Another internet company joins the auto industry.
On April 26, NETA Auto announced the start of Series D financing, with a financing amount of about CNY 3 billion. Internet security leader 360 became the strategic leading investor of this round of financing. Upon completion of all investments, 360 is expected to become the second-largest shareholder of NETA Auto.
Although 360 did not directly produce cars like Baidu and Xiaomi, as the second-largest shareholder, it will definitely participate deeply in the business of NETA Auto.
Although this is the first large-scale investment in new car-making forces, 360 has been deploying in the automotive security field for a long time. Its automotive network security team has also discovered major security vulnerabilities in Tesla. Zhou Hongyi, founder, CEO and chairman of 360, has also expressed his insights on intelligent vehicle network security on several occasions.
However, 360 has had a rough time since it announced its 2020 financial results. Although 360 barely completed the gambling agreement from 2017 to 2020, its net profit in 2020 decreased by 51.30% YoY, reaching CNY 2.913 billion.
Moreover, about 3.065 billion of 360’s restricted shares were unlocked and listed for trading on March 1, 2021. Shareholders including company executives have had unprecedented demand for cashing out and have been under huge selling pressure.
When 360 returned to the A-share market, its stock price soared to CNY 66.5 at one point, but as of the closing on April 26, the stock price was only CNY 12.93. Zhou Hongyi and other management certainly hope that 360’s stock price can be boosted by the news of participating in car production, like Baidu, and that NETA Auto can help 360 improve its performance with new business.
Visiting the Auto Show with a Focus on NETA
This year’s Shanghai Auto Show was the “first time visiting an auto show” for Zhou Hongyi, the “Red Bishop.” From the photos, he went to the booths of Leapmotor and XPeng. However, his focus should have been on NETA Auto.
According to reports from Yicai and other media, insiders from NETA Auto said that the two sides had been in contact for two months. Zhou Hongyi had led a team to NETA Auto’s factory to conduct research and experience its products.
At the auto show, neither 360 nor NETA revealed anything about investment, but it is expected that a decision had already been made at the time.
This round of financing for NETA is Series D. According to data from Tianyancha, NETA has accumulated more than 8.25 billion yuan in financing.
NETA is currently a stable second-tier player in the new car forces. In the first three months of this year, NETA’s terminal insurance numbers reached 5,003 vehicles, second only to the “NIO-XPeng-Li Auto” top three.
Official front-end sales data looks even better. NETA announced that the cumulative sales volume in the first three months of 2021 was 7,443 vehicles, a year-on-year increase of 390%. The total sales volume of NETA in 2020 was 15,000 vehicles, and the delivery volume of NETA in 2019 was 10,006.
After obtaining investment from 360, NETA will have stronger capital and technical resources to help stabilize its position in the new car forces, and even have the possibility of moving up and squeezing into the top tier.
360 Cultivates Automobile Data Security
It is realistic for NETA to look forward to 360’s support in automobile data security. As an internet digital security giant, it has significant accumulation in automobile data security.
At the 360 performance briefing, Zhou Hongyi said that the company has the first automobile security research team in China—360 Sky-Go Team, which can provide globally leading security solutions. Currently, it has cooperated with many mainstream automobile brands such as Mercedes-Benz and BYD on related projects.
The thing that 360 is widely known for in automobile security is finding vulnerabilities in Tesla.
As early as 2014, in the SyScan 360 Tesla cracking challenge, 360 found a vulnerability in Tesla and had already submitted it to Tesla.
Zhou Hongyi also said that all Tesla cars manufactured before 2017 have vulnerabilities. Whether it’s parking, opening the car door or driving, 360 can interfere with it.# Zhou Hongyi advocates for strengthening the network security of intelligent automobiles
Zhou Hongyi, as a member of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), submitted a proposal entitled “Proposal for Strengthening the Network Security of Intelligent Automobiles” at the two sessions this year. He suggested to construct a big data platform for the secure intelligent network-connected automobile, establish an intelligent automobile online attack and defense verification platform, strengthen supervision of data collection in intelligent automobiles, and include the intelligent automotive network security protection system into the automotive production, sales, and service system.
Zhou Hongyi believes that with the coming of the software-defined automobile era, network security will also play a significant role in the field of automobiles. He also stated that 360 is actively exploring market opportunities in the field of intelligent automobile security and anticipating increasing investment in relevant areas, further developing the feasibility of commercialized intelligent automobile security-related businesses.
Previously, Zhou Hongyi also revealed that many new automobile manufacturers, as well as traditional ones, have approached 360 seeking cooperation. The in-depth investment in NIO, unveiled the answer to “further developing intelligent automobile security-related commercial businesses.”
360’s Need to Manufacture Automobiles
For 360, investment in NIO is possibly an urgent business need.
On April 21, 360 released its annual performance report. In 2020, the net income belonging to the shareholders of the listed company was approximately RMB 2.913 billion, a decrease of 51.3% year-on-year. Operating income was approximately RMB 11.615 billion, a decrease of 9.55% year-on-year. Basic earnings per share were RMB 0.43, a decrease of 51.14% year-on-year.
Regarding the decline in performance, 360 stated, “In 2020, the macroeconomic situation faced severe challenges due to the outbreak of the epidemic at the beginning of the year. The Internet advertising budget was further reduced, and the advertising market was fiercely competitive. The progress of the company’s business plan was hindered, resulting in a decline in the company’s operating performance compared to the same period in the previous year.”
The incremental part of 360’s performance is represented by the security and other businesses, with revenue of RMB 0.808 billion, an increase of 70.73% year-on-year.
360 stated in its annual report that last year, the company continued to focus on the “big security” strategy, further expanding the service group of network security from individuals to enterprises, industries, cities, and countries, and set up the “360 Government and Enterprise Security Group.” The project which is central to the new generation of network security capabilities-the “360 Security Brain” project, has accumulated a total of RMB 1.263 billion in bids, becoming an important source of revenue for security businesses. The Security Brain projects successively completed in cities such as Chongqing, Tianjin, Shanghai, Guizhou, Qingdao, and Suzhou will effectively improve their ability to respond to high-level network threats and collaborative defense capabilities.In January of this year, 360 completed a financing round, raising a total of 4.9 billion yuan, and introduced more than ten strategic investments from state-owned backgrounds, including Chengdu High-tech Venture Capital, Chengdu Investment Fund, Zhuhai Venture Capital, Zhuhai Da Hengqin Innovative Development, Tianjin Haitai, Shanghai International, among others. The investment from these local capitals should encourage 360 to continue expanding into the field of network security, and intelligent car safety and local traffic data security are naturally one of the promising directions.
Previously, in February, 360 announced that around 3.065 billion locked-up shares of the company would be unlocked and listed for circulation on March 1, 2021. Facing massive pressure brought by the vast amount of unlocked shares and poor performance, 360’s stock price is struggling. At this point, announcing investment in a new car manufacturer which is making waves in the market may help alleviate the pressure on 360’s stock price.
From the market perspective, 360’s investment in NETA Motors did not reflect on the stock price. After the announcement was officially released on the evening of the 26th, the market will observe whether this news will help maintain market value.
However, now the positive effect of car manufacturing on stock prices is not as strong as before. Since Xiaomi announced its entry into car manufacturing, its stock price has not increased significantly.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.