Will all our drugs come from China?

I’m no car expert (I don’t even drive), but my cofounders used to work at a company called Applied Intuition that develops self-driving software for automakers. Over lunch we often talk about the similarities and differences between the pharma and auto industries, and one of the themes we keep returning to is the impact that innovation from China is having on established Western firms.

The big Western original equipment manufacturers (OEMs) — Volkswagen, Ford, BMW, GM, etc. — are facing an existential threat from Chinese OEMs that relatively recently began to push the bounds of performance, cost-efficiency, driver experience, and autonomy1. For too long the Western carmakers have been content to innovate in a gradual way; a bit more engine performance here, some new trims there — a few software integrations even (CarPlay!). Meanwhile, the ongoing technology transition from combustion engines to electric vehicles (EVs) gave Chinese manufacturers an opening to move from parts suppliers to car manufacturers in their own right.

A defining characteristic of the new wave of Chinese EVs is how they vertically integrate software and hardware in a way that’s hard for the stuck-in-their-ways Western companies to replicate; the pressure to respond to this has been a big driver of Applied Intuition’s partnerships with Western OEMs e.g. with Porsche. If you want to get a sense of how far ahead some of the high-end Chinese cars are check out this review of a futuristic Yangwang SUV.

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