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Brazil – Long Road Ahead

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Sentiments regarding economic recovery in Brazil rose high when Index of Economic Activity of the Central Bank (IBC-Br) recorded growth in January and February this year, only to be dampened by the March data, which showed 0.44% decline in the index. Hope of economic revival was hinged on good show by service sector, coupled with anticipation of improvement in agriculture and industrial sectors in the first quarter of 2017.

Fluctuations in IBC-Br, which is considered as a preview of Brazil’s GDP performance, indicate the fragile condition of the country’s economy, shaken by two back-to-back recessionary years. Downturn of 2015 and 2016 was uncommon in the country’s recent economic history, which had not seen the GDP declining for two straight quarters on more than four occasions since 1996. Brazil was among the few countries that were able to withstand the global financial turmoil of 2008-2009.

Reasons behind the deterioration of the Brazilian economy seem to be clear. Reliance on commodity exports for growth and high consumer debt were among the key factors that burst Brazil’s economic bubble. Unless these issues are addressed, Brazil’s long-term economic recovery will remain doubtful. Hence, it is imperative to look where the country stands with respect to each of the factors that contributed so considerably to the deterioration over the past two years.

EOS Perspective

In near term, commodities are likely to retain high share in Brazil’s external trade, as increasing the export share of finished or semi-finished goods would require significant efforts that Brazil currently is unlikely to be capable of making. Commodity prices are expected to remain volatile in near term, with soybean, sugar, and wheat likely to continue registering decline in prices (as witnessed year on year, April 2016 – April 2017). Therefore, unless the domestic demand picks up, commodity export is unlikely to assist significantly in boosting the Brazilian economy in the near future.

Keeping interest rates low is one of the ways to boost spending, and the country’s falling inflation, which in April 2017 plummeted to 4.08% (below the market forecast of 4.1%), has enabled the central bank to slash interest rates from 12.25% to 11.25%. This is expected to reduce the cost of credit for households, thereby boosting spending (amid fears of debt burden ballooning up again).

Brazil needs to create more assets to increase productivity and to create more income sources. Capital formation (a measure of investment) as a share of GDP was at about 15.5% in 2016 (fourth quarter) as compared with the high of 23% in 2013 (first quarter). The country needs to invest more, and one way to unlock funds for this would be through reforming the pension scheme (bill related to pension reforms was passed in lower house of Congress in May 2017 amid protests), which is the primary reason behind Brazil’s fiscal deficit. Brazil currently spends more than 10% of its GDP on pensions. Reforms seek to fix minimum retirement age at 65 for men and 62 for women. At present, many Brazilians qualify to retire in early to mid-fifties, and this not only impacts the productivity but also puts pressure on the government coffers.

There is a general consensus that Brazil will come out of recession in 2017, registering a modest sub-1% growth. However, to sustain this recovery, it will require a political will, fiscal discipline, and a vision for long-term growth.

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India – Prime Target for Smart Mobility

India’s rapidly growing urban population (CAGR 2.35% between 2011 and 2031e), increasing motorization rate (CAGR 12.7% between 2010 and 2025e), critical level of traffic congestion, growing rate of accidents, inadequate mobility monitoring and deteriorating air quality make the country a prime target for smart mobility solutions.

Mobility-as-a-Service (MaaS) could be a game changer for India’s traffic and transportation woes by seamlessly integrating the first and last mile connectivity to supplement the existing fragmented transportation systems. MaaS has the potential to help bridge the current gap between rapid mobility demand and the slow pace of infrastructure development. The rapid consumerization of IT and technology and growing smartphone penetration should help boost the adoption of MaaS, as long as the country’s government stands by its words of making India ‘truly digital’.

We take a closer look at MaaS and the potential impact it might have on India’s transportation and travel – two areas that could be radically altered.

To read further, go to Automotive World’s Q2 2017 Megatrends Magazine.

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Japan Hopes to Get a Slice of Mercosur Opportunity Cake as LATAM Exports to USA Decline

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In early May 2017, representatives from Japan and Mercosur, a sub-regional alliance consisting of Argentina, Brazil, Paraguay, and Uruguay, met to discuss trade and investment between the nations with the aim to promote free trade and fluid movement of goods. Over the past years, business between Mercosur and Japan has been badly affected mainly by outdated trade policies that have not been revised in a long time. To improve economic relations between Japan and member countries of Mercosur, trade policies need to be renewed and new sectors of investment should be explored.

In 2016, Japan exports to Mercosur nations reached US$3.5 billion and imports from Mercosur totaled US$7.6 billion. Both exports and imports drastically reduced since 2012, taking a hit of 52% and 42.8%, respectively.

Japan and Argentina

After a decade of slow business dealings, trade relations between Japan and Argentina are showing signs of improvement. The number of Japanese companies operating in Argentina reduced from 120 in the 1990s to 54 by the end of 2007. However, the interest of Japanese businesses in the Argentinian market has started to return since the last quarter of 2015, with 78 companies currently in operation in Argentina, and Japan aims to have a minimum of 200 Japanese companies operating in the coming years. According to Japan External Trade Organization (JETRO), in 2016, Japanese exports to Argentina stood at US$630 million, primary exports being machinery and electronics. Imports to Japan were worth US$762 million in the same year.

In order to boost Argentina’s economy, president Mauricio Macri has focused on reviving infrastructure projects in the country. Taking an advantage of this opportunity, Japanese trading companies are keeping a close watch on upcoming rail contracts. Marubeni Corporation, Mitsubishi Corporation, and Mitsui & Co., three of the largest trading companies in Japan, are interested in sales of passenger rail cars in Argentina and planning on submitting bids as part of the new proposed projects. Japanese companies plan to invest between US$6 billion and US$9 billion in Argentina during 2017-2020. The investments are likely to be made across various sectors including mining, energy, and agriculture, among others. With more sectors now open to investment, Japan hopes to boost trade in the broader Latin American market.

Japan and Brazil

Brazil is a large investment market for Japan. With close to 700 Japanese companies currently operating in Brazil, the commercial and industrial opportunities the country offers are unquestionable. In 2016, Japan imported goods worth US$6.7 billion from Brazil, a drop by 10.6% over the previous year when the imports stood at US$7.5 billion. Japan and Brazil are now partnering to strengthen trade and investment between the two countries to spur increase in trade.

Brazil offers Japan a considerable investment opportunity in infrastructure projects. After the Cooperation Agreement for the Promotion of Infrastructure Investments was signed in October 2016, investment in areas such as transportation, logistics, information technology, and energy is expected to increase. At the same time, Japan is a large market for Brazilian agricultural products such as soy, corn, and cotton, but Brazil is also interested to enter the fruit and beef market in Japan. While discussions and negotiations regarding the entry of Brazilian products in the Japanese market are still under way, issues related to hygiene and sanitary standards still need to be addressed.

Japan and Paraguay

Paraguay is one of the least explored countries in terms of trade by Japanese firms. Between 2011 and 2014, only some 10 Japanese companies established operations in Paraguay. Japanese exports to Paraguay stood at US$77.5 million in 2016 while imports from Paraguay were reported at US$41.6 million during the same year. Japanese companies plan to invest in Paraguay to improve business and generate revenue in sectors such as infrastructure, agriculture, and energy, which are seen as areas of opportunities in the future.

Japan and Uruguay

In January 2015, the countries signed a Japan-Uruguay Investment Agreement – the first investment agreement between Japan and any member of Mercosur. Uruguay has become an attractive destination for Japanese investors mainly due to the country’s economic and political stability, low level of corruption, and easy inflow of FDI in the country. Additionally, Japanese companies are provided with the same opportunities and conditions as domestic firms. Uruguay offers the benefit of being able to serve as a distribution hub and boasts of good logistical services to other Mercosur countries – Japanese companies are likely take this as an opportunity to develop an overseas base to strengthen business ties within the region. Uruguay largely depends on natural resources such as wind, water, solar, and biomass to produce energy, making the renewable energy sector in the country another attractive area for investment by Japanese companies in the coming years.

EOS Perspective

The arrival of Trump’s administration leading to USA’s withdrawal from Trans-Pacific Partnership and focus on encouraging domestic industrialization by limiting imports from countries across Latin America, have resulted in several LATAM countries’ attempts to improve and tighten friendly trade relations within their own region as well as with new partners globally, including Asia – we wrote about it in our article Trump In Action: Triumph Or Tremor For Latin America? in February 2017. Japan appears to be willing to use this situation to its advantage by renewing trade and investment policies with Mercosur nations as well.

In the past five years, exports and imports value have declined continuously between Japan and Mercosur nations, and to reverse this declining trend and to revive trade, Japan started to build new trading relationships with Mercosur countries. If successful, this initiative is likely to serve two purposes – firstly, Mercosur countries can reduce dependence on the USA and move towards new markets to look for new opportunities, and secondly, through increased investment in Mercosur, Japan can become a prominent player in the region to reap benefits from engaging in business with several emerging countries.

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Nanotechnology – Changing the Face of Agriculture

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Nanotechnology, using particles of dimension between 1 and 100 nanometers, has been around for quite a while. It has been successfully implemented across various verticals including medicine, information technology, energy, consumer goods, among others. Over the past decade, there has been an increased interest in applications of nanotechnology for improving plant protection and enhancing crops’ nutritive value. Agrochemical companies are continuously exploring possibilities offered by nanotechnology in the field of agriculture. Though considered to be a revolutionary technology, research will continue to evaluate potential benefits of this ‘technology in progress’.

The growth of the overall nanotechnology market is certain in the future – it was already projected to be over US$ 3 trillion in 2015. Although the understanding of the critical role nanotechnology plays in modern agriculture is increasing, the development of these products for agricultural purposes has received relatively little attention. Developing nanocapsules for delivering pesticides, fertilizers, and other chemicals to agricultural fields in a more efficient manner should allow to reduce the application of plant protection products, minimize nutrient loss, and increase crop yields. Agrochemical companies are conducting rigorous R&D to develop nano-based chemicals and have been successful in developing a varied range of products. For instance, Syngenta, a Swiss agribusiness company, developed a nano-encapsulated broad spectrum synthetic insecticide named Karate Zeon, containing lambda-cyhalothrin that is released on contact with leaves, for the control of insect pests in a range of crops. The product is currently available for use in multiple countries including USA, Germany, Brazil, France, India, Mexico, Indonesia, UK, Canada, and Italy. Another agrochemical company, US-based Nano Green Sciences, developed an organic nanoparticle-based plant tonic Nano Green that enhances the nutrient uptake of the plant thus improving plant growth. The company planned to apply for approval of the product’s use as a pesticide in various countries back in 2008, but the status of this application is currently unclear.

Though several nanoparticle products are available in the market, they do not classify as ‘nano’ mainly due to lack of standardized definition of the product. Defining a nanomaterial as ranging between 1 and 100 nanometers does not necessarily apply to all. While, surely, these nanochemicals are smaller structures that differ from conventional chemicals (pesticides and fertilizers) in terms of biological and chemical configuration, they also vary in size, nature, and terms of use. Due to this unclarity, the currently available agrochemicals have not been officially labeled as nanoparticle-containing products. Many agrochemical companies have filed patent applications for their existing nanochemicals, but these applications’ statuses are still mostly unclear.

EOS Perspective

Research is conducted to understand the applicability of nanotechnology in agriculture. Solutions are being devised to improve crop quality by optimizing nutrient management, reduce the amount of chemical sprayed by smart delivery of active ingredients, and to minimize nutritional loss of the soil. Research institutes and agro companies are still exploring the potential that nanotechnology can offer in the agricultural field. Advanced products such as plant protectors, soil enhancers, and products that increase the nutrients absorption capacity of plants are being developed. For instance, Rice Research and Development Institute of Sri Lanka, in 2016, tested a range of nanoparticles referred to as Urea-hydroxyapatite nanohybrid, carrying urea to increase the crop yield of rice. The test results showed 10% increase in crop yield and reduced the consumption of fertilizer by 50%.

Despite potential benefits that nanotechnology can offer, these products are available in the market only on a small scale mainly due to the high costs involved in their development. The agricultural nanotechnology also does not promise sufficient ROI. Opportunities to test and understand the long term benefits of these nano products on crops in live environment are limited. Ensuring a good availability of dedicated agricultural farms solely for the purpose of R&D to study their behavior seems nearly impossible and producing these nano products involves high cost of development which indicates slow turnaround in terms of profits. Agrochemical companies, apart from developing technologically advanced products, are also aiming to cut the development costs. For instance, in 2005 NaturalNano, a US-based company, started developing clay nanotubes called halloysite as potential low cost alternative nanocapsules used as a carrier of pesticides. More technological initiatives similar to this are required to make nanotechnology in agriculture a success.

Thanks to the ambiguity of which available products can be considered under the ‘nano’ category and the uncertainty about the products profitability, the use of nanochemicals on a large scale seems limited in current times. It seems that in the near future agriculturists are likely to continue using the conventional means to treat crops in order to keep insects and pests at bay. There is no doubt that nanotechnology has huge potential to impact the agricultural sector in a positive way and may emerge as a winner in distant future, however, to be used at a commercial scale, continuous research to evaluate the technology’s potential future is crucial.

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As GM Says Goodbye, Volvo Says Namaste India!

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18th May 2017 was a busy week for India’s automotive industry. One would think that it was the financial year end which was causing all the drama, but not really.

It was the week when, to some people’s surprise and other’s ‘that was expected’ reactions, GM India decide to call it quits – no more of the beloved (?) Chevrolet brand on India’s roads anymore. Cars will continue to be produced (or so GM claims, at least for the time being), but only to be exported to other markets in the APAC region.

The fact that GM is withdrawing from India does not come as a surprise – GM’s Chevrolet brand hasn’t performed well in India, in spite of GM introducing new models in recent years. In the segment, in which GM introduced its vehicles (mostly hatchbacks), there had already been an intensive competition from the likes of Maruti and Hyundai, and more recently Nissan. It would have perhaps been better for GM had it introduced models such as Opel or even Cadillac to lure a wider segment of India’s population. One of the reasons OEMs such as Nissan, Honda, or Toyota have done well is that they constantly innovated for the India market, changed designs, and introduced new models and variants that catered to a wide customer base. GM seems to have fared poorly on that front. GM simply failed to sense of the pulse of India’s car buyer who looks for an all-inclusive deal: value-for-money + safety + luxury + service + brand appeal + etc., which clearly was not being provided by the American OEM.

As GM was announcing its exit, Volvo, a Swedish OEM, shared the ambitious goal of doubling its market share in India’s premium segment by 2020. Interestingly though, Volvo’s announcement to start assembling premium cars did not come as a surprise. It already has a good brand name in the CV segment and in the PV segment, the section of India’s customers who would buy a Volvo car already associates it with classy design and exceptional safety. Local assembly would, in fact, be a boost for Volvo if they are able to introduce locally made, India-priced cars as well as use this India production as a hub for South-east Asia exports. Indian car buyers are hungry for more and more international OEMs to enter the market and provide them with world-class products, and cars are no exception. Albeit late to the party, Volvo has the breadth of quality products and service competence to make a strong dent in the premium segment.

So, while 18th May was good for some and bad for quite a few, the dynamics of India’s automotive market continues to keep OEMs on tenterhooks – yes, there is a great opportunity if one gets the formula right, but the pill of failure can be extremely bitter.

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TPP 2.0 – Minus the USA

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The Trans-Pacific Partnership (TPP) is a regional trade agreement involving twelve countries on the Pacific Rim: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the USA, and Vietnam. TPP was to be the largest regional trade agreement as the countries involved accounted for 40% of the world’s GDP and 26% of global trade by value. TPP differed from usual trade partnerships as the agreement, along with focus on free trade, also promoted intellectual property protection, enhanced labor standards, and environmental protection, as well as took into account the needs of a digitized global economy – setting new standards for 21st-century global trading environment.

Negotiations on the deal were concluded in October 2015 and representatives from each country signed the agreement in February 2016. TPP was to come in effect after approval of the agreement by each country’s legislature. Before the deal could materialize, the newly elected president of the USA, Donald Trump, issued an executive order in January 2017 withdrawing the country from the process – leaving remaining member-countries in a lurch.

As per the terms, TPP could come in effect only if ratified by six countries accounting for 85% of the group’s total GDP. Since the USA accounted for about 60% of the groups’ total GDP, its withdrawal killed the deal in a literal sense. However, the remaining eleven countries are still clung to the idea of TPP and are reluctant to throw away years of negotiation. This leads to a question – can TPP survive without the USA? We take a look at the countries’ take on a newly proposed TPP agreement involving the group of eleven countries, without the USA.

Japan to lead the pact

When the USA opted out from TPP, the first reaction of the prime minister of Japan reaffirmed that the trade deal was meaningless without participation of the USA – the largest market in the group. Soon Japan realized that even through eleven-member TPP it can still yield net economic gains in medium-sized markets such as Australia and Vietnam. Moreover, this deal was essential to reduce the dominance of China in the region. Since TPP has been an integral part of the Japanese government’s growth strategy, the country took a U-turn from its previous stance and took the lead in pushing forward the relaunch of TPP involving eleven member countries.

Australia, New Zealand, Singapore, and Canada still in favor of the deal

Australia and New Zealand, being advocates of trade liberalization, were among the first few countries to express their intention to continue with TPP without the USA. Through the eleven-country TPP, Australia and New Zealand aim to gain access to new markets such as Canada, Mexico, and Peru, with which these countries do not have any trade agreements. Moreover, New Zealand expects to gain about two thirds of the US$2.7 billion in estimated annual benefits (after 15 years) if the eleven-member TPP is implemented with terms similar to original deal. This indicates that TPP would result in net economic benefit for the members even without participation of the USA.

Singapore, being an export-oriented economy, strongly favors multilateral trading system especially with like-minded trading partners and thereby the country is likely to support eleven-member TPP.

In a bid to strengthen its economic ties with the pact, especially with Japan, Canada has also shown interest in renegotiating the TPP with remaining eleven countries and urges other nations to join the trade deal.

These countries believe that it would be better to have a weakened TPP without the US participation than to have no TPP at all.

Latin countries sense distinct opportunity

Mexico has enjoyed free access to markets of its largest trading partners – the USA and Canada – since 1994 through North American Free Trade Agreement (NAFTA). As Trump administration turns unfriendly and hostile towards Mexico, threatening to renegotiate or even withdraw from NAFTA, Mexico is looking to diversify its trading options to counter the effect. Under such circumstances, Mexico is more than willing to pursue an eleven-member TPP that will open new markets for the country.

Smaller countries such as Chile and Peru are also keen on going ahead with the proposed eleven-member TPP so as to gain access to Asian markets.

Some Asian countries may lack enough incentive to continue with TPP in absence of the USA

Without participation of the USA, it seems difficult to lure countries such as Malaysia and Vietnam that agreed to change rules on state-owned enterprises and deregulate key sectors such as finance, telecommunications, and retail in anticipation of gaining access to the US market. Both the countries signaled waning enthusiasm for TPP in absence of their largest target market – the USA. For instance, through the twelve-member TPP, Vietnam was expecting its textile exports to increase by 40%, primarily due to free access to the US market at 0% tariff. Thus, without the USA, the expected economic benefits of TPP would drastically reduce for Vietnam as well as Malaysia.

In such a scenario, these countries might give preference to alternative trade agreements such as Regional Comprehensive Economic Partnership (RCEP) that includes seven of the TPP members (i.e. Malaysia, Vietnam, Brunei, Singapore, Japan, Australia, and New Zealand). Launched in 2015 and backed by China, RCEP is the proposed trade agreement aimed to economically integrate 16 countries in Asia and Oceania region, however, this trade deal lacks the elements of intellectual property protection or labor and environment laws that TPP is set apart with. Brunei, the smallest economy in the pact, is actively involved in further discussions, however, its final take on eleven-member TPP is still unclear.

EOS Perspective

While the twelve-member TPP is effectively dead, the new TPP, if at all formed and implemented in future, would be very different from the original one. Being the largest economy in the group, the USA had great negotiation power in development of the original TPP. With the USA’s exit, the power dynamics have changed and the remaining member countries might want to reconsider certain terms that they agreed upon only under the pressure of the USA. For instance, Malaysia could demand change in TPP’s rules that restrict the country to offer preferential treatment to ethnic Malays in government contracts. Such difference in power dynamics might indicate that the eleven-member TPP negotiation process is unlikely to be as simple as just striking ‘the USA’ off the 5,000+ page agreement. It might take years of discussions and renegotiations before the member countries could reach a consensus.

Furthermore, increasing participation from other countries is one way to fill the void left by the USA. TPP members have extended invitation to several countries, including China and UK. China immediately rejected the proposal stating that the TPP is very complex and the country is rather focused on RCEP. In the meantime, UK is yet to confirm its intent. UK is looking to deepen ties with other countries to boost trade after Brexit, thus, joining the TPP might be a good decision, as this might possibly allow the country to have direct access to the markets of the current eleven member countries. However, UK would need to objectively weigh in the estimated benefits of joining TPP as against the stringent requirements of the deal.

At this stage, the future of TPP is uncertain. In the end, all countries act in the best interest of their own economies as well as own political aspirations. Though the ambitious TPP proposal laid out a strong vision for international rules-based trade and investment system for global digital economy, it is far from implementation unless it ensures satisfactory benefits for all the countries involved.

China wine market
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China’s Wine Market: Will Challenges Crush the Growing Appetite for Imported Wines?

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Over the past decade, China’s wine industry has evolved significantly and is at the forefront of becoming one of the most promising emerging wine markets globally. Globalization and massive socio-economic transformations among Chinese population have revolutionized consumers’ preferences and taste, which in turn created demand for high quality foreign wines in the country. Imported wines have been pouring into China, with approximately one out of every five wine bottles opened being imported. In 2016, China imported 638 million (15% y-o-y growth) liters of wine, valued at US$ 2.4 billion (16% y-o-y growth). The Chinese wine buyers are enthusiastically purchasing a variety of labels across all price ranges, making it an important market for global wine sellers. However, the burgeoning imported wine industry in China faces a few impediments. Faced with stringent import regulations, supply chain impairments, language barrier, counterfeit products, and exorbitant tariff rates, importing wine into China is not a simple process. Nevertheless, importers and producers need to overcome these challenges to establish themselves in the flourishing imported wine business in China.

China is one of the ten largest wine consumers in the world with over 2,000 brands of wine sold in the country, out of which 1,500 were imported in 2015. Consumption of imported wine is the highest in tier I cities including Beijing, Guangzhou, Shanghai, and Shenzhen, which together account for 53% of imported wine sales volume. These cities are populated with expatriates, western-educated young professionals, and consumers, who prefer imported wines. France has consistently been the key wine exporter, accounting for a share of 40% in total wine imports (by volume) to China in 2016, followed by Australia, Spain, and Chile.

China’s Wine Market

Imported wines are quickly trickling down among the wealthy Chinese citizens in urban areas, as consumption of wine is considered a status symbol, influenced by westernization. Growth is further driven by youth population and growing middle class learning about foreign liquor brands and demanding imported wines. In addition, increased consumer spending and government’s promotion of wine as a healthy substitute to the traditional alcohol ‘baijiu’ have accelerated demand for wine in the country.

Despite the growing wine demand, the imported wine industry faces several challenges including dealing with high import tariff rates and circulation of fake wine, breaking through the language and cultural barrier in China, and facing the complex distribution system along with strict import regulations.

EOS Perspective

Chinese consumers are typically interested and enthusiastic about overseas goods which explains their yearning for imported wines. The growing demand for foreign wines is driving the import business, with over 24,000 wine importers present in China, located mostly in Shanghai, Beijing, and Guangzhou. Although obstacles continue to hover above the imported wine market, certain steps have been taken to ease the hassles and this could help alleviate challenges to some extent.

What steps have been taken to overcome challenges?

The Chinese government is actively trying to curb the counterfeiting issue in the country and has introduced an anti-fraud initiative called Protected Eco-origin Product (PEOP) which is a label placed on wine bottles that acts as a guarantee of authenticity by the government. Several technologies are being adopted, including radio frequency identification (RFID) tags, Near Field Communication (NFC) chips, QR codes, etc., to combat counterfeiting. RFID tags and NFC chips offering unique serial identifiers are incorporated into wine bottle’s capsule. Using an app, users can quickly check the authenticity of wine bottles.

The government is also focusing on infrastructural development of tier II cities, which is likely to improve distribution channel across these cities, resulting in better access to imported wines.

What does the future hold for imported wine market in China?

Over 2016-2019, the Chinese wine market is forecast to reach US$ 69.3 billion, growing at a CAGR of 15.4%, with imported wines likely to occupy a significant portion of the market. In near term, imported wines are likely to filter down to tier II cities, as consumers’ knowledge and preference for imported wines is growing amidst government’s efforts to make wine more accessible across these cities.

Further, the imported wine market is likely to undergo certain structural changes. Presently, the Chinese imported wine market is very fragmented, comprising several small importers focusing and operating locally within one city. These smaller importers might realign themselves by joining forces through mergers and acquisitions, in order to take advantage of economies of scale to be able to better compete on price.

Online distribution of wines is likely to gain more popularity, as China offers highly developed e-commerce infrastructure to sell products online. Consumers are slowly opting for online channel to purchase imported wines due to the availability of wide selection, transparency of information, and ease of comparing different brands with each other through information available online. Some producers started selling their wines through marketplaces such as Tmall and JD.com, as well as through specialized alcohol platforms such as Yesmywine, Jiuxian, and Wangjiu. Further, importers use delivery apps such as Dianping and ELeMe to sell imported wines.

The foreign wine market is expected to continue thriving in China and remain an attractive proposition for importers and producers. However, the key challenges will most likely persist in the market amidst other weaknesses including slow implementation of regulations, corruption, and weak administration.

Nevertheless, wine importers and producers foresee tremendous growth opportunity in China’s imported wine industry, and they are likely to continue making efforts to navigate through all obstacles, hoping to make the struggle worthwhile in the long term.

Driverless Autonomous Vehicles
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Autonomous Vehicles: Moving Closer to the Driverless Future

An Uber self-driving car was reported getting into an accident in Arizona last month. But as the saying goes “any publicity is good publicity”, this also holds true for autonomous vehicles. The news sparked a discussion and shed some light on potential challenges the technology may face before it becomes available for commercial use. At the same time, it spread awareness about the level of safety testing being done to improve the technology before it is rolled out to the public. We are taking a look at what’s potentially in store for users waiting to see streets flooded with driverless vehicles.

Autonomous self-driving vehicles have been the talk of the industry for some time now, with some of the initial attempts to create a modern autonomous car dating back to 1980s. However, major advancements have only been made during the last decade, coinciding with advancements in the supporting technologies, such as advanced sensors, real-time mapping, and cognitive intelligence, which are perhaps the most crucial to the success of any autonomous vehicle.

Early advancements in the segment were led by technology companies which focused on developing software to automate/assist driving of cars. Some prime examples include nuTonomy, which has recently partnered with Grab (a ride-hailing startup rival to Uber) to test its self-driving cars in Singapore, Cruise Automation (acquired by GM in 2016), and Argo AI, which has recently received a US$1 billion investment from Ford. These companies use primarily regular cars/vans that are retrofitted with sensors, as well as high-definition mapping and software systems.

However, software alone is not capable enough to offer self-driving driving functionalities, therefore, automotive OEMs are taking the front seat when it comes to driving advancements in autonomous vehicles segment. New cars/vans, which are tuned to work seamlessly with this software, are likely to adapt better with the algorithms and meet stringent performance and safety standards required before they can be rolled out commercially. California-based Navigant Research believes that with its investment in Argo AI, Ford has taken a lead among such automotive OEMs in the race to produce an autonomous, self-driving vehicles.

Advanced levels of autonomy still to be achieved

In a nutshell, there are five levels of autonomous cars. Levels 1 through to 3 require human intervention in some form or other. The most basic level comprises only driver assistance systems, such as steering or acceleration control. Most common form of currently prevalent autonomy is Level 2, which involves the driver being disengaged from physically operating the vehicle for some time, using automation such as cruise control and lane-centering. Tesla’s current Autopilot system can be categorized as Level 2.

Level 3 involves the car completely undertaking the safety-critical functions, under certain traffic or environmental conditions, while requiring a driver to intervene if necessary.

Most OEMs developing autonomous cars target launching their vehicles in the next three to five years. Tesla is probably the closest, with its Model 3 car with Autopilot 3 system expected to be unveiled in 2018 (however, this depends on whether the regulations are in place by then). Nissan, Toyota, Google, and Volvo plan to achieve this by 2020, while BMW and Ford have set a deadline for 2021. Most of these companies are working on achieving cars with Level 3 autonomy, with a driver sitting behind the steering wheel to take over from the car’s programming as and when required.

Level 4 and Level 5 vehicles are deemed as fully autonomous which means they do not require a driver and all driving functions are undertaken by the car. The only difference is that while Level 4 vehicles are limited to most common roads and general traffic conditions, Level 5 vehicles are able to offer performance equivalent to a human driving in every scenario – including extreme environments such as off-roads.

Some OEMs, Ford in particular, are against the practice of using a human as a back-up, based on the understanding that a person sitting idle behind the wheel often loses the situational awareness which is required when he needs to take over from the car’s programming. Ford is planning to skip achieving Level 3 autonomy and target development of Level 4 autonomous vehicles instead.

Google is currently the only company focusing on developing a Level 5 autonomous car (or a robot car). The company already showcased a prototype that has no steering wheel or manual controls – a prototype that in true sense can be the first autonomous car. Tesla also plans to work on achieving the highest level of autonomy and plans to fit its cars with all hardware necessary for a fully-autonomous vehicle.

High costs continue to be challenging

While the plans are in place, one massive roadblock that persists in the development of these cars of future are costs. There are multiple sensors used in these cars, including SONAR and LIDAR. The ongoing research has helped to reduce the costs of sensors – Google’s Waymo has managed to reduce the costs of LIDAR sensors by 90%, from about $75,000 (in 2009) to about $7,000 (in 2016) – but they are still very expensive. The fact that a driverless car requires about four of these sensors, makes the cars largely unaffordable for consumers, and that puts off any discussion of feasibility of commercial production at this stage.

EOS Perspective

The first three months of 2017 have been particularly eventful, with several prototypes launched or tested. This activity is expected to increase further as companies try to meet their ambitious plans to roll out self-driving cars by 2020.

Initial adoption is likely to come from companies investing in commercial fleet, particularly those focusing on on-demand taxi or fleet, similar to what Uber or Lyft offer. Series of investments by large bus manufacturing companies, such as Scania, Iveco, and Yutong, also indicate how this technology will be the flavor of the future in public transport.

It is too soon to comment how and when exactly these autonomous vehicles can be expected to impact the way people choose to travel and how they may redefine the societies’ mobility. It is likely to depend on how the regulatory environment evolves to allow driverless cars in active traffic. Current regulatory environment for driverless cars is still at a nascent stage and allows only for testing of these cars in an isolated environment. Some states in the USA, particularly California, Arizona, and Pennsylvania, have opened up to testing of these cars in general public. However, recent accidents and cases of autonomous cars breaking traffic rules have put pressure on authorities to reconsider their stance until the cars become more advanced and tested to handle the nuances of public traffic. We might need to wait another decade or two before driverless cars are a reality in many markets. As things stand, endless efforts continue to go behind the curtain, as companies strive to win the race to develop highly autonomous and safe vehicles.

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