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Who will stay at the "table"?

The following article comes from the Journal of Business Management, written by Yang Jigang

As we all know, "volume" has been the norm in China's new energy vehicle industry in recent years: traditional car companies have to roll to transform into new energy; The new forces of car manufacturing should open up new battlefields and take the initiative to roll; If the joint venture brand wants to maintain a competitive advantage, it must be rolled; Luxury brands should maintain their figure and roll carefully; Independent car companies want to overtake in corners and accelerate the volume, as the so-called "there is no most volume, only more volume".

- Article Information -

The author of this article is Yang Jigang, an expert in enterprise transformation, a researcher in the "New Four Modernizations of Automobiles" industry, and a partner of Zhixing Taolu. Originally published by "Business Management Magazine", Digital Enterprise is authorized to publish.

Behind the volume, on the one hand, it reflects that the new energy vehicle industry is on the cusp, there are opportunities everywhere, everywhere is the outlet, and enterprises do not want to miss the opportunity; On the other hand, any mature industry has experienced countless times of the process: the poor competitiveness of the enterprise out, the customer does not pay the bill of the enterprise out, the "copycat" and "high imitation" will not be innovative enterprises out, the process of the volume is the process of the industry to maturity. From this point of view, the volume of China's new energy vehicle industry at this stage just shows that the industry is moving from disorder to order, from naïve to mature.

The leaders in the automobile circle have their own thoughts and calculations: some wait and see the changes, and are temporarily in a situation of advancing and retreating freely; Some are anxious in the face of the sales volume and inventory backlog that have been delayed; There are also strong attacks, relying on capital and scientific and technological advantages to try various dimensionality reduction strikes. Where will China's automotive industry go? This is not only related to the industry itself, but also to the "transformation of old and new kinetic energy" of China's economy, to the transformation from a manufacturing country to a manufacturing power, and to the achievement of the "double carbon" goal.

The changes in the new energy vehicle industry are profoundly affecting the upstream and downstream of the industrial chain, becoming a microcosm of "Made in China" towards high-quality development.

Who will stay at the "table"?

From "savage growth" to "Spring and Autumn Warring States" - four landmark events in the development of China's new energy vehicles

Can we find a clear clue to explain the blowout development of China's new energy vehicle industry in just over ten years? Obviously, this is not an easy task. The following four landmark events may help us get a glimpse of the development of China's new energy vehicle industry and see the spring and autumn in the subtleties.

Event 1: Tesla builds a factory in China

Six years ago, Shanghai Lingang was still a barren land, and the industrial development had just started. Tesla CEO Elon · Musk on the other side of the ocean are worried, despite the initial success of the low-priced model Model 3, but Tesla's stock price is under pressure, Wall Street is obviously not satisfied with the record of annual sales of 245,000 units (2018 sales), and the problems of profitability, production capacity, batteries, manufacturing costs are plaguing this "Silicon Valley Iron Man".

Where to raise funds, where to build factories, where to meet Tesla's rapid expansion needs with production capacity and market? On July 10, 2018, Tesla, the Shanghai Municipal Government and the Shanghai Lingang Management Committee jointly signed an investment agreement for the pure electric vehicle project, and Tesla will build a Tesla Gigafactory in the Lingang area that integrates R&D, manufacturing, sales and other functions. This is Tesla's largest gigafactory outside the United States, and it also creates the world speed of the automotive industry's "construction started, production and delivery that year" in the automotive industry. This was later called "China speed" by Musk, and it also became a yardstick for him to benchmark the construction and mass production progress of other Tesla gigafactories around the world.

Of course, Musk's generosity also touched Musk's heart: the efficiency of the city-government-led dedicated project team was impressive; Chinese banks have provided US$521 million (3.5 billion yuan) in special loan support for the construction and operation of Tesla's Shanghai Gigafactory park infrastructure, among other things. At the same time, Tesla also became the first wholly foreign-owned automobile enterprise in China, and before that, according to the "Industrial Policy for the Automobile Industry" issued by the mainland in 1994, foreign production and sales of automobiles in China "must be carried out in the form of joint ventures, and the foreign party of the joint venture automobile company cannot hold more than 50% of the shares".

It can be seen that the treatment given to Tesla is very generous. Favorable conditions certainly come at a price. Whether it is called a "bet" or a "condition", the important thing is that both sides have met expectations: Shanghai has the world's leading new energy vehicle industry cluster led by Tesla; Tesla has the world's most efficient manufacturing factories and the world's largest single market.

More importantly, this is another successful case of China's innovation and upgrading of the upstream and downstream industrial chain of the domestic industry by attracting global industry leaders to settle down after Apple's iPhone supply chain drove the overall rise of China's smartphone industry 15 years ago, but this time it was the new energy vehicle industry that was driven.

With the leadership of Apple's iPhone, China has given birth to the overall rise of the smartphone industry, including Huawei, Xiaomi, Honor, OPPO, and vivo; Driven by Tesla's Shanghai Gigafactory, China has ushered in vehicle companies including BYD, Ideal, Weilai, Xiaopeng, Wenjie, Nezha, Lingpao, Xiaomi, etc., as well as power battery companies such as CATL, China Innovation Airlines, Guoxuan Hi-Tech, EVE Lithium Energy, Ganfeng Lithium Battery, Tianqi Lithium, as well as a large number of key parts supporting enterprises such as Huangchuan Power, United Electronics, Dayang Motor, Xinrui Technology, and Desay SV. China has now built the world's most complete upstream and downstream industrial chain of new energy vehicles, and Tesla's catfish effect has been brought into full play.

Who will stay at the "table"?

Tesla Model Y won the world's best-selling model (Source: Tesla)

Event 2: BYD has sprung up

January 3, 2024 is another "highlight moment" for BYD and China's new energy vehicle industry. BYD officially announced that its annual sales in 2023 will reach 3,024,400 units, becoming the "first brother" in global new energy vehicle sales for the second consecutive year, and setting a record for the highest annual sales of Chinese brand car manufacturers, ranking among the top ten global car companies in terms of sales (data from the "2023 Global Auto Sales Ranking" released by GlobalData). Just three months later, according to the global car sales ranking released by the Yiche list, BYD surpassed Honda to rank fourth in global car sales with a monthly sales of 312,700 units in April, and became the only new energy vehicle company among the top five sales to achieve positive growth. On July 4, 2024, BYD held a ceremony for the completion of its Thailand plant and the roll-off of the 8 million new energy vehicles in Rayong, Thailand, becoming the first car company in the world to achieve the 8 million new energy vehicles off the assembly line. Why did BYD reach the top?

First, BYD was born in battery manufacturing and was once a supplier of mobile phone batteries for Nokia and Motorola. The battery is the core component of new energy vehicles, and BYD's "blade battery" and CATL's "Kirin battery" are known as the "endurance duo" of China's new energy vehicle batteries. If the core technology in the era of fuel vehicles is in the engine, then in the era of new energy vehicles, at least from the perspective of power source, batteries have become the key technology of automobile manufacturers. A few years ago, when battery life and charging became the "pain point" of new energy vehicle users, the battery life and charging speed of BYD batteries happened to become the key magic weapon for its success.

Second, BYD's "BYD Electronics" is one of the world's top 10 EMS (Electronic Manufacturing Services) manufacturers, and its customers include brands such as Xiaomi, Huawei, Apple, Samsung, and Honor, and also assembles iPads for Apple. That is to say, in terms of the level of electronic manufacturing, BYD and Foxconn, Pegatron, Flextronics, Tianhong, etc. have been in the same camp. Some people say, isn't it just a foundry, what's the big deal. Don't look down on EMS foundries. Taking Foxconn as an example, the suppliers that can convince Apple and cooperate with for decades certainly have their own housekeeping skills. For world-renowned EMS manufacturers, including BYD, the "impossible triangle" of "high quality, low cost, and fast delivery" must become possible, and it must be sustainably stable, and the yield rate must be pursued. This kind of integrated manufacturing advantage that runs through the upstream and downstream of the industrial chain (vertical integration), from battery to assembly, from raw materials to finished products, is currently dominated by BYD and Tesla in the entire field of new energy vehicles.

Third, the vertical integration of batteries and the industrial chain brings cost and price advantages. Since there is no winner in the price war, why do many leading companies still launch a price war? The crux of the matter is that if the price war initiated by the parties is based on the industrial chain, value chain, continuous cost reduction, efficiency increase and innovation, then such a price war is essentially to build its own "moat"; And if the price war is to get rid of the opponent, lose money and make money, and even pay the price of "hurting the enemy by 800 and losing yourself by 1,000", then such a price war harms others and hurts oneself.

From this point of view, the first to launch a price war in the field of new energy vehicles is Tesla and BYD. Tesla's famous "integrated casting" process can continuously reduce the cost of car body production, and the current "Unboxed Assembly Process" further reduces the manufacturing cost; BYD, on the other hand, relies on its industrial chain advantages, with the improvement of the level of vertical integration, especially the improvement of the standardization level of its various models, to continue to reduce costs, so as to achieve a more competitive price advantage. This is also one of the reasons why BYD has been able to continue to reduce prices in the "Dynasty" and "Ocean" series products since the beginning of this year. The sudden emergence of BYD has verified the maturity and completeness of China's new energy vehicle industry chain.

Who will stay at the "table"?
▲The BYD plant in Rayong, Thailand is the first factory opened by a large Chinese electric vehicle manufacturer in Southeast Asia. The cars produced by the plant will be sold to Thailand and other Southeast Asian countries. (Source: BYD)

Event 3: Huawei's alternative "car building"

While emphasizing that it is resolute not to build cars, it will cooperate with other car companies to release new models, and Huawei is the only one in this kind of operation. Does Huawei build a car? Before asking the world, this issue was controversial, and Huawei had to come out again and again to refute the rumors. However, after AITO M5, M7, M9 and other products have been launched one after another and continue to sell well, no one cares about the topic of whether Huawei makes cars - the products have already entered the market.

It is true that Huawei has not made a (whole) car so far, whether it is Wenjie, Zhijie, Xiangjie, Aojie and other brands, they are all built in cooperation with different car manufacturers. However, for end users, it doesn't matter what Huawei says, what matters is whether the model it chooses has Huawei's technology investment, whether it has Huawei's brand endorsement, and if it can still be a model released by Huawei's Yu Chengdong on the spot, it is "made by Huawei".

In fact, in Huawei's automotive business strategy, there are three routes to choose from: first, the component model, similar to Bosch in the era of fuel vehicles, Huawei wants to provide standardized parts for intelligent networked vehicles for car companies; The second is the HUAWEI Inside mode (HI), which is similar to "Intel Inside" in the PC era, in which Huawei undertakes the mission of intelligent computing terminals for automobiles. The third is Huawei's smart car model, which can be understood as a "full-stack intelligent car solution", from early product selection to architecture design, key technology research and development, quality control management, and terminal sales, Huawei is responsible for all aspects, and the main task of car companies is manufacturing. At present, AITO Wenjie, which cooperates with Cialis, is a kind of smart car mode.

Today, Huawei has become an important pole in China's new energy vehicle industry. Taking AITO Wenjie as an example, according to the data of the "Sales Ranking of China's New Passenger Car Brands in the First Quarter of 2024" released by China Automotive Digital Research Institute, the sales volume of Wenjie was 85,842 units, a year-on-year increase of 635.33%, and it ranked first over Ideal (80,400 units). In addition, Huawei and other car companies have successively launched brand models such as Zhijie, Xiangjie, and Aojie, and the "Hongmeng Zhixing Ecosystem" endorsed by Huawei has gradually become a system, with vehicle machine systems, intelligent cockpits, and intelligent driving, and Huawei's "three-in-one" full-stack intelligent car solution providing another option for Chinese new energy vehicle manufacturers. Huawei's entry into the market has accelerated the pace of China's new energy vehicles as a whole to become intelligent.

Who will stay at the "table"?

▲ Huawei's "Trinity" full-stack intelligent vehicle solution provides another option for Chinese new energy vehicle manufacturers.

Event 4: Lei Jun enters the game and Xiaomi SU7

At a press conference on March 30, 2021, Lei Jun officially announced the construction of the car. Rebus (the industry's joking name for Xiaomi's founder Lei Jun) finally came to an end, with 100 billion yuan, and it was the last business in his life to "bet on all his net worth", and went all out to "fight for Xiaomi cars". This kind of situation has made the entire automotive industry feel like a storm is about to come three years ago. Sure enough, three years later, Lei Jun fulfilled his promise and released Xiaomi's first product, the SU7, in Beijing. This is another smartphone manufacturer after Huawei, and it is a "people-car-home" ecological layout, which makes many car companies feel overwhelmed.

Xiaomi Auto officially released relevant data: 4 minutes after the opening of reservations on March 28, Xiaomi SU7 Dading exceeded 10,000 units; After 27 minutes, it exceeded 50,000 vehicles; 24 hours later, the data was 88,898 vehicles. On the morning of April 3, 2024, Lei Jun held a delivery ceremony for the first batch of owners of Xiaomi SU7. As of the end of May, Xiaomi SU7 has delivered a total of 15,764 units, and this year's delivery target is 100,000 units. Even Musk is envious of such data (for comparison, Tesla delivered 2,721 units of its first production car, the Model S, in 2012, and sold 103,000 units until 2017).

Let's take a look at several changes in China's automotive industry after Lei Jun entered the game.

First, the founder personally went down to the field to open the delivery ceremony for the first batch of car owners, open the door, send flowers, and take a group photo, which made other car manufacturers "under great pressure"; The second is that Lei Jun incarnated as Xiaomi's first anchor with goods on the self-media platform, with a lot of topics, traffic, and interactions, and he started live broadcasts at every turn, which made the "heads" of those traditional car companies unable to sit still, and they were embarrassed to go out if they didn't bring goods anymore, and the way of product marketing had completely changed; The third is to stand for peers, at the Xiaomi SU7 press conference, Lei Jun invited a number of car companies to the "head" platform, after the press conference, Lei Jun on different occasions for the Great Wall, Weilai, ideal, Xiaopeng and other products platform, this approach, so that the car circle has always been "well water does not violate the river water" has a taste of foam.

More importantly, with the entry of Xiaomi, the "scientific and technological attributes" of China's new energy vehicles are getting stronger and stronger. The consensus of more and more people in the automotive industry is that in this great change in the automotive industry, electrification is the first half, and intelligence is the second half. The transition from functional vehicles to smart vehicles is becoming more and more obvious. From bicycle intelligence to intelligent transportation, from in-vehicle intelligence to cloud intelligence, behind intelligence is hard technology, algorithms, computing power and large models.

From this point of view, with the entry of technology manufacturers represented by Xiaomi and Huawei, the primary challenge faced by traditional car companies is how to transform from manufacturing enterprises to technology companies. This is not a problem that can be solved by just throwing money and investing in R&D, but also involves in-depth changes in behavior, process mechanism, organizational structure and corporate culture.

In addition, Li Auto will take the lead in making a profit in 2023 (net profit of 11.81 billion yuan), becoming the first new car-making force with sales of more than 100 billion yuan; NIO has opened a new battery swap model in the whole industry; Xpeng has in-depth cooperation with Volkswagen; Zero Run and Stellantis have established a joint venture in Amsterdam, Netherlands; independent car companies including Geely, Chery, Great Wall, FAW, Dongfeng, Changan, SAIC, GAC, BAIC, etc., as well as independent car companies including Volkswagen, General Motors, Toyota, Honda, Ford, etc., as well as The exploration and practice of joint venture brands such as Hyundai in the field of new energy vehicles constitute part of the development of China's new energy vehicle industry.

From savage growth to crazy involution; From a hundred flowers to the Spring and Autumn Period and the Warring States Period. All car companies are aware that the elimination of the new energy vehicle track has begun. There are few tickets, and only by continuing to evolve can there be a glimmer of life. Who can have the last laugh and become one of the few top students to make it to the finals?

From the "Spring and Autumn Warring States" to the "New Three Kingdoms"

-- Independent, joint ventures and new EV manufacturers

In the face of the rolling Yangtze River of the trend of the times, most of the so-called "heroes" are short-lived. In the face of the wave of the times of "new energy vehicles", how glorious and excellent a car company was in the past, and how deep the historical precipitation was, were not the most important, and even became a historical burden, which was accidentally crushed by the next wave. Regarding this point, color TVs, refrigerators, PCs, mobile phones, the Internet and other industries have staged similar plots one after another. Haier's founder Zhang Ruimin's classic sentence "There are only enterprises of the times, there are no successful enterprises" is a realistic annotation in the industrial field.

For Chinese car companies, there is no question of "whether to follow or not" in the new energy game, only the question of "how to avoid going out". Independent, joint ventures and new car-making forces are staging the "Romance of the New Three Kingdoms" in the field of new energy vehicles in China. Due to the completely different challenges faced, each car company's survival path is also different, and the way of life that is suitable for this car company may not be suitable for the other car company. More importantly, independent, joint ventures and new car-making forces are in different stages of development, have different positioning and cognition of the new energy vehicle industry, and have different scales and volumes, which is destined to have completely different paths for them to enter the finals. whether to preserve strength, or to overtake in corners; whether it is active in battle, or passive in defense; Is it disruptive innovation, or continuous iteration? Let's divide the words into three ends, each with a branch.

The camp of independent brands: either overtake in corners or be eliminated

Six years ago, at an annual strategy seminar for executives of a domestic self-owned brand car company, the author raised a question: in the next 5 to 10 years, which (traditional) car companies will still remain on the table, and which (traditional) car companies will forget about each other? The on-site discussion was very lively, and the answers given by the various groups were varied, and even a few executives laughed at themselves, "It's hard to say if we are not there (then)." At that time, we reached a consensus on the spot: as far as the domestic market is concerned, at least half of the car companies will withdraw from the market, and three out of ten car companies may become foundries, and at most only two out of ten car companies can continue to evolve and stay on the table.

Six years later, when I and a few former students look back at the consensus reached at the seminar, we still feel that the perception was too optimistic: in the end, it may not be even 10% of what remains at the table. Of course, the pattern of the poker table has quietly changed: new car manufacturers have come forward one after another, traditional car companies have transformed and changed, and the competitive landscape of the new energy vehicle market has completely changed. At the same time, compared with joint venture brands, the trend of increasing the overall strength of independent brands has continued.

Which one is stronger in the independent camp? Judging from the data of the "Retail Sales Ranking of Passenger Car Manufacturers from January to December 2023" released by the Passenger Car Association, the top five have already appeared in the pattern of "North and South Volkswagen vs. the Top Three" ("North and South Volkswagen" refers to SAIC Volkswagen and FAW-Volkswagen; The "independent top three" refers to BYD, Changan, and Geely).

Specifically, BYD sold 2706075 units, FAW-Volkswagen 1846617 units, Geely 1412415 units, Changan units 1372199 units, and SAIC Volkswagen units 1231433 units. At least from the data level, in addition to the soaring BYD, the sales of independent brand camps are Geely and Changan. If we take the sales data of new energy vehicles as a reference, from the sales ranking of new energy vehicle manufacturers in the Chinese market in the first quarter of 2024, the top five are: BYD 583754, Geely 138536, Tesla 132,420, Changan 116625 and SAIC-GM-Wuling 105663. In contrast, whether from the perspective of passenger cars or new energy vehicles, BYD, Geely and Changan are well-deserved "independent three heroes". We mentioned BYD before, and now we will focus on Geely and Changan.

Let's talk about auspiciousness first. In the new energy track, Geely has laid out almost all its car brands, including Geely, Geometry, Galaxy, Zeekr, Polestar, Lynk & Co, Volvo, Smart, Radar, etc., all of which have new energy models on the market. At the same time, Geely has Cao Cao Travel, Yao Travel, Ruilan Automobile (battery swap travel), Yiyi Internet (battery swap and energy supplement), Taili Speed Car (flying car), Xingji Meizu (Geely Group investment enterprise, full-stack intelligent multi-terminal platform) and other business clusters covering the upstream and downstream of the new energy vehicle industry, which is another new energy vehicle enterprise with all-round layout and deep cultivation of the industrial chain in addition to BYD. For Geely, the sales volume itself is not a problem, and the multi-brand layout ensures Geely's product coverage in multiple price ranges. Compared with BYD and Tesla, the lack of "star hit" products is the problem that Geely needs to solve urgently in the new energy vehicle track. When there will be a popular product like BYD Qin, and when there will be a phenomenal product like Tesla Model Y, it is very important for Geely, and it is also the focus of the next breakthrough.

Let's look at Chang'an. Objectively speaking, among the state-owned automobile enterprises, Changan Automobile is one of them when it comes to who is most concerned about the new energy vehicle business, has the greatest R&D investment, has the most thorough strategic transformation, and responds most timely to the market. In the new energy track, Changan not only lays out the brands of AVATAR, Deep Blue and Kaizen, but also has in-depth cooperation with the upstream and downstream of the industrial chain with an open and win-win mentality. Taking AVATR as an example, on November 15, 2021, the AVATR automobile brand led by Changan Automobile (C) and jointly built with Huawei (H) and CATL (N) was officially released, and AVATR 11 also became the first model based on the CHN intelligent electric vehicle technology platform.

At the level of business transformation and organizational change, Chang'an is even more responsible. Zhu Huarong, the head of the company, personally went on the live broadcast to learn marketing, playing methods, and innovation from the new forces of car manufacturing. At the 2024 China Automobile Chongqing Forum held in June, as the host, Zhu Huarong shared his views on the automotive industry being too "rolly": "Recently, the industry has also rolled out four old men to promote live broadcasts. The competition has changed from the initial volume cost, volume price, volume technology, to the current volume executives, volume users, and volume services, and has produced a new 'volume king' - volume traffic. Traffic is also productivity, it is a factor of production, and executives themselves have their own traffic. "Don't underestimate this kind of open-mindedness, many traditional car companies switch to the new energy track, and there is not much sense of security.

At this time, car companies are more worried about their "soul" being "controlled" by partners, especially when it comes to technical elements such as autonomous driving, intelligent cockpit, vehicle machine system, and data collaboration, and the sense of insecurity is even stronger. In this case, it is not easy for Changan Automobile to truly achieve "openness and win-win, innovation and change", which is also the reason why Changan has maintained its growth momentum in recent years and ranked among the first echelon of its own brands.

In addition, in the camp of independent brands, the performance of Chery and Great Wall is also remarkable. One is the rapid development momentum of internationalization, which has been exported to overseas markets for many years; One is to stand out in the SUV market, and its single products have ranked first in the sales list of SUV models for 99 consecutive months. However, in the field of new energy vehicles, Chery and Great Wall (in terms of sales) are still in a state of momentum and will not be repeated.

Joint venture brand camp: either transform and change, or sit back and eat

As one of the achievements of reform and opening up, the emergence of joint ventures has historically been part of "Chinese characteristics". In order to understand the ins and outs of joint venture car companies, we need to know two key points: "exchanging market for technology" and "foreign parties cannot hold more than 50% of the shares".

Let's start with "market for technology". This is a development strategy promoted at the national level in the early stage of reform and opening up, based on the reality of the mainland's weak industrial base, late start, and backward technology.

In the automotive industry, the first joint venture automobile company in China was Volkswagen of Germany. In October 1984, as the first case of "market for technology", SAIC Volkswagen Co., Ltd., a joint venture between SAIC Motor and Volkswagen Group of Germany, officially signed a contract to lay the foundation, and the "Santana" was introduced into the Chinese market as the first model. In May 1988, FAW Group and Audi jointly signed the "Technology Transfer License Contract for the Production of Audi in FAW", and Volkswagen transferred the old body molds of the Audi 100 plant in South Africa to FAW of China, and the Audi 100 was introduced to the Chinese market as the first domestic luxury car brand. The status of the "North and South Masses" was thus established. Later, joint ventures including FAW Toyota, BMW Brilliance, SAIC-GM, Beijing Benz, Beijing Hyundai, GAC Toyota, GAC Honda, Dongfeng Honda, Dongfeng Citroen, Changan Ford, Changan Mazda and other joint ventures appeared in various places, opening a glorious period of more than 20 years in the Chinese market for joint venture brands.

Again, "foreign parties cannot hold more than 50% of the shares". The earliest source is the "Industrial Policy for the Automobile Industry" issued by the mainland in 1994, which stated that the production and sale of automobiles in China by foreign investors "must be carried out in the form of joint ventures, and the foreign party of the joint venture automobile company shall not hold more than 50% of the shares". In the 27 years since, this policy has not changed. It was not until December 27, 2021 that the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly issued the Special Administrative Measures (Negative List) for the Access of Foreign Investment (2021 Edition), which stipulates that from January 1, 2022, the "foreign shareholding restrictions" on passenger car manufacturing and the restrictions on the establishment of two or less joint ventures by the same foreign investor to produce similar vehicle products in China will be abolished. At this point, the provision that "foreign parties cannot hold more than 50% of the shares" of joint venture car companies has officially withdrawn from the historical stage. BMW Brilliance took the lead in changing the shareholding ratio of both parties, and the "New Joint Venture 2.0 Era" in China's automotive field began.

In the past, at least at the product and technology level, the voice of joint venture car companies was more in the hands of foreign investors. For example, the brand is foreign, the technology is foreign, and even the business process, management structure, service system, etc. are foreign. For a long time, the reason for users to buy was not the name of the joint venture car company marked on the rear of the car, but the brand logo that was affixed to the center of the car's grille or trunk lid. What's more, most of the foreign investors of domestic joint venture car companies are among the top 10 large automobile groups in the world, and their brand influence and product appeal are global, which means greater brand dividends for the rapidly developing Chinese auto market, and also constitutes a reason for consumers to pay the bill.

However, with the rise of self-owned brand car companies, especially in the era of new energy vehicles, new car-making forces have risen one after another, and there is little left of the brand dividends of joint venture car companies. At the same time, the younger generation of consumers are no longer obsessed with the baptism of car culture by joint venture brands, and are more willing to try new brands. In this case, the joint venture must keep up with the changes of the times, which not only refers to the power of the car (new energy), but also needs the car to be smarter, more fashionable and more modern. And those joint venture car companies that have long been accustomed to "a small change in three years, a big change in five years", "a price increase for explosive car pick-ups, and many after-sales service routines", "lengthening, enlargement, and interior decoration", in the glorious period of the joint venture brand, how can there be any source of change? It is only because of the encirclement and interception of Tesla, new car-making forces and independent brands in recent years that some joint venture car companies have been forced to embark on the road of price reduction, oil to electricity and intelligent transformation.

In fact, the more prosperous the joint venture brand in the past in terms of sales, the more difficult it is to turn around quickly; The more joint venture car companies with popular star models, the more difficult it is to cross the hurdle of new energy. The mountain rain is about to come and the wind is full of buildings, and the story of Nokia seems to have happened yesterday. In this regard, Volkswagen's approach is the most resolute, not only to set up a new energy vehicle research and development center in Hefei to promote the transformation of SAIC Volkswagen and FAW-Volkswagen to the new energy track, but also to cooperate with Xiaopeng Motors, one of the new forces in car manufacturing, to learn intelligent networking, which is much stronger than those joint venture car companies that are still on the shelf, nostalgic for the old times, and always say "want to be back then". However, it is more important to reflect on the Chinese shareholders in the joint ventures. Has the "market for technology" blossomed? Is its own brand stronger? If the profits of the joint venture car companies decline, or the share of money decreases due to equity changes, will there be any room to subsidize the independent business segment? These are all serious questions, but they are serious issues that the Chinese shareholders of the joint venture brand must face.

The camp of new forces in car manufacturing: The new forces are just a prelude, and car building is the right thing to do

New EV manufacturers are a specific term that often refers to new EV manufacturers that have no experience in the past, but have only crossed over from other industries in recent years, and have adopted strategies, paths and methods that are incompatible with traditional car companies. The new car-making forces often mentioned in the automotive industry roughly include a number of new car-making brands such as Ideal, Weilai, Xiaopeng, Xiaomi, Nezha, Lingpao, Gaohe, and Jidu (later renamed as Agitation). Subsequently, the new forces of car manufacturing also included new energy vehicle brands established by traditional car companies such as GAC Aion, SAIC Zhiji, Changan AVATAR, Celis Wenjie, BAIC Jihu, Dongfeng Lantu and so on.

However, with the entry of Huawei and Xiaomi, the new energy vehicle track has entered the knockout round, and the term "new car-making force" has gradually become a thing of the past. For all car companies, regardless of whether they are "new forces" or not, sales, user bills, and explosive products are the key to market competition.

Taking Li Auto as an example, in 2023, Li Auto will become the first new car manufacturer in China with a revenue of more than 100 billion yuan and a profit of more than 10 billion yuan, and has initially built a product matrix including L6, L7, L8, L9, etc., becoming the leader of the domestic extended-range SUV market. However, in April this year, the ideal pure electric MPV new product MEGA was launched, and many people thought that the ideal was going to open the road of "extended range SUV + pure electric MPV" dual growth engine, but it encountered an unprecedented malicious attack by the network water army. The performance declined, sales declined, profits decreased, and the news of "18% layoffs (involving 5,600 employees)" was also exposed. In less than half a year, Li Auto has completely experienced the two days of ice and fire, and the market will never open up and fall lightly just because you are a new force in car manufacturing.

Another representative case is the Xiaomi SU7, which was released in just 43 days and delivered more than 10,000 units, and Xiaomi officially said that it would "ensure that the delivery target of 100,000 units will be achieved throughout the year". This is a goal that many traditional car companies are difficult to achieve when they were in their glory. Since you are entering, don't think of yourself as a "newbie". In Lei Jun's words: "Life and death are downplayed, and if you don't accept it, you will do it." In fact, Lei Jun has never said in public that Xiaomi Auto is a new force in car manufacturing, and you have to do your best to get on the field, no matter whether you are old or new.

However, from the perspective of the development process of the new energy vehicle industry, the entry of new car-making groups has indeed injected new force into the development of the entire industry. Tesla Model S is the first mass-produced model of a new car manufacturer in the true sense, and 10 years ago, Musk held a delivery ceremony for the first batch of Model S owners (15) in the Chinese market, including Li Xiang, founder of Li Auto, Li Bin, founder of NIO, and Lei Jun, founder of Xiaomi Auto. 10 years later, the first three Tesla Model S owners have all become members of the new car-making forces: one chooses the extended range track, the other chooses the battery swap mode, and the other focuses on the "people-car-home" ecology. In a sense, this can be understood as the passing of the torch from the new forces of car manufacturing.

However, Tesla, as a new force in car manufacturing, had to solve the main problems of battery life and charging, while now new car manufacturers including Xiaomi, Huawei, Ideal, Weilai, Xiaopeng, etc., have to solve the problems of intelligent driving, intelligent car machine and intelligent cockpit. Electrification is the first half, intelligence is the second half, and the key to intelligence lies in data, computing power and algorithms, as well as large models and artificial intelligence. In this way, the evolution direction of new energy vehicle companies will be technology companies.

From this perspective, we can understand why the key problem faced by Toyota and Volkswagen is that it is difficult to transform into a technology company; Why Mercedes-Benz and BMW have suffered from the pain of transformation, and even continue to postpone the timetable for new energy transformation. The biggest difference between technology companies and traditional car companies is the difference between Moore's law and Joule's law, and the difference between bits and watts.

There is not much time left for car companies. Who will stay at the table, we'll see.