Amazon China to close local marketplace and place more focus on cross-border

Amazon has finally given up the fight with Chinese online shopping giants to capture the domestic market. On Thursday, the Seattle-based ecommerce company announced it will shut down its marketplace on Amazon.cn, which connects mainland Chinese buyers and sellers, while other units of its local venture will stay intact.

“We are working closely with our sellers to ensure a smooth transition and to continue to deliver the best customer experience possible,” an Amazon spokesperson told TechCrunch, adding that this segment of the business will end on July 18.

The partial retreat, first reported by Reuters and Bloomberg, is indicative of the relentless ecommerce race in China where Alibaba and JD.com dominate, with newcomer Pinduoduo closing on the incumbents’ heels.

But this is hardly the end of Amazon’s China story. The American giant has over the years attracted waves of cross-border sellers, many of whom have hailed from China’s traditional export industry looking to sell cheaply manufactured goods to consumers around the world for lucrative margins. To date, Chinese export suppliers are able to sell to 12 countries that include India, Japan, Australia, Canada, the United States, and five Western European countries.

Other global ecommerce players also have their eyes set on the massive raft of goods flowing out of China, though each comes with a different geographic focus. Alibaba-backed Lazada, for example, is the bridge between Chinese merchants and Southeast Asian shoppers, while Jumia, which just listed in the U.S., exports from China to Africa.

“The biggest appeal [of exporting through Amazon] is the low costs because we are close to a lot of supply chain resources,” a Shenzhen-based vendor selling water-resistant placemats on Amazon told TechCrunch.

In the meantime, China has developed a big craving for imported goods as middle-class consumers now demand higher quality products. Amazon is in the import business, too, although it lags far behind more entrenched players such as Alibaba, of which Tmall Global takes the lead with 29 percent market share in the cross-border ecommerce space according to data from iResearch, dwarfing Amazon’s 6 percent.

That could change if Amazon finds a prominent local partner. Rumors have swirled for months that Amazon was reportedly in talks to merge its import unit with Kaola, the cross-border shopping business run by Chinese internet giant Netease with a 22.6 percent market share.

Not to be forgotten, Amazon also offers cloud computing services to Chinese enterprises although, in this space, it’s again in a direct face-off with Alibaba Cloud, the dominant player in China. Lastly, China remains the largest market for Kindle, so pivotal that the e-reader launched a localized model just for China.

“Over the past few years, we have been evolving our China online retail business to increasingly emphasize cross-border sales, and in return we’ve seen very strong response from Chinese customers,” said the Amazon spokesperson. “Amazon’s commitment to China remains strong—we have built a solid foundation here in a number of successful businesses and we will continue to invest and grow in China across Amazon Global Store, Global Selling, AWS, Kindle devices and content.”

Starbucks challenger Luckin’s fundraising spree continues with $150M investment

Coffee startup Luckin is continuing its fundraising spree as it sets its sight on becoming an alternative to Starbucks in China.

The a-year-and-a-half old company announced on Thursday that it closed a Series B-plus raise totaling $150 million. The fresh proceeds valued Luckin at $2.9 billion post-money, up from $2.2 billion just four months ago.

While many question Luckin’s cash-fueled expansion, Blackrock, which owns a 6.58 percent stake in Starbucks, shows its confidence in the Chinese startup by pumping $125 million through its private equity fund into Luckin’s new round.

With that, the New York-based investment firm has its bet on two contrasting models for China’s coffee consumption. While Starbucks zeroes in on the brick-and-mortar experience, Luckin is a network of last-mile coffee delivery centers plus places for people to pick up orders and sit down targeting busy white-collar workers.

In a move that would amp up its battle with Luckin, Starbucks teamed up with Alibaba’s food delivery unit Ele.me last August to put hot and cold drinks in people’s hands.

Luckin did not disclose how it will spend the fresh capital infusion, but the pace at which it’s raising suggests the startup is in dire need of cash. The new round arrived less than a year after it secured a $200 million Series A in July and another $200 million from a Series B in December.

Indeed, Luckin founder Qian Zhiya, a former executive at auto rental firm Car Inc, confessed the company burned through $150 million within just six months from launching. A big chunk of money had gone to shelling out deep discounts for consumers, while the coffee challenger’s offline expansion was as cash-intensive.

As of late, Luckin has opened 2,000 outlets consisting of small prep kitchens, pickup stations and cafes in 22 Chinese cities, up from 1,700 locations reached in December. That gives Luckin less than eight months to fulfill its ambition of becoming the “biggest coffee chain in China by the number of outlets run and cups sold.” The goal is to top 4,500 outlets by the end of 2019.

Starbucks, which made its foray into China 20 years ago, has also been aggressively putting up storefronts. It currently runs 3,600 stores across 150 cities in China, up from 3,300 last May.

When it comes to actual people using the service, Starbucks still enjoys a huge lead. The Luckin app that allows one to order and pay has 650 thousand unique downloads in March, data from research firm iResearch shows. Starbucks’s app is more than four times its size with 2.81 million unique downloads from the same period.

Other investors who joined in on Luckin’s latest round included existing backers such as Singapore’s sovereign wealth fund GIC, Chinese government-controlled China International Capital Corporation, Dazheng Capital and Joy Capital, whose founding partner Liu Erhai sits on Luckin’s board.

Terry Gou will resign as Foxconn’s chairman to run for president of Taiwan

Foxconn chairman Terry Gou officially announced on Wednesday that he will run for president of Taiwan. Gou will step down from leading the company (also known as Hon Hai Precision Industry Co. Ltd.), one of Apple’s most important manufacturers, in order to campaign for the nomination of the Kuomintang, the pro-China opposition party.

Taiwan’s economy and complicated relationship with China will be at the heart of the 2020 presidential campaign, as incumbent Tsai Ing-wen defends her position against not only candidates from the Kuomintang and other parties, but also a challenger from her own party, the Democratic Progressive Party, William Lai, who entered the race last month.

Gou earlier said that his presidential aspirations had been blessed by Mazu, the sea goddess who is one of the most important Taoist and Buddhist deities. Gou founded Foxconn in 1974 and has held no political office, but his campaign will be helped by his business reputation and reported $7 billion net worth.

Gou’s lack of government experience may be balanced in the mind of voters by his relationships with Donald Trump and China’s government. Foxconn has committed to building a $10 billion factory in Wisconsin. Even though Taiwan’s sovereignty is not recognized by China, which views the country as a rogue province, Foxconn has more plants there than in any other country.

Dutch chipmaker NXP makes China push by backing radar company Hawkeye

Dutch chipmaker NXP Semiconductors has come a long way since Qualcomm’s outsize $44 billion to acquire it fell through last year. In an announcement released on Tuesday, NXP said it’s agreed to back and partner with Hawkeye Technology, a Chinese company specializing in automotive radars, as part of an ambition to capture the rapid growth of sensor-powered vehicles in China.

Financial terms of the investment were undisclosed, but the tie-up will see Hawkeye providing a suite of technical know-how to NXP. That includes the Chinese company’s engineering team, a research lab it set up with Southeast University in the Chinese city of Nanjing, and its 77Ghz radar, a long-range sensing technology that enables cars to detect crashes down to sub-millimeter accuracy.

Under the agreement, NXP and Hawkeye will work together to create reference designs rather than retail products.

“The fast development of ADAS [Automatic Data Acquisition System] and autonomous driving technologies has raised new requirements for vehicle-based millimeter radar,” said Alex Shi, co-founder and chief executive of Hawkeye. “By partnering with NXP, Hawkeye will focus on providing advanced millimeter wave radar system level solutions as well as comprehensive technical support for Tier 1 customers.”

The deal is a smart move for NXP, whose claim to fame is its chips for car-related applications, as it strives to be a key player in China’s autonomous driving race. Hawkeye may be little known, but not its CEO. Shi was the former boss of Banma Network, a joint venture between ecommerce behemoth Alibaba and Chinese state-owned automaker SAIC Motors, which is the key force to commercialize Alibaba’s connected car solutions.

In April 2015, Shi and a group of other prominent auto figures from China founded Hawkeye with an initial registered capital of 30 million yuan ($4.5 million).

The Hawkeye funding arrived less than a year after Qualcomm dropped its proposed buyout of NXP, which was set to be one of the largest in the semiconductor space but ended up as a collateral damage in rising trade tensions between China and the U.S. Qualcomm had mulled buying NXP as early as September 2016.

China remained a focus for NXP, which assured that its alliance with Hawkeye is evidence of its “confidence in the Chinese market” and “determination to continuously invest in the country,” said NXP president Kurt Sievers in a statement.

“Innovators in automotive, like Hawkeye and Southeast University, have become the driving force for the transformation of China’s automotive industry. We are pleased to collaborate with these excellent partners, leveraging NXP’s leadership in the fast-growing radar semiconductor market to improve road safety,” Sievers added.

Aptiv takes its self-driving car ambitions (and tech) to China

Aptiv, the U.S. auto supplier and self-driving software company, is opening an autonomous mobility center in Shanghai to focus on the development and eventual deployment of its technology on public roads.

The expansion marks the fifth market where Aptiv has set up R&D, testing or operational facilities. Aptiv has autonomous driving operations in Boston, Las Vegas, Pittsburgh and Singapore. But China is perhaps its most ambitious endeavor yet.

Aptiv has never had any AV operations in China, but it does have a long history in the country including manufacturing and engineering facilities. The company, in its earlier forms as Delphi and Delco has been in China since 1993 — experience that will be invaluable as it tries to bring its autonomous vehicle efforts into a new market, Aptiv Autonomous Mobility President Karl Iagnemma told TechCrunch in a recent interview.

“The long-term opportunity in China is off the charts,” Iagnemma said, noting a recent McKinsey study that claims the country will host two-thirds of the world’s autonomous driven miles by 2040 and be trillion-dollar mobility service opportunity.

“For Aptiv, it’s always been a question of not ‘if’, but when we’re going to enter the Chinese market,” he added.

Aptiv will have self-driving cars testing on public roads by the second half of 2019.

“Our experience in other markets has shown that in this industry, you learn by doing,” Iagnemma explained.

And it’s remark that Iagnemma can stand by. Iagnemma is the co-founder of self-driving car startup nuTonomy, one of the first to launch a robotaxi service in 2016 in Singapore that the public—along with human safety drivers — could use.

NuTonomy was acquired by Delphi in 2017 for $450 million. NuTonomy became part of Aptiv after its spinoff from Delphi was complete.

Aptiv is also in discussions with potential partners for mapping and commercial deployment of Aptiv’s vehicles in China.

Some of those partnerships will likely mimic the types of relationships Aptiv has created here in the U.S., notably with Lyft . Aptiv’s self-driving vehicles operate on Lyft’s ride-hailing platform in Las Vegas and have provided more than 40,000 paid autonomous rides in Las Vegas via the Lyft app.

Aptiv will also have to create new kinds of partnerships unlike those it has in the U.S. due to restrictions and rules in China around data collection, intellectual property and creating high resolution map data.

Student sues JD.com’s billionaire CEO Richard Liu for alleged rape

A Chinese student has filed a lawsuit against JD.com founder and chief executive Richard Liu, alleging the billionaire businessman raped her in Minnesota back in August, four months after local prosecutors decided not to press charges.

The lawsuit, which was filed in Hennepin County on Tuesday, is seeking damages of more than $50,000. It identifies the student as Jingyao Liu (not related to Richard Liu), an undergraduate student at the University of Minnesota.

JD did not immediately respond to a request for comment on the lawsuit. Liu has maintained his innocence through his lawyers throughout the investigation. Liu said on social media in December that he had “broken no laws” but felt “extreme self-admonishment and regret” for the pain that his behavior “on that day” brought to his family and wife, who is an internet celebrity known as Sister Milk Tea.

In December, Hennepin County Attorney Michael Freeman said he was not charging Liu because “there were profound evidentiary problems which would have made it highly unlikely that any criminal charge could be proven beyond a reasonable doubt.” He further emphasized his decision “had nothing to do with Liu’s status as a wealthy, foreign businessman.”

Liu’s case has drawn widespread interest in China where the tale of Liu’s rags-to-riches has inspired many. If charged and convicted, Liu could face up to 30 years in prison.

JD’s stock immediately tumbled after the student first accused Liu in August over concerns that the case will hamper his ability to run the company, which is the arch-rival to Jack Ma’s Alibaba and faces growing competition from ecommerce upstart Pinduoduo.

The company’s shares have slowly crawled back since December after the Hennepin County Attorney decided not to charge the founder. Nonetheless, JD is coping with sagging morale as large-scale layoffs hit executives and a new pay scheme threatens to depress income among its armies of couriers.

Alibaba will let you find restaurants and order food with voice in a car

Competition in the Chinese internet has for years been about who controls your mobile apps. These days, giants are increasingly turning to offline scenarios, including what’s going on behind the dashboard in your car.

On Tuesday, Alibaba announced at the annual Shanghai Auto Show that it’s developing apps for connected cars that will let drivers find restaurants, queue up and make reservations at restaurants, order food and eventually complete a plethora of other tasks using voice, motion or touch control. Third-party developers are invited to make their in-car apps, which will run on Alibaba’s operating system AliOS.

Rather than working as standalone apps, these in-car services come in the form of “mini apps,” which are smaller than regular ones in exchange for faster access and smaller file sizes, in Alibaba’s all-in-one digital wallet Alipay . Alibaba has other so-called “super apps” in its ecosystem, such as marketplace Taobao and navigation service AutoNavi, but the payments solution clearly makes more economic sense if Alibaba wants people to spend more while sitting in a four-wheeler.

There’s no timeline for when Alibaba will officially roll out in-car mini apps but it’s already planning for a launch, a company spokesperson told TechCrunch.

Making lite apps has been a popular strategy for China’s internet giants operating super apps that host outside apps, or “mini-apps”; that way users rarely need to leave their ecosystems. These lite apps are known to be easier and cheaper to build than a native app, although developers have to make concessions like giving their hosts certain level of access to user data and obeying rules as they would with Apple’s App Store. For in-car services, Alibaba says there will be “specific review criteria for safety and control” tailored to the auto industry.

alios cars alibaba

Photo source: Alibaba

Alibaba’s move is indicative of a heightened competition to control the operating system in next-gen connected cars. For those who wonder whether the ecommerce behemoth will make its own cars given it’s aggressively infiltrated the physical space, like opening its own supermarket chain Hema, the company’s solution to vehicles appears to be on the software front, at least for now.

In 2017, Alibaba rebranded its operating system with a deep focus to put AliOS into car partners. To achieve this goal, Alibaba also set up a joint venture called Banma Network with state-owned automaker SAIC Motor and Dongfeng Peugeot Citroen, which is the French car company’s China venture, that would hawk and integrate AliOS-powered solutions with car clients. As of last August, 700 thousand AliOS-powered SAIC vehicles had been sold.

Alibaba competitors Tencent and Baidu have also driven into the auto field, although through slightly different routes. Baidu began by betting on autonomous driving and built an Android-like developer platform for car manufacturers. While the futuristic plan is far from bearing significant commercial fruit, it’s gained a strong foothold in self-driving with the most mileage driven in Beijing, a pivotal hub to test autonomous cars. Tencent’s car initiatives seem more nebulous. Like Baidu, it’s testing self-driving and like Alibaba, it’s partnered with industry veterans to make cars, but it’s unclear where the advantage lies for the social media and gaming giant in the auto space.

Electric car startup Byton loses co-founder and former CEO, reported $500M Series C to close this summer

The race is on for building and shipping more cost-effective electric cars, but today one of more ambitious startups in the field announced some significant changes that underscore some of the challenges in making that a reality. Byton, the Chinese electric car startup, today announced that Carsten Breitfeld, the former BMW executive and Byton co-founder who had been the CEO and was most recently chairman, has left the company “to start a new adventure within the start-up industry.”

To offset that news, Byton said that it is currently recruiting for a new CTO, will close its Series C funding — a $500 million round, according to this report from January — this summer, and is on track for production of its M-Byte SUV vehicle for Q4 2019. The company recently said that it is looking towards an IPO, with the business currently valued at around $4 billion and counting 50,000 customers, with half in China and half in the US.

“Thanks to our founding team and all employees we’re well on track and looking forward to delivering the M-Byte this year to customers in China, followed by the US and Europe in 2020,” said Byton co-founder and current CEO Dr. Daniel Kirchert. “Carsten helped build a strong BYTON brand and bring in the right people to take our start-up to the next level. Now we are focusing on our main goal to achieve the on-time-start-of-production of the first BYTON series production model in 2019 with our strong team and partners.” There were no comments about IPOs in today’s statement.

It’s not clear who is overseeing the technical aspects of the business in the meantime — it doesn’t appear that there had been an official CTO at the company previously, but before Byton, Breitfeld had been VP of engineering at BMW. Dick Abendroth, another BMW engineering alum, left Byton in October of last year to become CTO of OEM Continental.

Byton was originally started as Future Mobility Corporation as a joint venture between Harmony Auto, Tencent, and Foxconn, who put Breitfeld and Kirchert, pictured below left and right, in place as co-founders and leaders of the business. It has raised about $700 million to date, with the most recent round of $500 million closing in June 2018.

But there have been reports that the company was running out of money since the end of last year, balancing the capital intensiveness of building new vehicle technology and new vehicles as a startup (no small feat considering that its competitors are some of the biggest companies in the world), with the fact that the company now employs some 1,600 people — a good portion of which were cherry picked from existing automotive companies and are therefore expensive.

Byton is not the only electric car company that swerving to try to avoid unexpected roadblocks in its growth. Tesla earlier this year cut its workforce to streamline its own production, and it has been making many sudden decisions on its retail strategy in an effort to cut costs.

For the new generation of vehicles, it’s not just all-electric technology that is tricky to build in a cost-effective and efficient way, but the fact these investments are being balanced against other major initiatives around vehicle software, and in particular autonomous technology.

Many believe that the industry is heading inevitably towards self-driving vehicles, but nright now we’re far from that and the development of the features poses a lot of safety and other hurdles and a completely picture of how it will look is still a moving target. Byton, for its part, is currently working with a third party, Aurora, for self-driving tech for its vehicles.

We have contacted Byton with questions about who is acting as CTO at the company currently, and if it can provide any more details on the Series C or valuation, and we will update this post as we learn more.

JD founder cautions logistics business must tighten belt

Alibaba’s arch-foe JD.com has long prided itself on owning and controlling its logistics services: couriers are treated as in-house staff and paid a basic income. But that will end soon as costs keep piling up for the ecommerce giant.

In an internal letter sent to the staff on Monday, JD founder and chief executive Richard Liu said the company will scrap basic salary for couriers as net loss amounted to 2.8 billion yuan ($420 million) in 2018 at JD’s logistics unit.

“The main reason is we had too few orders externally and too high a cost internally,” said Liu. “You all know that the last two years have been quite difficult for the company. We have been in the loss for more than ten years. If losses continue, JD Logistics only has two years of runway left with its capital raised.”

“I don’t think any of our delivery brothers want the company to go bankrupt,” Liu added.

JD Logistics became a standalone business in 2017 and subsequently raised billions of dollars from investors. JD still owns an 81.4 percent stake in the logistics arm, which was valued at around $13.5 billion at the time it raised $2.5 billion in February 2018.

Going forward, JD Logistics will continue to pay social insurances on behalf of its couriers, whose income is now based on the number of packages they handle. Liu assured that the old basic pay accounted for just 10 percent of the delivery staff’s total income so his goal is not to cut but boost salary for them, and eventually for JD Logistics as well.

But couriers are feeling the heat. Monthly pay used to average 7,000 yuan ($1,043) to 8,000 yuan, a Shenzhen-based courier told TechCrunch. Under the new scheme, he and his regional colleagues are earning 5,000 yuan to 6,000 yuan. Liu said in the letter that it’s “up to the couriers” to vie for better salaries, but it’s unclear how they can secure more packages in practice. JD said it has no comment on the issues addressed in Liu’s letter.

JD delivery staff are assigned on a regional basis. Assuming the number of parcels that go out of a region stays relatively constant, couriers can’t do much to boost their piecework wage. Already, some couriers have devised cheats that involve mailing parcels to themselves and rejecting them at delivery in order to jack up income, TechCrunch has learned.

JD Logistics

Photo source: JD Logistics via Weibo

China’s express delivery market, like many other fledgling industries, is a relentless race that sees players offer heavily subsidized prices for customers to stay competitive. JD is going against companies like Alibaba that enlist a consortium of third-party contracted couriers rather than hiring their own to keep costs down.

JD’s fourth-quarter cost of revenues grew 20.7 percent to $16.8 billion, mainly driven by expenses related to logistics services alongside its online direct sales business, the company’s earnings report revealed. The Amazon-like service is finding ways to bulk up revenues by opening its logistics service to third-party clients as well as expanding overseas.

“It’s just a matter of time that JD will remove couriers’ minimum income. It can’t increase the price for customers, so it’s passing the cost to the couriers,” said Alex Cheong, founder and chief executive of Web2Ship, a service that enables price comparisons across different express shipping services, told TechCrunch.

“In China, the only thing [courier companies] can play is the volume game. There’s this mentality that as volume goes up, companies will get more efficient, and costs will lower. But growth is actually slowing,” Cheong warned.

The income restructuring at JD’s logistics arm comes amid a widespread layoff across the parent company to remove low-performers, or what Liu labeled as “slackers.” JD is namechecked as one of China’s internet companies working 9 am to 9 pm, 6 days a week, or “996”, a demanding schedule that has prompted an online protest.

JD denied that it practices the “996” routine though it sees itself as “a competitive workplace that rewards initiative and hard work” which is consistent with its “entrepreneurial roots,” a JD spokesperson told TechCrunch earlier.

The ecommerce titan has long promoted its in-house logistics arm as offering “quality” service, so it remains to see how the removal of basic income will affect couriers’ morale. But one thing is for sure. Under the piece rate system, JD knows its exact labor cost per unit and avoids paying for employees’ idle time.

Smart speakers installed base to top 200 million by year end

Smart speakers’ global installed base is on track to top 200 million by the end of this year, according to a report out today from analysts at Canalys. Specifically, the firm forecasts the installed base will grow by 82.4 percent from 114 million units in 2018 to 207.9 million in 2019. The U.S. will continue to lead in terms of smart speaker adoption, but a good portion of this year’s growth will also come from East Asian markets –  particularly China, the report says.

The firm estimates 166 percent year-over-year growth in the installed base for smart speakers in mainland China this year – going from 22.5 million units in 2018 to 59.9 million in 2019 – to reach 13 percent smart speaker penetration in the region. That’s compared with 46 percent growth in the U.S.

The market for China will also look much different from the U.S., where Amazon and Google today dominate. These companies don’t have a smart speaker presence in China. That means others – like Alibaba’s Tmall Genie, Xiaomi’s Xiao Ai, Baidu’s DuerOS and more – will gain traction instead. Canalys predicts Tmall will lead, with 39 percent of the 2019 smart speaker market share in mainland China, followed by 25 percent for Xiao Ai, 24 percent for DuerOS and 12 percent for all others. (Note that Canalys didn’t break out estimates for Apple HomePod in China, where it launched in January. But given its higher price point, it seems the firm isn’t predicting huge adoption at this time.)

“Local vendors are bullish about China’s smart speaker market, and their aim for this year is to keep growing their respective installed bases in the country by shipping more devices into households,” said Canalys senior analyst Jason Low. “Hardware differentiation is becoming increasingly difficult, and consumers have higher expectations of smart speakers and smart assistants. Vendors will need to focus on marketing the next-generation ‘wow factor’ for their respective smart assistants and voice services to change consumers’ perception and drive greater adoption,” he added.

It’s worth noting, too, that the market for the voice assistants powering these smart speakers is even broader. For instance, Baidu announced in January 2019 that its DuerOS assistant has topped 200 million devices. This device base includes other things like home appliances and set-top boxes, in addition to smart speakers, however. And the worldwide market for voice assistants is on track to reach 8 billion by 2023, up from 2.5 billion in 2018, a report from Juniper Research said.

Canalys’ forecast follows news that smart speakers have hit critical mass in the U.S., where now 41 percent of U.S. consumers now own a voice-activated speaker, up from 21.5 percent in 2017.

While most analysts firms are reporting rapid global growth for smart speakers, their individual forecasts may vary some.

For example, Deloitte estimated the installed base for smart speakers will be even bigger – reaching more than 250 million units by the end of 2019, following 63 percent year-over-year growth. That would make smart speakers the “fastest-growing connected device category worldwide in 2019,” the firm had said, and would see the total market worth $7 billion.

Canalys’ forecast agrees with this prediction, if not the exact numbers. Today, it also adds that smart speakers will top the install base of wearable bands (like smartwatches and fitness trackers) in 2019, and will overtake tablets by 2021.