in Paris. The goal is to showcase treasures from around the world, an idea that is captured by the chain’s name — Bonnie&Clyde — the names of a Depression-era crime couple who is often depicted as chic and rebellious in popular culture.
Customers don’t pay at B&C’s brick-and-mortar store; instead, they order through its app and can have the order delivered to their doorsteps within four hours if they live in Shanghai. The delivery time is much shorter than China’s standard e-commerce import practice, which normally takes three to seven days for goods to arrive from their overseas distribution centers.
B&C, on the other hand, stockpiles in its own warehouse in a free trade zone in Shanghai, which allows for much quicker delivery. And since it holds exclusive and selective distribution rights to the brands it works with, it has a good grasp over how much inventory to keep.
A promotional short video made by Ushopal for Juliette Has A Gun in China
At China’s beauty stores targeting the mass market, shoppers are often seen moving from one busily stocked shelf to another while their eyes are fixated on their phones, browsing product reviews on content commerce apps like Xiaohongshu. B&C wants full attention from its customers by limiting its in-store product number and statinoing a team of beauty advisors. The demographics it targets are also quite different.
“When they are traveling in the U.S., they are going to Barneys, Saxs Fifth Avenue and whey they are in the U.K., they are going to Harrods,” Lau, vice president of brands at Ushopal, told TechCrunch in an interview. “They are familiar with the experience, and they are not here to line up.”
Last year, B&C generated over $200 million in gross merchandise value through the products it bought from a dozen of brands and subsequently sold in China. The average ticket size of its sales was over 5,000 yuan ($770), with shoppers often spending over 10,000 yuan per order, according to Lau. Many of the customers were what he called “second-generation rich,” roughly China’s equivalent to trust fund kids, as well as “well-to-do wives.”
Ushopal doesn’t limit its portfolio to overseas products. It doesn’t distinguish the origin of a brand, said Lau, whether it’s Chinese, Japanese or European. Though the company mainly works with Western brands at the moment, Lau said Chinese brands are becoming more sophisticated and often understand the local market better.
“For us, it’s just about creating great brands. It’s like Estée Lauder, which has brands from all over the world. We are a China-based company but a global luxury business.”
Tesla is working on vehicles tailored to Chinese consumers as complaints about the quality of its electric vehicles send shock waves through the internet in the country.
The American EV giant is mulling new products that will be designed from the ground up for China, Grace Tao, a vice president at Tesla, told 21st Century Business Herald, a Chinese business news outlet, during the Shanghai auto show this week. The vehicles developed in China will also be sold globally, she added.
At the same auto event on Monday, a woman showed up at Tesla’s booth, climbing atop a Tesla car and shouting allegations of faulty brakes made by the company. The person was later detained for damaging the vehicle, and Tesla said on microblogging platform Weibo that her car had crashed due to exceeding the speed limit, not quality issues.
Nonetheless, the protestor won widespread sympathy when videos of her spread online. Many users joined in to vent about their Tesla problems. Posts with the hashtag “Tesla stand turned into a stage for defending rights” garnered over 220 million views on Weibo within two days.
“We have since the start been willing to work with national and authoritative third-party organizations to thoroughly inspect the issues raised by the public. By doing this, we wish to win assurance and understanding from consumers,” Tesla China said in a statement posted on Weibo in response to the incident.
“But we still haven’t fulfilled this wish, mainly because our ways of communicating with customers may be problematic. Secondly, we indeed can’t decide for our customers how they want to resolve these issues.”
Like in the West, Tesla has fostered a cult-like following in China. And along with Apple, it’s one of the few American tech giants that have gained a firm foothold in China. Last year, Tesla shipped nearly 500,000 vehicles globally and China contributed 20% to its revenues.
But the company also faces mounting competition from Chinese homegrown challengers. Xpeng, Nio, and Li Auto, the well-funded startups, as well as old-school carmakers, with help from high-tech firms like Huawei, are ready to take a slice of Tesla’s market. The designed-in-China vehicles are already finding a spot among the more patriotic crowds.
It doesn’t help that the Chinese government is placing more scrutiny over Tesla. In January, the firm was summoned by local regulators over quality concerns, shortly after it recalled several tens of thousands of vehicles in the country. The government restricted the use of Tesla by military facilities over national security concerns, The Wall Street Journal reported in March. Elon Musk later said his company would be shut down if its cars were used to spy.
One after another, Chinese tech giants have announced their plans for the auto space over the last few months. Some internet companies, like search engine provider Baidu, decided to recruit help from a traditional carmaker to produce cars. Xiaomi, which makes its own smartphones but has stressed for years it’s a light-asset firm making money from software services, also jumped on the automaking bandwagon. Industry observers are now speculating who will be the next. Huawei naturally comes to their minds.
Huawei seems well-suited for building cars — at least more qualified than some of the pure internet firms — thanks to its history in manufacturing and supply chain management, brand recognition, and vast retail network. But the telecom equipment and smartphone maker repeatedly denied reports claiming it was launching a car brand. Instead, it says its role is to be a Tier 1 supplier for automakers or OEMs (original equipment manufacturers).
Huawei is not a carmaker, the company’s rotating chairman Eric Xu reiterated recently at the firm’s annual analyst conference in Shenzhen.
“Since 2012, I have personally engaged with the chairmen and CEOs of all major car OEMs in China as well as executives of German and Japanese automakers. During this process, I found that the automotive industry needs Huawei. It doesn’t need the Huawei brand, but instead, it needs our ICT [information and communication technology] expertise to help build future-oriented vehicles,” said Xu, who said the strategy has not changed since it was incepted in 2018.
There are three major roles in auto production: branded vehicle manufacturers like Audi, Honda, Tesla, and soon Apple; Tier 1 companies that supply car parts and systems directly to carmakers, including established ones like Bosch and Continental, and now Huawei; and lastly, chip suppliers including Nvidia, Intel and NXP, whose role is increasingly crucial as industry players make strides toward highly automated vehicles. Huawei also makes in-house car chips.
“Huawei wants to be the next-generation Bosch,” an executive from a Chinese robotaxi startup told TechCrunch, asking not to be named.
Huawei makes its position as a Tier 1 supplier unequivocal. So far it has secured three major customers: BAIC, Chang’an Automobile, and Guangzhou Automobile Group.
“We won’t have too many of these types of in-depth collaboration,” Xu assured.
Arcfox, a new electric passenger car brand under state-owned carmaker BAIC, debuted its Alpha S model quipped with Huawei’s “HI” systems, short for Huawei Inside (not unlike “Powered by Intel”), during the annual Shanghai auto show on Saturday. The electric sedan, priced between 388,900 yuan and 429,900 yuan (about $60,000 and $66,000), comes with Huawei functions including an operating system driven by Huawei’s Kirin chip, a range of apps that run on HarmonyOS, automated driving, fast charging, and cloud computing.
Perhaps most eye-catching is that Alpha S has achieved Level 4 capabilities, which Huawei confirmed with TechCrunch.
That’s a bold statement, for it means that the car will not require human intervention in most scenarios, that is, drivers can take their hands off the wheels and nap.
There are some nuances to this claim, though. In a recent interview, Su Qing, general manager for autonomous driving at Huawei, said Alpha S is L4 in terms of “experience” but L2 according to “legal” responsibilities. China has only permitted a small number of companies to test autonomous vehicles without safety drivers in restricted areas and is far from letting consumer-grade driverless cars roam urban roads.
As it turned out, Huawei’s “L4” functions were shown during a demo, during which the Arcfox car traveled for 1,000 kilometers in a busy Chinese city without human intervention, though a safety driver was present in the driving seat. Automating the car is a stack of sensors, including three lidars, six millimeter-wave radars, 13 ultrasonic radars and 12 cameras, as well as Huawei’s own chipset for automated driving.
“This would be much better than Tesla,” Xu said of the car’s capabilities.
But some argue the Huawei-powered vehicle isn’t L4 by strict definition. The debate seems to be a matter of semantics.
“Our cars you see today are already L4, but I can assure you, I dare not let the driver leave the car,” Su said. “Before you achieve really big MPI [miles per intervention] numbers, don’t even mention L4. It’s all just demos.”
“It’s not L4 if you can’t remove the safety driver,” the executive from the robotaxi company argued. “A demo can be done easily, but removing the driver is very difficult.”
“This technology that Huawei claims is different from L4 autonomous driving,” said a director working for another Chinese autonomous vehicle startup. “The current challenge for L4 is not whether it can be driverless but how to be driverless at all times.”
L4 or not, Huawei is certainly willing to splurge on the future of driving. This year, the firm is on track to spend $1 billion on smart vehicle components and tech, Xu said at the analyst event.
A 5G future
Many believe 5G will play a key role in accelerating the development of driverless vehicles. Huawei, the world’s biggest telecom equipment maker, would have a lot to reap from 5G rollouts across the globe, but Xu argued the next-gen wireless technology isn’t a necessity for self-driving vehicles.
“To make autonomous driving a reality, the vehicles themselves have to be autonomous. That means a vehicle can drive autonomously without external support,” said the executive.
“Completely relying on 5G or 5.5G for autonomous driving will inevitably cause problems. What if a 5G site goes wrong? That would raise a very high bar for mobile network operators. They would have to ensure their networks cover every corner, don’t go wrong in any circumstances and have high levels of resilience. I think that’s simply an unrealistic expectation.”
Huawei may be happy enough as a Tier 1 supplier if it ends up taking over Bosch’s market. Many Chinese companies are shifting away from Western tech suppliers towards homegrown options in anticipation of future sanctions or simply to seek cheaper alternatives that are just as robust. Arcfox is just the beginning of Huawei’s car ambitions.
About a year after Beyond Meat debuted in China on Starbucks’s menu, the Californian plant-based protein company opened a production facility near Shanghai to tap the country’s supply chain resources and potentially reduce the carbon footprint of its products.
Situated in Jiaxing, a city 85 km from Shanghai, the plant is Beyond Meat’s first end-to-end manufacturing facility outside the U.S., the Nasdaq-listed company said in an announcement on Wednesday.
Over the past year, competition became steep in China’s alternative protein space with the foray of foreign players like Beyond Meat and Eat Just, as well as a slew of capital injections for domestic startups including Hey Maet and Starfield.
Beyond Meat doesn’t flinch at the rivalry. When asked by TechCrunch to comment on a story about China’s alternative protein scene, a representative of the company said “there are none that Beyond Meat considers their competitors.”
China not only has an enormous, unsaturated market for meat replacements; it’s also a major supplier of plant-based protein. Chinese meat substitute startups enjoy a cost advantage from the outset and don’t lack interest from investors who race to back consumer products that are more reflective of the tastes of the rising middle class.
Having some kind of manufacturing capacity in China is thus almost a prerequisite for any serious foreign player. Tesla has done it before to build Gigafactory in Shanghai to deliver cheaper electric vehicles. Localized production also helps companies advance their sustainability goals as it shortens the supply chain.
In Beyond Meat’s own words, the Jiaxing facility is “expected to significantly increase the speed and scale in which the company can produce and distribute its products within the region while also improving Beyond Meat’s cost structure and sustainability of operations.”
The American food-tech giant works hard on localization, selling in China both its flagship burger patties and an imitation minced pork product made specifically for the world’s largest consumer of pork. The soy- and rice-based minced pork could be used in a wide range of Chinese cuisines and is the result of a collaboration between the firm’s Shanghai and Los Angeles teams.
Besides production, the Jiaxing plant will also take on R&D responsibilities to invent new products for the region. Beyond Meat will also be unveiling its first owned manufacturing facility in Europe this year.
“We are committed to investing in China as a region for long-term growth,” said Ethan Brown, CEO and founder of Beyond Meat. “We believe this new manufacturing facility will be instrumental in advancing our pricing and sustainability metrics as we seek to provide Chinese consumers with delicious plant-based proteins that are good for both people and planet.”
Beyond Meat products can now be found in Starbucks, KFC, Alibaba’s Hema supermarket and other retail channels across major Chinese cities.
Commercial human spaceflight company Virgin Galactic has unveiled the first ever Spaceship III, the third major iteration of its spacecraft design. The first in this new series is called ‘VSS (Virgin SpaceShip) Imagine,’ and will start ground testing now with the aim of beginning its first glide flights starting this summer. VSS Imagine has a snazzy new external look, including a mirrored wraparound finish that’s designed to reflect the spacecraft’s changing environment as it makes its way from the ground to space — but more importantly, it moves Virgin Galactic closer to achieving the engineering goals it requires to produce a fleet of spacecraft at scale.
I spoke to Virgin Galactic CEO Michael Colglazier about VSS Imagine, and what it represents for the company.
“We can build these at a faster pace,” he explained. “These are still relatively slow, versus what we want in our next class of spaceships. But what we do expect to have here is, we’ve taken all the learnings from [VSS] Unity, and built-in what we need to do so that we can turn these ships at a faster pace, because obviously, the number of flights we can do is the product of how many ships you have, and how quickly you can turn them.”
Unlike Unity, which is the spacecraft that Virgin Galactic first flew in September 2016, and that it ‘s still using in New Mexico now for its testing and commercial launch preparation program, Imagine has a “modular design” that makes it much easier to maintain, and increases the rate at which it can fly subsequent missions. As Colglazier mentioned, there’s still more work to be done in that regard to get the Spaceship design to the point where it’s able to support the company’s target of around 400 flights per year, per individual spaceport, but it’s a big upgrade, and the company is already beginning manufacturing work on a second Spaceship III-class vehicle, ‘VSS Inspire.’
“What you’re seeing in the images, the choice of the livery, the film that we’ve put out, is a very clear step, as a consumer brand launch, and as we’re stepping in and building that, that will build over the course of the summer as we build up towards Richard [Branson]’s flight,” he said. “Very purposefully, we’ve used these lofty words of ‘democratizing space’ — but space is meant for everyone. It may take a while, just for everyone to get there, but it’s coming. And so this was leading with a very consumer facing, ‘Why are we doing this?’”
In fact, that focus on the consumer side of the business has been a lot of Colglazier’s work over the past eight months since joining the company. He said that the Virgin Galactic he joined had a “world-class team” that had the aerospace pieces completely locked in, but that his particular contribution has been in building up the commercial side of the business to match.
“We’re now bringing some talent in that is used to scaling this kind of a business, so Swami Iyer actually started Monday of last week,” he said. “And when you see a guy like Joe Rohde, who came in on the experience side, there’s no replacement — that’s additive to building out now the shoulders around this experience.”
Iyer joined as President of Aerospace Systems, and brings years of experience in the commercial space and defense industry, across GKN Advanced Defernce Systems, Honeywell Aerospace and more. Rohde, on the other hand, boasts a very different background, as a longtime Disney Imagineer, who joins the company as its first ‘Experience Architect,’ focused squarely on defining what the Virgin Galactic experience is for its astronaut customers, their friends and family, and the broader public, too.
Colglazier said that their vision for what the experience will look like will also be different depending on what part of the world you’re flying from, noting that weather you fly from a spaceport in Europe, Asia, India or Australia should result in something “dramatically different,” even if the spacecraft themselves are all used in the same way as they are in New Mexico. That definitely seems like a logical approach from an executive whose prior experience includes leading Disney’s parks in Burbank, Paris, Hong Kong, Shanghai and Tokyo.
Image Credits: Virgin Galactic
In the end, Colglazier said that the core philosophy Virgin Galactic will pursue in terms of consumer brand will be one focused on inclusion, even if the actual ‘going to space’ part of its offering remains out of reach for most in the short term.
“This is for everyone, it has to be for everyone,” he said. That aspiration may take some number of years to actually be realized, but in the meantime, we have to find a way that our brand and our company can be accessed, that what we do can be accessed by all sorts of people at all different layers of engagement, so we’re going to be very purposeful about that. You’re going to hear us talking mostly about, effectively the apex experience — actually taking the new ships to space. But the ability to tier down out of that is really, really important, and the ability for us to be a brand that’s reaching out to everyone is incredibly important.”
That begins with the approach to this spacecraft debut today, Colglazier says, and is apparent in the tone of the video the company debuted (embedded above) to mark the reveal. And Virgin Galactic also still has 600 passengers booked and waiting for their own flights, so that’s obviously a key focus after Branson’s flight targeted for later this year.
Finally, I asked Colglazier when he himself intends to go up, since he said he definitely plans to when joining the company. Mostly, he said, he doesn’t want to cut in front of any paying customers.
“Okay, there are 600 or so people that are going to be a little ticked at me, if I jumped the line, so I’m going to keep focused at the consumer level,” he said. “But nobody else is in line yet, so I’m gonna get in before anybody else comes in line.”
As the Chinese government works to curb its environmental impact, policies like a carbon trading system could spur the adoption of new technologies, increasing demand for goods and services from domestic startups and tech companies around the world.
Carbon markets, implemented in some parts of the U.S. and widely across Europe, put a price on industrial emissions and force companies to offset those emissions by investing in projects that would remove an equivalent portion of greenhouse gases from the atmosphere.
The efficacy of the policy is also effected by the hierarchies that exist within the bureaucracy of the Chinese Communist Party. As ChinaDialogue noted, the measures were issued by the Ministry of Ecology and Environment, which carry lower legal authority than if they came from the NDRC, the leading governing body for macroeconomic policy across China and the overseer of the nation’s major economic initiatives.
That said, no country as large as China, which accounts for 28% of the world’s greenhouse gas emissions, has ever implemented a national carbon emissions trading market.
BEIJING, CHINA – MARCH 20: Chinese President Xi Jinping delivers a speech during the closing session of the National People’s Congress (NPC) at the Great Hall of the People on March 20, 2018 in Beijing, China. (Photo by Lintao Zhang/Getty Images)
China first started testing regional emissions trading systems back in 2011 in Shenzhen, Shanghai, Beijing, Guangdong, Tianjin, Hubei, Chongqing and Fujian. Using a system that instituted caps on emissions based on carbon intensity (emissions per unit of GDP) rather than an absolute emissions cap, the Chinese government began rolling out these pilots across its power sector and to other industries.
After a restructuring in 2018, the plan, which was initially drafted under the auspices of the National Development and Reform Commission was kicked down to the Ministry of Ecology and the Environment. The devolution of China’s cap and trade emissions program came as the United States was withdrawing from the Paris Agreement amid an abdication of climate regulation or initiatives under the Presidency of Donald Trump.
Initially intended to begin with trading simulations in 2020, China’s emissions schemes were derailed by the COVID-19 pandemic and pushed back to the back half of the year with an implementation of actual trading starting yesterday.
For now, the emissions trading system covers China’s power industry and roughly 2,000 energy generation facilities. That alone represents 30% of the nation’s total emissions and over time the trading system will encompass heavy industry like cement, steel, aluminum, chemicals and oil and gas, according to ChinaDialogue.
Initially, the government is allocating emissions allowances for free and will begin auctioning allowances “at the appropriate time according to the situation.”
That kind of language, and concerns raised by state-owned enterprises and financial services firms flagging the effect carbon pricing could have on profitability and lending risk shows that the government in Beijing is still putting more weight on the economic benefits rather than environmental costs of much of its industrial growth.
That said, a survey of market participants cited by ChinaDialogue indicated that prices are expected to start at 41 yuan (US$6.3) per ton of CO2 and rise to 66 yuan per ton in 2025. The price of carbon in China is expected to hit 77 yuan by 2030.
Meanwhile, a commission on carbon prices formed in 2017 and helmed by the economists Joseph Stiglitz and Nicholas Stern indicated that carbon needed to be priced at somewhere between $40 and $80 by 2020 and somewhere in the $50 to $100 range by 2030 if the markets and prices were to have any impact on behavior.
No nation has actually hit those price targets, although the European Union has come the closest — and seen the most reduction in greenhouse gas emissions as a result.
Still, the plan from the Chinese government does include public reporting requirements for verified company-level emissions. And the existence of a market, if the government decides to put real prices in place and consequences for flouting the system, could be a huge boon for the monitoring and management equipment startups that are developing tech to track emissions.
As the analysts at ChinaDialogue note:
“The hardest part of carbon pricing is often getting it started. The moment that the Chinese government decides to increase ambition with the national ETS, it can. The mechanism is now in place, and it can be ramped up if the momentum and political will provided by President Xi’s climate ambition continues. In the coming years, this could see an absolute and decreasing cap, more sectors covered, more transparent data provision and more effective cross-government coordination. This is especially so with energy and industrial regulators who will need to see the ETS not as a threat to their turf, but as a measure with significant co-benefits for their own policy objectives.”
Batteries are the latest landing pad for investors.
In the past week alone, two companies have announced plans to become publicly traded companies by merging with special purpose acquisition companies. European battery manufacturer FREYR said Friday it would become a publicly traded company through a special purpose acquisition vehicle with a valuation at $1.4 billion. Houston area startup Microvast announced Monday its own SPAC, at a $3 billion valuation.
A $4.4 billion combined valuation for two companies with a little over $100 million in revenue (FREYR has yet to manufacture a battery) would seem absurd were it not for the incredible demand for batteries that’s coming.
Legacy automakers like GM and Ford have committed billions of dollars to shifting their portfolios to electric models. GM said last year it will spend $27 billion over the next five years on the development of electric vehicles and automated technology. Meanwhile, a number of newer entrants are either preparing to begin production of their electric vehicles or scaling up. Rivian, for instance, will begin delivering its electric pickup truck this summer. The company has also been tapped by Amazon to build thousands of electric vans.
Meanwhile, some of the largest cities in the world are planning their own electrification initiatives. Shanghai is hoping to have electric vehicles represent roughly half of all new vehicle purchases by 2025 and all public buses, taxis, delivery trucks, and government vehicles will be zero-emission by the same period, according to research from the Royal Bank of Canada.
A potential windfall from China’s EV market is likely one reason for the significant investment into Microvast by investors including the Oshkosh Corp., a 100 year-old industrial vehicles manufacturer; the $8.67 trillion money management firm, BlackRock; Koch Strategic Platforms; and InterPrivate, a private equity fund manager. That’s because Microvast’s previous backers include CDH Investments and CITIC Securities, two of the most well-connected private equity and financial services firms in China.
So is the company’s focus on commercial and industrial vehicles. Microvast believes that the market for commercial electric vehicles could be $30 billion in the near term. Currently, commercial EV sales represent just 1.5% of the market, but that penetration is supposed to climb to 9% by 2025, according to the company.
“In 2008, we set out to power a mobility revolution by building disruptive battery technologies that would allow electric vehicles to compete with internal combustion engine vehicles,” said Microvast chief executive Yang Wu, in a statement. “Since that time we have launched three generations of battery technologies that have provided our customers with battery performance far superior to our competitors and that successfully satisfy, over many years of operation, the stringent requirements of commercial vehicle operators.”
Roughly 30,000 vehicles are using Microvast’s batteries and the investment in Microvast includes about $822 million in cash that will finance the expansion of its manufacturing capacity to hit 9 gigawatt hours by 2022. The money should help Microvast meet its contractual obligations which account for about $1.5 billion in total value, according to the company.
If Chinese investors stand to win big in the upcoming Microvast public offering, a clutch of American investors and one giant Japanese corporation are waiting expectantly for FREYR’s public offering. Northbridge Venture Partners, CRV, and Itochu Corp. are all going to see gains from FREYR’s exit — even if they’re not backers of the European company.
Those three firms, along with the International Finance Corp. are investors in 24m, the Boston-based startup licensing its technology to FREYR to make its batteries.
FREYR’s public offering will also be another win for Yet-Ming Chiang, a serial entrepreneur and professor who has a long and storied history of developing innovations in the battery and materials science industry.
The MIT professor has been working on sustainable technologies for the last two decades, first at the now-defunct battery startup A123 Systems and then with a slew of startups like the 3D printing company Desktop Metal; lithium-ion battery technology developer, 24m; the energy storage system designer, Form Energy; and Baseload Renewables, another early-stage energy storage startup.
Desktop Metal went public last year after it was acquired by a Special Purpose Acquisition Company, and now 24m is getting a potential boost from a big cash infusion into one of its European manufacturing partners, FREYR.
The Norwegian company, which has plans to build five modular battery manufacturing facilities around a site in its home country intends to develop up to 43 gigawatt hours of clean batteries over the next four years.
For FREYR chief executive Tom Jensen there were two main draws for the 24m technology. “It’s the production process itself,” said Jensen. “What they basically do is they mix the electrolyte with the active material, which allows them to make thicker electrodes and reduce the inactive materials in the battery. Beyond that, when you actually do that you remove the need fo a number of traditional production steps… Compared to conventional lithium battery production it reduces production from 15 steps to 5 steps.”
Those process efficiencies combined with the higher volumes of energy bearing material in the cell leads to a fundamental disruption in the battery production process.
Jensen said the company would need $2.5 billion to fully realize its plans, but that the float should get FREYR there. The company is merging with Alussa Energy Acquisition Corp. in a SPAC backed by investors including Koch Strategic Platforms, Glencore, Fidelity Management & Research Company LLC, Franklin Templeton, Sylebra Capital and Van Eck Associates.
All of these investments are necessary if the world is to meet targets for vehicle electrification on the timelines that have been established.
As the Royal Bank of Canada noted in a December report on the electric vehicle industry. “We estimate that globally, battery electric vehicles (BEVs) will represent ~3% of 2020 global demand, while plug-in hybrid-electric vehicles (PHEVs) will represent another ~1.3%,” according to RBC’s figures. “But we see robust growth off these low figures. By 2025, when growth is still primarily regulatory driven, we see ~11% BEV global penetration of new demand representing a ~40% CAGR from 2020’s levels and ~5% PHEV penetration representing a ~35% CAGR. By 2025, we see BEV penetration in Western Europe at ~20%, China at ~17.5%, and the US at 7%. Comparatively, we expect internal combustion engine (ICE) vehicles to grow (cyclically) at a 2% CAGR through 2025. On a pure unit basis, we see “peak ICE” in 2024.”
Short, snappy, entertaining videos have become an increasingly common way for young people to receive information. Why not learn English through TikTok-like videos too? That was what prompted Angelo Huang to launch Blabla.
Originally from Taiwan, Huang relocated to Shanghai in 2019 to start Blabla after working in Silicon Valley for over a decade. A year later, Blabla was chosen as part of Y Combinator’s 2020 summer cohort. The coronavirus had begun to spread in the U.S. at the time, keeping millions at home, and interest in remote learning was reviving.
“It was my eighth time applying to YC,” Huang, who founded two companies before Blabla, told TechCrunch during an interview.
This week, Blabla announced it has raised $1.54 million in a seed round led by Amino Capital, Starling Ventures, Y Combinator, and Wayra X, the innovation arm of the Spanish telecoms giant Telefónica. While Y Combinator wasn’t particularly instrumental in Blabla’s expansion in China — one of the biggest English-learning markets — the famed accelerator was of great help introducing investors to the young company, said the founder.
The Blabla app pays native English speakers by the hour to create short, engaging videos tailored to English-learning students around the world. The content creators are aided by Blabla’s proprietary software that can recognize and tag their scenes, as well as third-party translation tools that can subtitle their videos. The students, in turn, pay a subscription fee to receive personalized video recommendations based on their level of proficiency. They can practice through the app’s built-in speech recognition, among other features like speaking contests and pop quizzes.
The startup is in a highly crowded space. In China, the online English-learning market is occupied by established companies like VIPKID, which is backed by Tencent and Sequoia Capital. Compared to VIPKID’s one-on-one tutoring model, Blabla is more affordable with its starting price of 39 yuan ($6) a month, Huang noted.
“The students [on mainstream English learning apps] might have to spend several thousands of RMB before they can have a meaningful conversation with their teachers. We instead recycle our videos and are able to offer lessons at much cheaper prices.”
The app has about 11,000 weekly users and 300-400 paid users at the moment, with 80-90% of its total users coming from China; the goal for this year is to reach 300,000 students. The funding will allow Blabla to expand in Southeast Asia and Latin America while Wayra X can potentially help it scale to Telefónica’s 340 million global users. It will be seeking brand deals with influencers on the likes of TikTok and Youtube. The new capital will also enable BlaBla to add new features, such as pairing up language learners based on their interests and profiles.
Blabla doesn’t limit itself to teaching English and has ambitions to bring in teachers of other languages. “We want to be a global online pay-for-knowledge platform,” said Huang.
As financial troubles escalate at Danke, China’s authorities are stepping in to hold the once-promising apartment rental and sharing company accountable.
In recent weeks, landlords who did not receive payments from Danke, which functions as a sublessor, began to evict tenants. After a flurry of local reports exposing the firm’s massive debt, which is reported to be as high as $520 million, a district court in Shanghai placed Ziwutong Beijing Asset Management, the parent organization behind Danke, on the country’s “social credit” blacklist.
The Chinese government’s social credit system is a set of mechanisms aimed at improving the enforcement of existing laws and offenders can face restrictions in their daily activity. In Danke’s case, founder and chief executive officer Gao Jing has been barred from “heavy spending,” which includes everything from flying first-class, taking a high-speed train, buying property, going on vacation, to enrolling children in “expensive” private schools, according to a court notice.
The move came after a senior judge from China’s Supreme People’s Court told the press that Danke was under investigation by relevant authorities over its cash-flow problems.
Danke, founded in 2015 and backed by high-profile investors like Ant Financial, Tiger Global, and LinkedIn’s former China head Derek Shen, pledged to make urban housing affordable and pleasant for China’s white-collar workers. The catch is it’s advancing through aggressive debt-fueled expansion.
Instead of the traditional rental model, Danke relies on an elaborate financing scheme to maintain cash flows. Tenants are offered price incentives to pay upfront for a year and induced to cover the sums by taking out loans, which are provided by Danke’s partner banks. Renters who refuse to sign up for the loans are asked to pay more.
With capital funded by the loans, Danke then pays the homeowners — but only on a monthly or quarterly basis. This gives the startup much financial flexibility to rent from landlords and spend on renovating apartments, which are then sublet to tenants at a markup.
Danke’s model epitomizes the promises of internet platforms or so-called sharing economy — light asset, rapid scaling, but it also creates enormous risks for the suppliers and consumers it vows to serve. When the COVID-19 pandemic hit, China’s rental market cooled, putting stress on Danke’s funding vehicle.
When TechCrunch spoke to Danke’s angel investor and chairman Derek Shen last year about the firm’s financial risks, he had this to say: “There’s nothing wrong with the financial instrument itself. The real issue is when the housing operator struggles to repay, so the key is to make sure the business is well-functioning.”
“What is needed is stricter market supervision to prevent such cases from recurring,” said an opinion piece published in state-backed paper China Daily. “The involvement of banks and loans have made the risks even higher. Given how unsustainable Danke’s business model is, it is time financial supervision departments consider making stricter financial rules forbidding such risky practices.”
Listed in New York, Danke saw its shares plunge to $2 last month from a high of $13.5 when it went public in January. Year to date the company has only released its Q1 earnings report, which recorded a net loss of $174.3 million.
The financial turmoil also puts WeBank, Danke’s major partner bank, under the spotlight for its participation in a highly leveraged rental business in return for handsome interests. The Tencent-backed internet bank announced on social media that it would transfer loan obligations from tenants to Danke, which has been subsidizing renters’ loan interests to WeBank already. In the three months ended March, Danke paid a total of $7.9 million in interests related to “rent financing.”
Danke cannot be immediately reached for comment on the story.
Residents of Shenzhen will see truly driverless cars on the road starting Thursday. AutoX, a four-year-old startup backed by Alibaba, MediaTek and Shanghai Motors, is deploying a fleet of 25 unmanned vehicles in downtown Shenzhen, marking the first time any autonomous driving car in China tests without safety drivers or remote operators on public roads.
The cars, meant as robotaxis, are not yet open to the public, an AutoX spokesperson told TechCrunch.
It also indicates that China wants to bring its smart driving industry on par with the U.S. Cities from Shenzhen to Shanghai are competing to attract autonomous driving upstarts by clearing regulatory hurdles, touting subsidies and putting up 5G infrastructure.
As a result, each city ends up with its own poster child in the space: AutoX and Deeproute.ai in Shenzhen, Pony.ai and WeRide in Guangzhou, Momenta in Suzhou, Baidu’s Apollo fleet in Beijing, to name a few. The autonomous driving companies, in turn, work closely with traditional carmakers to make their vehicles smarter and more suitable for future transportation.
“We have obtained support from the local government. Shenzhen is making a lot of rapid progress on legislation for self-driving cars,” said the AutoX representative.
The decision to remove drivers from the front and operators from a remote center appears a bold move in one of China’s most populated cities. AutoX equips its vehicles with its proprietary vehicle control unit called XCU, which it claims has faster processing speed and more computational capability to handle the complex road scenarios in China’s cities.
“[The XCU] provides multiple layers of redundancy to handle this kind of situation,” said AutoX when asked how its vehicles will respond should the machines ever go rogue.
The company also stressed the experience it learned from “millions of miles” driven in China’s densest city centers through its 100 robotaxis in the past few years. Its rivals are also aggressively accumulating mileage to train their self-driving algorithms while banking sizable investments to fund R&D and pilot tests. AutoX itself, for instance, has raised more than $160 million to date.
By Monday morning, local authorities grabbed hold of the situations, tweeting out videos of the 17,719 workers in orderly lines waiting to get tested, with calm piano music playing in the background. According to The Washington Post, it remained unclear what happened to the workers after that—if they were still being held at the airport, if they were moved to a quarantine facility, or if they were allowed to go home.
For years, founders and investors in China had little interest in open source software because it did not seem like the most viable business model. Zilliz‘s latest financing round shows that attitude is changing. The three-year-old Chinese startup, which builds open source software for processing unstructured data, recently closed a Series B round of $43 million.
The investment, which catapults Zilliz’s to-date raise to over $53 million, is a sizable amount for any open source business around the world. Storied private equity firm Hillhouse Capital led the round joined by Trustbridge Partners, Pavilion Capital, and existing investors 5Y Capital (formerly Morningside) and Yunqi Partners.
Investors are going after Zilliz as they increasingly recognize open source as an effective software development strategy, Charles Xie, founder and CEO of Zilliz, told TechCrunch at an open source meetup in Shenzhen where he spoke as the first Chinese board chairperson for Linux Foundation’s AI umbrella, LF AI.
“Investors are seeing very good exits for open source companies around the world in recent years, from Elastic to MongoDB,” he added.
“When Starlord [Xie’s nickname] first told us his vision for data processing in the future digital age, we thought it was a crazy idea, but we chose to believe,” said 5Y Capital’s partner Liu Kai.
There’s one caveat for investing in the area: don’t expect to make money in the first 3 to 5 years. “But if you’re looking at an 8 to 10-year cycle, these [open source] companies can gain valuation at tens of billions of dollars,” Xie reckoned.
After six years as a software engineer at Oracle, Xie left the U.S. and headed home to start Zilliz in China. Like many Chinese entrepreneurs these days, Xie named his startup in English to mark the firm’s vision to be “global from day one.” While Zilliz set out in Shanghai, the goal is to relocate its headquarters to Silicon Valley when the firm delivers “robust technology and products” in the next 12 months, Xie said. China is an ideal starting point both for the cheaper engineering talents and the explosive growth of unstructured data — anything from molecular structure, people’s shopping behavior, audio information to video content.
“The amount of unstructured data in a region is in proportion to the size of its population and the level of its economic activity, so it’s easy to see why China is the biggest data source,” Xie observed.
On the other hand, China has seen rapid development in mobile internet and AI, especially in terms of real-life applications, which Xie argued makes China a suitable testing ground for data processing software.
So far Zilliz’s open source product Milvus has been “starred” over 4,440 times on GitHub and attracted some 120 contributors and 400 enterprise users around the world, half of whom are outside China. It’s done so without spending a penny on advertising; rather, user acquisition has come from its active participation on GitHub, Reddit, and other online developer communities.
Going forward, Zilliz plans to deploy its fresh capital in overseas recruitment, expanding its open source ecosystem, as well as research and development in its cloud-based products and services, which will eventually become a revenue driver as it starts monetizing in the second half of 2021.
Further confirmation that the esports market is booming amid the pandemic comes today with the news that esports ‘total solutions provider’ VSPN (Versus Programming Network) has raised what it describes as ‘close to’ $100 million in a Series B funding round, led by Tencent Holdings . Other investors that participated in the round include Tiantu Capital, SIG (Susquehanna International Group), and Kuaishou. The funding round will go towards improving esports products and its ecosystem in China and across Asia.
Founded in 2016 and headquartered in Shanghai, VSPN was one of the early pioneers in esports tournament organization and content creation out of Asia. It has since expanded into other businesses including offline venue operation.
In a statement, Dino Ying, CEO of VSPN (see also our exclusive interview) said: “We are delighted to announce this latest round of funding. Thanks to policies supporting Shanghai as the global center for esports, and with Beijing, Chengdu, and Xi’an expressing confidence in the development of esports, VSPN has grown rapidly in recent years. After this funding round, we look forward to building an esports research institute, an esports culture park, and further expanding globally. VSPN has a long-term vision and is dedicated to the sustainable development of the global esports ecosystem.”
Dino Ying, VSPN CEO
Mars Hou, general manager of Tencent Esports, commented: “VSPN’s long-term company vision and leading position in esports production are vital for Tencent to optimize the layout of the esports industry’s development.”
We had a hint that Tencent might invest in VSPN when, in March this year, Mark Ren, COO of Tencent Holdings, made a public statement that Tencent would provide more high-quality esports competitions in conjunction with tournament organizers like VSPN.
As we observed in August, Tencent, already the world’s biggest games publisher, that it would consolidate Douyu and Huya, the previously competing live-streaming sites focused on video games.
In other words, Tencent’s investment into VSPN shows it is once again doubling-down on the esports market.
This Series B funding round comes four years after VSPN’s 2016 Series A funding round, which was led by Focus Media Network, joined by China Jianteng Sports Industry Fund, Guangdian Capital, and Averest Capital.
Now, VSPN has become the principal tournament organizer and broadcaster for PUBG MOBILE international competitions, and China’s top competitions for Honor of Kings, PUBG, Peacekeeper Elite, CrossFire, FIFA, QQ Speed, and Clash Royale. This will tally-up 12,000 hours of original content. The company has partnered with over 70% of China’s esports tournaments.
In March, another huge esports player, ESL, joined forces with Tencent to become a part of the PUBG Mobile esports circuit for 2020.
In addition to its core esports tournament and content production business, VSPN has branded esports venues in Chengdu, Xi’an, and Shanghai. In May, VSPN launched its first overseas venue, V. SPACE in Seoul, South Korea.
And even offline events are coming back. VSPN hosted the first large-scale esport event with offline audiences in August this year. And the LOL S10 event will open 6,000 tickets. However, all tournaments will operate under strict COVID-19 prevention measures and approval processes by the Chinese government, and not all esports events are allowing offline audiences. In the main, only high-level ones are approved.
VSPN said it will continue to focus on building an esports short-form video ecosystem, improving the quality of esports content creation, and reaching more users via different channels. VSPN currently houses more than 1,000 employees in five business divisions.
China, the world’s biggest market for meat consumption, has seen a growing demand for plant-based protein. Euromonitor predicted that the country’s “free from meat” market, including plant-based meat substitutes, would be worth almost $12 billion by 2023, up from just under $10 billion in 2018.
The Nasdaq-listed food giant is now bringing its signature Beyond Burgers into Freshippo (“Hema” in Chinese), Alibaba’s supermarket chain with a 30-minute delivery service that recorded a spike in orders during the pandemic as people avoided in-person shopping.
The tie-up will potentially promote the animal-free burgers to customers of Freshippo’s more than 200 stores across China’s Tier 1 and Tier 2 cities. They will first be available in 50 stores in Shanghai and arrive in more locations in September.
“We know that retail will be a critical part of our success in China, and we’re pleased to mark this early milestone within a few months of our market entry,” Ethan Brown, founder and chief executive officer of Beyond Meat, said in a statement.
Plant-based meat has a long history in China, serving the country’s Buddhist communities before the diet emerged as a broader urban lifestyle in more recent times. Amid health concerns, the Chinese government told citizens to cut back on meat consumption in 2016. The middle-class urban dwellers have also been embracing fake meat products as they respond to climate change.
“Regardless of international or local brands, Chinese consumers are now only seeing the first generation of plant-based offerings. Purchases today are mostly limited to forward-thinking experimenters,” Matilda Ho, founder and managing director of Bits x Bites, a venture capital firm targeting the Chinese food-tech industry, told TechCrunch. “The good news is China’s per capita consumption of plant-based protein is amongst the highest in the world.”
“For these offerings to scale to mass consumers or attract repeat purchases from early adopters, there is tremendous opportunity to improve on the mouthfeel, flavor, and how these products fit into the Chinese palate. To appeal to health-conscious flexitarians or vegetarians, there is also plenty of room to improve the nutritional profile in comparison to the conventional tofu or Buddhist mimic meat,” Ho added.
Meanwhile, Beyond Meat’s rival back home Impossible Foods may be having a harder time cracking the market, as its genetically-modified soy ingredient could cause concerns among health-conscious Chinese.
Apple’s newest version of iOS is bringing a host of new features to Maps, including a a dedicated cycling option that will optimize paths with bikes lanes and even let users know the route includes challenging hills.
Apple unveiled the new feature Monday at a virtual version of WWDC 2020, the company’s annual developer conference.
Apple Maps has included public transit and walking in previous iterations. But the biking option has been the most requested, according to Apple senior director Stacey Lysik.
The cycling feature will roll out in iOS 14 in a limited number cities initially, starting withNewYorkCity, the SanFranciscoBayArea, and ShanghaiandBeijing in China. Apple will addmanymorecitiesinthecomingmonths, Lysik said.
The biking option takes elevationintoaccounttolet users knowif they‘reinforachallenginguphillworkoutoraleisurelyflatride. Lysik said users will also be able to tell it their route includes quiet or busy streets and even if there is a steep passage coming up or if they’ll need to carry their bike up the stairs.
Stairs is obviously not ideal, so this feature also lets users opt to avoid stairs altogether.
Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what those events mean to people in the rest of the world. This week, we are seeing the backlash Chinese tech companies face around the world as anti-China sentiment escalates. In China, one of the world’s largest trade fairs kicked off, virtually.
Chinese apps are facing major challenges in India after an app named Remove China Apps that made it easy for users to delete China-related services went viral. Though Google has pulled the app, anti-China sentiment will likely haunt Chinese apps in India as political tensions between the countries heighten. Several Indian celebrities in recent days have supported deleting Chinese apps. Yoga guru Baba Ramdev tweeted a video over the weekend that showed him deleting several apps with an affiliation with China.
Decoupling from Chinese tech might not be easy in practice. Four out of the top five smartphone brands in India are Chinese, according to Counterpoint data, three of which belong to the enigmatic BBK Electronics group based in Shenzhen. These Android phones normally come bundled with a suite of Chinese utility apps, so users would have to find alternatives were they to abandon the Chinese options.
Indian smartphone shipments market share (Counterpoint)
China tech back home
Tencent Cloud powers mega trade show
The coronavirus outbreak is prompting people to bring everything online — including mega-size trade shows. This week, Tencent announced that it will provide technological infrastructure to digitize China’s oldest and biggest trade fair Canto Fair, which was postponed due to the coronavirus and later rescheduled to run virtually from June 15 to 24.
The project is no small feat for Tencent. Last year, the trade show, which took place in China’s major trade city Guangzhou, attracted just below 200,000 buyers with turnover reaching nearly $30 billion.
The social networking and gaming giant, which has a growing cloud unit, will deploy more than 1,300 acceleration nodes across some 30 countries to handle the traffic of several hundred thousand exhibitors and buyers (1,100 of these acceleration nodes will be in China).
The virtual system will support essential trade show functionalities such as matchmaking between exhibitors and buyers, product demonstrations through videos and interactive live streaming.
The project will also acquire users for Tencent’s enterprise-facing services, which have become the giant’s new growth focus. For instance, Tencent Meeting, a Zoom equivalent, can host up to 300 participants per session. The app is currently the most downloaded iOS “business” app in China, according to App Annie.
ERP startup Jushuitan raised $100 million
Jushuitan, a six-year-old Shanghai-based startup focused on ERP (enterprise resources planning) tailored to e-commerce, announced completing a $100 million Series C round led by Goldman Sachs. While China’s consumer-facing internet companies are in many ways on par with their American counterparts, the country is still “5-10 years behind in the area of enterprise software,” stated Sun Mengxi, managing director at Goldman Sachs.
The firm’s software-as-a-service solutions have served more than 500,000 e-commerce clients in China, but it’s looking for overseas expansion — which will use some of the proceeds from this round of funding. The fresh capital will also help upgrade the Jushuitan’s products and services, work on its integration into supply chains, as well as allow it to invest in or acquire other companies.
Jushuitan is betting on the need for digitization in China’s massive online retail industry, which has seen exponential growth since the early 2010s. Chief executive and founder Luo Haidong contended in a previous interview that the “watershed” in Chinese e-commerce happened around 2013-2014.
“When e-commerce first emerged, stores were able to sell all their inventory as long as they managed their orders well. But as the number of stores increased and growth slowed after 2014, there was a greater need to improve management. I clearly felt that the market was calling for an integrated system to manage orders, warehouses and supply chains — that gave Jushuitan a great opportunity.”
The race to automate vehicles on China’s roads is heating up. Didi, the Uber of China, announced this week an outsized investment of over $500 million in its freshly minted autonomous driving subsidiary. Placing the bet — the single largest fundraising round in China’s autonomous driving sector — is its existing investor Softbank, the Japanese telecom giant and startup benefactor that has also backed Uber.
As China’s largest ride-hailing provider with mountains of traffic data, Didi clearly has an upper hand in developing robotaxis, which could help address driver shortage in the long term. But it was relatively late to the field. In 2018, Didi ranked eighth in kilometers of autonomous driving tests carried out in Beijing, far behind search giant Baidu which accounted for over 90% of the total mileage that year.
It’s since played aggressive catchup. Last August, it spun off its then three-year-old autonomous driving unit into an independent company to focus on R&D, building partnerships along the value chain, and promoting the futuristic technology to the government. The team now has a staff of 200 across its China and U.S. offices.
As an industry observer told me, “robotaxis will become a reality only when you have the necessary operational skills, technology and government support all in place.”
Didi is most famous for its operational efficiency, as facilitating safe and pleasant rides between drivers and passengers is no small feat. The company’s leadership hails from Alibaba’s legendary business-to-business sales team, also known as the “Alibaba Iron Army” for its ability in on-the-ground operation.
On the tech front, the subsidiary is headed by chief executive Zhang Bo, a Baidu veteran, and chief technology officer Wei Junqing, who joined last year from self-driving software company Aptiv.
The autonomous segment can also benefit from Didi’s all-encompassing reach in the mobility industry. For instance, it’s working to leverage the parent company’s smart charging networks, fleet maintenance service and insurance programs for autonomous fleets.
The fresh capital will enable Didi’s autonomous business to improve safety — an area that became a focal point of the company after two deadly accidents — and efficiency through conducting R&D and road tests. The financing will also allow it to deepen industry cooperation and accelerate the deployment of robotaxi services in China and abroad.
Over the years, Didi has turned to traditional carmakers for synergies in what it dubs the “D-Alliance,” which counts more than 31 partners. It has applied autonomous driving technology to vehicles from Lincoln, Nissan, Volvo, BYD, to name a few.
Didi has secured open-road testing licenses in three major cities in China as well as California. It said last August that it aimed to begin picking up ride-hailing passengers with autonomous cars in Shanghai in a few months’ time. It’s accumulated 300,000 kilometers of road tests in China and the U.S. as of last August.
Ettitude, the Los Angeles-based, direct-to-consumer startup making sustainable bedding and sleepwear from bamboo fibers, has raised a sustainably sized round that should keep the company going even in the face of an economic recession.
Co-founded by the Melbourne, Australia native Phoebe Yu and serial entrepreneur Kat Dey, ettitude sells high-end bamboo bedding made using a process she first heard about in her old job working as an exporter helping chain stores source textiles in China.
Sourced from a factory in Zhejiang, China, near Shanghai, the bamboo textiles are made using non-toxic solvents and a closed-loop system that reuses water for the process, according to Yu.
Yu started selling the cleanBamboo-branded bedding under the etitude label in Melbourne first, but when she saw the orders begin to pick up from the U.S. she relocated and took her company with her.
Upon arrival, Yu realized that she’d need a strong co-founder with experience in branding to help her navigate the massive market in the U.S. So Yu turned to AngelList which is where she found Dey.
A serial entrepreneur with a background in retail, whose first company TryTheWorld was acquired by EarthBox in 2017, Dey was looking for her next project.
“Phoebe sent me a sample and i had the best night of sleep in my life,” Dey said. From then on in the two co-founders began the long, hard slog of marketing their business.
Sales are growing, according to the two women, and the company’s chances have certainly been improved by the capital infusion from Drumbeat Ventures and TA Ventures, a European female-founded fund focusing on technology innovation.
The $1.6 million financing will be used to boost sales and marketing as the company expands beyond bedding — with an average price of $178 for a queen-sized sheet set — and into sleepwear and other categories.
“Phoebe, Kat and their brand, ettitude, are as genuine a combination of passion, purpose, and proprietary product that I’ve seen in the marketplace in my 20 years,” said Drumbeat Ventures founder, Adam Burgoon, in a statement. “They are perfectly positioned to bring their mission of sustainability and comfort to a broader audience.”
Canadian coffee-and-doughnut chain Tim Hortons has secured a heavyweight partner to further its China expansion. The company announced on its social media account (in Chinese) on Tuesday that it has landed funding from Tencent, the Chinese social networking and gaming giant, without disclosing the size of the proceeds.
Tim Hortons did not immediately respond to TechCrunch’s request for comment. A spokesperson for Tencent declined to comment on the investment.
The 55-year-old Canadian coffee chain entered China in February 2019. With Alibaba already tapped by Starbucks, its archrival Tencent became an obvious ally for Tim Hortons. The coffee firm said the fresh capital will go towards setting up digital infrastructure, such as a WeChat-based mini app, and opening more storefronts. It currently counts about 50 locations in China, most of which are in Shanghai, and aims to reach 1,500 stores without specifying a deadline for the plan.
Investors and businesses have in recent years been jostling to convert a nation of tea drinkers into coffee consumers by merging online and offline retail. Starbucks palled up with Alibaba on a series of “new retail” efforts, which include shared membership perks between the two, delivery carried out by Alibaba’s Ele.me, voice ordering, and a distribution partnership with Alibaba’s omnichannel supermarket Hema. Coffee upstart Luckin, which is recently ensnarled in an accounting scandal, was digital from day one and focuses on app orders and 30-minute delivery.
Virgin Galactic today revealed a new partnership with NASA, in pursuit of the goal of developing a high speed vehicle for point-to-point travel across Earth. NASA has been pursuing development of high mach air travel itself, with the development of its Supersonic X-59 low-boon supersonic test plane built by Lockheed Martin, but this new partnership agreement with Virgin Galactic and its subsidiary The Spaceship Company specifically seeks to figure out a sustainable way to apply high-speed transportation technologies to civil and commercial aviation.
Virgin Galactic thinks that it will be able to get a head start on this project specifically because of the work it’s done to date on developing, engineering and flight-testing its existent vehicles, which include the WhiteKnightTwo carrier aircraft, and the SpaceShipTwo winged spacecraft that launches from the carrier to reach the edge of space. The design of the company’s system uses traditional runways for take-off and landing, while the rocket-propelled SpaceShipTwo skims the outer edge of Earth’s atmosphere at the boundary of space to provide its commercial tourist passengers with a trip that includes stunning views and a few minutes of weightlessness.
In fact, Virgin Galactic’s technology does seem like a good fit for point-to-point high-speed travel. Perhaps best popularized by SpaceX and one of their many ambitious plans for their forthcoming Starship, point-to-point envisions traveling between two places on Earth at very high speeds either extremely high up in the atmosphere (much higher than current commercial planes go) or even potentially through space. The advantages of doing this are that you can go much faster as the atmosphere thins and friction and air resistance lower. The International Space Station, for instance, performs a full orbit around Earth once every 90 minutes.
A trip from NYC to Shanghai using Starship would take just 40 minutes, SpaceX has said, rather than the 16 hours it takes today. Virgin Galactic and NASA aren’t yet near the stage where they’re talking about trip times, but for comparison’s sake, consider that SpaceShipTwo travels at a top speed of around 4,000 km/h (nearly 2,500 mph), while a Boeing 747 maxes out at about 988 km/h (just under 615 mph).
The new partnership between Virgin Galactic and NASA was formed under a Space Act Agreement, which is a type of agreement that NASA uses to work with organizations it deems able to help it fulfill its various goals, missions and program directives. It’s early yet to imagine what this will look like exactly, but Virgin Galactic says in a press release that it will be “seeking to develop a vehicle for the next-generation of safe and efficient high speed air travel, with a focus on customer experience and environmental responsibility,” and that it will be doing so in cooperation with its “industry partners.”
Chinese electric vehicle startup Nio has secured a $1 billion investment from several state-owned companies in Hefei in return for agreeing to establish headquarters in the city’s economic development hotspot and giving up a stake in one of its business units.
The injection of capital comes from several investors, including Hefei City Construction and Investment Holding Group, CMG-SDIC Capital and Anhui Provincial Emerging Industry Investment Co.
Nio’s factory is already in Hefei, which it operates with Anhui Jianghuai Automobile Group. However, the company’s headquarters and other operations are in Shanghai about 300 miles from the Anhui provincial city. Under this agreement, Nio will locate all of its Chinese operations, including R&D, sales, service and supply chain, in the Hefei Economic and Technological Development Area.
The investment is another important milestone of NIO for its long-term growth, Nio said in a statement Wednesday.
“After receiving the investments from the strategic investors, Nio will have more sufficient funds to support its business development, to enhance its leadership in the products and technologies of smart electric vehicles and to offer services exceeding users’ expectation,” the company said, adding that the launch of Nio China headquarters in Hefei enables NIO to improve its operational efficiency and to sustain its growth and competitiveness in the long run.
Despite the new capital, Nio faces a series of challenges, including a downturn in the Chinese automotive market. Electric vehicle sales in China declined 4% to 1.21 million vehicles in 2019 from the previous year. The company’s ES8 and ES6 vehicles haven’t generated the same demand as Tesla’s Model 3. Meanwhile, the COVID-19 pandemic is dampening demand further as customers stayed home.
Structuring the deal requires some asset shuffling. The investment is targeted towards Nio China, a recently established business unit under Nio Inc.
Investors will put 7 billion yuan, or $1 billion, into Nio’s holding company. Nio will put its core China businesses and assets — which include vehicle research and development, supply chain and its power division — into Nio China, a subsidiary of the holding company. Nio’s parent company will also invest into Nio China.
At the end, investors will hold a 24.1% stake in Nio China while Nio will have a 75.9% controlling equity interesting into the unit.
The company expects the closing of the investments to take place in the second quarter of 2020, subject to the satisfaction of customary closing conditions.