The Theranos of Chinese Autonomous Vehicles; Heartwarming Ofo Follow-Up

I’m Jordan Schneider, the host of SupChina’s ChinaEconTalk podcast. In this newsletter, I translate articles from Chinese media about tech, business, and political economy. 

This week features an anonymous ex-employee playing whistleblower on a self-driving car startup. This engineer writes that he initially was lured in by a charismatic founder who sold him a story of building a company to help the nation develop and fight back against American bullying. But eventually, he came to see his boss as nothing more than a scam artist.


Why I made my escape from a Chinese autonomous vehicle company

我为什么逃离无人车公司. Anonymous engineer, Focus on Cutting Edge Tech5/4/2019

I am an unmanned algorithmic engineer who just left an autonomous driving company last month and can be said to be “escaping.”

During my time working at this company, I have witnessed too many dark corners of human nature and have seen autonomous driving become nothing but a tool for making money. Many engineers have not seen through this scam. So I want to tell those who are still trapped just what kind of scam is this. And once this scam gets bigger, it will cause a crisis in the entire industry.

‘Make Cars for the Country’

I first got a degree in the US, then after graduation worked as an engineer in America. Although that job was stable, I always knew that once I found a suitable opportunity I’d head back home.

Then I came across “A.”

He used to be at a big American tech firm, and was a really friendly guy. He said that autonomous driving is the best opportunity for engineers to serve the country. I was really embarrassed to have trusted him later, but at the time I was all-in.

He said that autonomous driving is becoming a concentrated expression of national development and competition. However, he can’t bear to see the United States bullying China. He doesn’t want to make money but just hopes to contribute to the country. Sounds pretty ambitious, right?

Playing the Authorities

After moving back to China, the author found himself working with a team that all bought into the founder’s patriotic dream.

And this set of stories wasn’t only for us, but also the local and provincial governments that are eager to “score” autopilot. But the regional folks weren’t stupid; they wouldn’t hand out money just based on “making cars for the nation.”

So our engineers cooked something up.

Although driverless technology and implementation are not easy, it is not too difficult to make an impressive-looking prototype. As long as the car is on a fixed route on the closed road, it can give riders the experience of “disengaging from the steering wheel.” If you let the officials try it, you can win over the local bureaucrats. Therefore, with A’s national vehicle story and our technology demonstration, we were able to pry some support out of the local government.

A told us that the local government would give us RMB 300 million (about $43 million), but later we realized that this wasn’t true. Later, I found out that the local government isn’t all that foolish. We got some resources, like office space, land, and policy incentives, but as for real capital—nope. However, this wasn’t the end of the line for A. The patriotic story got the engineers on board, and combined with the fake prototype, he was able to make ppts and use his relationships to get support from the capital market. [note: the verb everyone uses for making ppts in China is “to paint ppts”]

The author goes on to describe fundraising: the investors were harder to trick than the employees and municipalities. The ones who really know tech could see through the tricks and A’s mixed reputation made it hard to raise money from famous funds.

Along came “B,” an old classmate of A who used to work in finance, knew nothing about tech, and bragged that Neil Shen (founder and head of Sequoia China) and Allen Zhu (founder of GSR Ventures) were his “little brothers.” “My one phone call can get us a billion or two!” But later the company announced a fundraising round that didn’t even have one reputable VC in the mix.

They later heard that seed money came from A and B’s rich hometown friends (tuhao), and that it wasn’t equity but a convertible bond. Even this bond was only given because the municipality stuck their necks out for the firm, and the tuhao figured that in the worst case they’d get a bailout—but little did they know even the municipality was increasingly skeptical.

The author then learned more about A’s background: he’d previously used a P2P firm as a cover for the same sort of government and convertible debt scheme.

Other local governments didn’t know what was going on, but they were too careful with their money to invest. But to the engineers, it all sounded very legit. Other types of people from real car companies joined the firm: SOE car company employees got duped relatively easily because they loved the patriotic story, but true automotive entrepreneurs or those with a background at foreign car firms saw through the scheme. Besides, the SOE employees really wanted to work with cool technology—at their old firms, they never got to work with innovative tech.

‘We’ll arrange you a girlfriend’

Wages were often not paid on time, and often deducted for no reason. But A is really skilled at playing good cop/bad cop with HR. HR always finds some reason for deducting wages, not paying wages on time, and not raising salaries as promised.

So we went to ask A what was going on. He didn’t know what it was. It really didn’t work. He said that he wasn’t in the weeds of the specific business, but all in all, should respect the work and decisions of his managers.

One night, A said that everyone had to come to work immediately. One employee said that their child was sick, and asked to take care of the child first. But A said no, everyone has to show up ASAP. But once everyone got to the office, there wasn’t any emergency, he just called on everyone for the sake of it. Everyone’s been talking about 996 lately, but we were doing more than 996.

If you can’t fulfill all his requests, he’ll dock your salary. This isn’t what normal management does, right?

A also really understands the psychology of these engineers and knows how to exploit the best and worst in them. He knows that lots of engineers live simple lives, have low EQs, and have a hard time finding a girlfriend. A used mealtimes as an opportunity to brainwash you, saying that if you work really hard both money and girlfriends will come. To be honest, there are women in the company; some young, some have families. If they heard what A said, how would they feel?

The more we thought about it, the more suspicious we grew and wanted to give up our hopes of back pay and hope for the firm. But every time we tried to leave, A will try to talk his version of sense into us, saying that young people must have a long-term vision, that we are making cars for the country and completing a national mission. But if his talks didn’t stop us, he’d threaten to execute the non-compete. When we joined, we didn’t carefully read the contract, but when we were leaving we realized that lots of the benefits weren’t there, and all the equity-based compensation is up to A himself. In the autonomous vehicle industry, everyone knows the future is bright, but the way that A is playing the game is like musical chairs: lots of people are going to lose big. When the music stops, it will be a big blow to both these engineers and the whole industry. Those diligent engineers and companies that are doing real things are going to get unfairly tarnished.

Anyway, I am already disheartened, I have escaped and never want to work on autonomous vehicles again. I’m afraid that I will meet someone like A again. I’m afraid to play another part in a scam. I don’t want to be beaten like this without driving.

I chose to escape.

If Ofo Dies, Please Bury It in Myanmar

如果有一天ofo死了,请把它埋在缅甸. 志象网, Luo Ruiyao, 6/26/2019

In a heartwarming twist to last week’s edition the newsletter which featured an CEOs burning billions building bikes that seemed destined for scrapping, an enterprising head of a Burmese NGO has scraped together enough money to pay the bicycle graveyard more than what the old Ofos and Mobikes would be worth to scrap. Some of these bikes are shaving hours of the daily commute for Burmese students.

For now he has sourced all his bikes from Southeast Asia, markets like Singapore and Malaysia where Ofo expanded only to later shut down operations. Each bike can be bought in near new conditions at auction for around $15 (down from a $50 manufacturing price) and delivery plus refurbishment costs another $35. Said the NGO’s CEO, “this is a once in a lifetime opportunity. The oversupply of bikes means a glut for the recycling plans, so these companies are willing to sell to me.”

If one day ofo is dead, please bury it in MyanmarIf one day ofo is dead, please bury it in Myanmar