Author: Wang Xuan
Is it criticizing traditional car companies or poisoning new forces?
Once again, Luo Yonghao’s comments have caused a stir: “in the electric car era, traditional car companies have no chance at all.” In his opinion, traditional car companies are like trains on tracks. When facing disruptive changes in the industry, the place to compete becomes a quagmire, and the tracks become a burden, not as useful as donkeys and carts.
The analogy is quite good. Let’s not make any more comparisons next time.
Luo Yonghao’s absolute comments remind me of a recent question on Zhihu, “Have traditional car companies entered a ‘Nokia’ moment?” The person who raised this viewpoint is economist Ren Zeping. Comparing traditional car companies to Nokia is not a new argument. However, are traditional car companies really like the wooden chicken that doesn’t move in Ren Zeping’s eyes? Have new forces really entered an era of effortless victory? The answer is probably not so absolute.
It is not difficult to see that the significant impact of electrification and intelligence on the automotive industry is why many experts underestimate traditional car companies and overestimate new force car companies. Innovation and disruption are also the themes of the automotive industry today.
However, leaving aside the technological accumulation of the automotive industry over the past century and only discussing innovation, it is probably beyond the ability of new forces car companies to be classified as “disruptors.”
If intelligent electric cars with disruptive potential are compared to the 1.0 products of the new era automotive industry, and traditional cars are compared to 0.5, then the journey from 0 to 0.5 to 1.0 must go through countless evolutions of 0.1, 0.01, etc. These stages are worth unpacking for analysis.
Without tracks, how can new forces drive?
Believe me, 99% of people who claim to want to make 0-1 products and disrupt the entire industry are frauds, and the remaining 1% are carefully planning their long-standing dreams in the East.
Looking back, who gave new players the courage to build cars? The answer is a mature supply chain, policy and market stimulation, and technological paving by pioneers.
The reason why automobiles are called the gem of industry is precisely because of their long supply chain and the wide range of upstream and downstream industries. China’s ability to become an automotive power is not only due to consumer purchasing power, but also to its mature supply chain. Recently, after the release of the L9 by Li Auto, the entire vehicle’s supply chain list was exposed by the media. After careful searching, it was discovered that whether it was a domestic parts supplier or an international enterprise entering China, their registration time in China was around 1995-2005, which was during the first wave of independent brand car making in China.Byd, Geely, Great Wall, Chery, and other national team players have created opportunities for Chinese auto parts suppliers and also let world-class suppliers recognize the broad Chinese market. Building a car in China is not difficult. Every detail of the car can be found on the market, where suppliers provide solutions. There are also opportunities for selection and preferential treatment. Even Tier 1 suppliers can personally help the OEMs to debug the vehicle.
The complete domestic automotive industry chain is the opportunity for the new car-making movement that began around 2016. Building a car from 0 to 0.5 using the supply chain is not difficult. However, if they cannot survive, how can they talk about technological innovation and industry subversion? At this point, we should understand that the supply chain is the basic plate for most new car-making companies to build cars.
When it comes to BYD, Luo Yonghao said, “Some things cannot be said now, but in five years, you will see the results.” Wang Chuanfu and BYD are always tagged as old-fashioned by netizens, which can be said to be a great injustice. As early as 1997, Wang Chuanfu personally bought a Beijing brand electric car and became China’s first electric car user. Yuan Jiazhin, an engineer at Beijing Second Automobile Factory, said that at that time, Wang Chuanfu had the idea of making electric cars. Moreover, BYD, founded in 2003, launched the pure electric car BYD ET in 2004.
You can say that Wang Chuanfu does not have the courage of Elon Musk, but this is no different from the electric car version of “Why not eat meat”. If BYD had rooted in the electric vehicle industry in 2003 without shaking, then it would have been a disruptor. The premise is that it can survive. However, disruptors need to build a technical system from scratch and face a market with no demand. Private car-making companies at the time could not afford such a dream. Conversely, if there were no clear policy support and market demand brought by it after 2010, can the later ones boldly enter the market?
Undoubtedly, Tesla brought electric cars into the mainstream market. Tesla’s journey of making electric cars can be said to have overcome great obstacles. In the era where the three electric system had no complete supply chain, they had to use the last resort of inserting laptop batteries into the car chassis. They also had to develop a BMS battery management system that was so conforming to the “first-principle”; and to control those restless lithium batteries.The success of Tesla comes to some extent from its pioneering positioning. Model S is a product that allows consumers to get a glimpse of the charm of electric vehicles. In 2013, there was a hot review of Model S on Motortrend. The author said that the car’s appearance was actually plain, the grille was closed, the lines were more concise, and it didn’t feel much different from the cars we drive daily. But it really feels great to drive!
At that time, there were also some new energy products, such as Nissan Leaf, BMW i3, and extended-range Chevrolet Volt, but only Model S was based on a pure electric platform. So the advantage of electrification helped it attract a lot of attention. People began to realize that the range of electric vehicles could be more than just 200 kilometers, and the accelerating ability per 100 kilometers could easily surpass that of gasoline cars at the same price.
Model S can be said to be the iPhone 4 in the electric vehicle industry. Similar to the mobile phone industry, it was only because there was a benchmark that there were many homogenized products that followed.
And the people who took the lead in making homogenized products in the automobile industry are none other than the new force car companies in our mouths. From the perspective of supply chain, market, and technology, the so-called “three giants” mentioned by Luo Yonghao have never deviated from the track explored by predecessors.
Are traditional car companies waiting to be overturned?
I can roughly understand what Luo Yonghao means by the quagmire being the electrification technology and intelligent capabilities. Unfortunately, Teacher Luo’s knowledge is too broad, so his insights in any field are too one-sided. It cannot be denied that the innovation of electrification and intelligence is the advanced path from traditional automobile 0.5 to intelligent electric vehicle 1.0, but traditional car companies may not wait to be overturned.
Car companies that want to take this advanced path must have a key ability—vertical integration, which is the foundation of independent innovation.
BYD is the most typical example.
From “borrowing” from Toyota to selling more than 100,000 DM-i per month now, BYD has been learning to innovate over the past 20 years. If you have been to BYD’s headquarters, you will know that BYD has a “patent wall”. It is precisely because of its deep cultivation in batteries and vehicles that BYD may have the possibility of innovation in hybrid technology.
Moving away from the supply chain and plagiarism path, and then to fully independent and transforming innovative technology into products, the process of BYD becoming a trillion-dollar “King of Di” is enough to give us inspiration. Without innovation and technological barriers, how can there be overturning? With fuel consumption advantages, BYD has overturned the pattern of the entire car market below 250,000 yuan.In the recent quarrel between Li Ruifeng, the CEO of WEY, and Yu Chengdong, the importance of the underlying technology to a product was revealed. Although the definition of “backwardness” varies from person to person, Li Ruifeng’s view that the series hybrid form (extender) is backward compared to the series-parallel hybrid form is valid. At least in terms of technological difficulty, the breakthrough of series hybrid form technology is easier to achieve.
Perhaps this is why ideal automobiles adopt the form of extender to enter the automobile industry. After all, for new car companies with small size, they cannot support a large R&D team at the initial stage. Making a car by combining user needs with supply chain capabilities is the best solution. However, the journey of Ideal Automobile is not just about the present. They gave up purchasing Dong’an Power’s extender on L9 and turned to self-develop an extender to seek the advancement from 0.5 to 1.
The efforts of traditional car companies in electrification are easily overlooked, such as the recent “Evolving Day” of Xpeng P7. Everyone was excited about “all of the 8155 chips were purchased by AN. COHI” but ignored the important technology of four-wheel-drive and two-wheel-drive switching.
The front and rear dual motors of the Xpeng P7 both use permanent magnet synchronous motors. Although permanent magnet synchronous motors have the advantage of high efficiency compared to asynchronous induction motors, they also have disadvantages in nature. An induction motor can achieve almost zero power consumption when not electrified, but a permanent magnet synchronous motor will continue to consume power even if it does not output power. Therefore, we can see that many models with dual motor configurations are composed of permanent magnet synchronous motors and induction motors, such as NIO.
The solution developed by Xpeng can fully utilize the advantages of dual permanent magnet synchronous motors, and the lightning switching is achieved by adding a clutch to the electric drive system to actively disconnect the power to avoid permanent magnet synchronous motors from “stealthily” consuming power.
At the same time, we should also pay attention to a detail that the OTA lightning switching function supported on Xpeng P7 is powered by Weirui motor hardware, which is also a motor supplier under Geely.
Of course, traditional car companies have also made many innovations in the three-electric system, such as the 800V high-voltage platform, and the universal wBMS wireless battery management technology. Electric innovation cannot do without three characteristics: more, faster, and more energy-efficient. They correspond to longer cruising range, faster charging speed, and higher efficiency respectively, and it is not difficult to find that these are the product strengths that users are most concerned about.
The sentence said by the great man, “If the common people like something, and you don’t like it, who are you?” should be given to Mr. Luo. It is too dogmatic to judge the future of the automobile industry based solely on “new and old”.## In Musk’s opinion, what needs to be done to achieve disruption?
If the future belongs to smart electric cars, it is worth discussing where intelligence will lead. Based on Musk’s dynamics, I would like to make some speculations.
Musk once said two sentences, “The first company to achieve fully autonomous driving can occupy 25% of the market share” and “If Tesla cannot achieve Level 4 autonomous driving, it will be worthless.” Musk’s words implied that autonomous driving is the core technology to disrupt the automotive industry. In order to achieve this goal, Tesla has firmly grasped the core technologies related to both autonomous driving and the entire vehicle, and this is also a kind of vertical integration.
Autonomous driving data and vehicles cannot be completely separated. The vehicle can run data to feed back algorithms, and algorithms can make the vehicle itself more capable. Currently, most of the cooperation between car companies and autonomous driving companies is similar to the early days of IBM and Microsoft, with one providing the body and the other providing the soul, while Tesla is more like Apple.
Musk’s prediction of market share is somewhat similar to that of the consumer electronics industry. If fully autonomous driving is achieved one day, soulless companies may not necessarily become Nokia, but are more likely to become Lenovo or Asus. There may still be differentiation on the product side, but practitioners around the world will focus on WWDC, looking for those innovations that top companies bring.
Major car manufacturers that want to seek greater development have already started investing in autonomous driving systems, such as XPeng. Since XPeng’s confrontation with Musk, XPeng Motors has been destined to be a company that fights autonomous driving to the death. Li Auto and Nio are also followers of the self-developed autonomous driving route. Of course, it’s not only new forces that self-develop autonomous driving, but also traditional car companies such as General Motors and Volvo, which have subsidiary companies specializing in autonomous driving software.
In conclusion
In fact, it is not the traditional car companies that will be eliminated in the future, but the companies that cannot respond to changes. The view that “the tail is too large to turn around” is not entirely applicable in the automotive industry. If there is not enough size, how can a company support the ability to vertically integrate?
Nowadays, the second-generation products of Li Auto and XPeng are already on the market, while the first-generation products of various companies are still in the 0.5 stage. And now they are slowly moving towards the 1 stage.
Therefore, development is the inevitable road for each new force, and everyone is just slowly adapting to changes. If someone tells you that they can directly create a product from 0 to 1, please throw their PPT directly into the recycle bin.
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.