Author: Chen Nianhang

The big news in the autonomous driving industry has finally been announced. On October 13th, Volkswagen’s autonomous driving company CARIAD and Horizon officially announced their joint venture, with Volkswagen CARIAD holding a controlling 60% stake in the newly formed company. Volkswagen Group plans to invest approximately 2.4 billion euros in this collaboration, and the transaction is expected to be completed in the first half of 2023.

The new joint venture will focus on developing scalable full-stack advanced driver assistance systems and autonomous driving solutions. It is not a software company as previously rumored and not solely focused on intelligent driving chips, but instead aims to provide full-stack intelligent driving solutions. This joint venture will be positioned as the core intelligent driving Tier 1 company for Volkswagen Group in China.

In the future, Volkswagen will launch pure electric vehicle models (SAIC Volkswagen, FAW Volkswagen, Volkswagen Anhui) in the Chinese market that will be extensively equipped with the intelligent driving solutions developed by this joint venture.

This partnership brings together one of the top five global automakers that sells three to four million new cars a year in the Chinese market and a rising domestic intelligent driving chip company. The combination of the two is also a deep-water mine for the entire intelligent automotive industry:

• 2.4 billion euros is not a small amount. It demonstrates Volkswagen’s firm commitment to intelligent driving.
• Why did Volkswagen choose to form a joint venture with a Chinese intelligent driving chip maker?

With these views and questions in mind, let’s talk about this joint venture, which is worth the attention of the entire industry.

Volkswagen partners with Horizon to establish a joint venture company

Recently, the Volkswagen Group, which has just undergone a change of leadership, implemented this important measure for the Chinese market, with the goal of enhancing its technical reserves in vehicle autonomous driving and responding to future fierce competition.

At the same time, the establishment of a joint venture in the Chinese market also helps to maintain the independence of the technology supply for its subsequent domestic vehicle models to a certain extent.

The establishment of the joint venture means that the intelligent driving software and chip solutions from Horizon will be used in the subsequent pure electric vehicles of Volkswagen’s three joint ventures in China (FAW Volkswagen, SAIC Volkswagen, Volkswagen Anhui).

For Horizon, this means a huge order volume and further expansion of its circle of automotive industry friends. For Volkswagen, it provides a very strong grip on the development of intelligent vehicles in the Chinese market.

In fact, at the beginning of 2022, the German media “Manager Magazine” reported that Volkswagen Group was negotiating to acquire Huawei’s ADS autonomous driving department, with a potential acquisition price of tens of billions of euros, and that senior executives from Volkswagen Group and Huawei had been engaged in negotiations for several months.## Volkswagen’s Failed Partnership with Huawei and the Development of Intelligent Software

According to sources familiar with the matter, Volkswagen had expressed interest in establishing a joint venture focused on autonomous driving with Huawei and had planned to appoint former Huawei executive, Qing Su, as the CEO of the joint venture. However, the talks ultimately fell apart due to two reasons: the United States’ suppression of Huawei, and Huawei’s asking price for their autonomous driving system (ADS) exceeding Volkswagen’s budget.

In the end, Volkswagen, with a strong demand for software and intelligent development in the automotive industry, found an excellent partner in China: Horizon Robotics.

The partnership between Volkswagen and Horizon Robotics is now being discussed in two ways online: firstly, Volkswagen’s huge market share in China and the strategies it plans to implement to enhance its intelligent capabilities; secondly, why a hardware enterprise like Horizon Robotics has decided to establish a software joint venture with Volkswagen.

Under the leadership of CEO Herbert Diess, Volkswagen Group is extremely determined to transform its business in electrification and intelligentization.

Volkswagen has already invested heavily in electric vehicle technology, with its platform MEB and ID. series of pure electric vehicles, as well as building a global battery supply chain, including self-built battery factories. However, Volkswagen’s difficulty lies in the development of intelligent software and emerging technologies, which has become a major concern for the automaker. As the competition in China’s intelligent automotive market grows, Volkswagen is feeling increasingly weak, particularly in the face of new players like ZVE and their superior intelligent driving experience.

In fact, Volkswagen’s poor image in software ability was deeply rooted in the minds of global consumers after its first MEB platform intelligent electric vehicle, the ID.3, was unable to be upgraded OTA and had to be manually upgraded offline in large numbers. Therefore, in order to enhance its software capabilities, compete with intelligent car companies like Tesla on a global stage, and rise above its current position, Volkswagen began to invest heavily in technology and bolster its software capabilities.

In 2020, Volkswagen Group established CARIAD, a software company in Germany that focuses on developing electronic and electrical systems, automotive operating systems such as VW.OS, intelligent cabins, and intelligent driving technologies. CARIAD’s three main research areas are:- Futureproof Hardware: Utilizing powerful and scalable computing units to significantly reduce the original 70+ ECU in the car, with architecture supporting data uploading and software updates;

• Unified Software: Including operating system VW.OS and Volkswagen’s cloud VW.AC. VW.OS is similar to a mobile operating system, responsible for scheduling all hardware in the car to support upper-layer services;
• Innovative Application: Intelligent driving (highway assisted driving and autonomous parking) and intelligent cockpit applications, etc.

Through these three directions, Volkswagen hopes to become a car company that truly achieves “software-defined cars” by 2025.

To date, CARIAD has already formed a team with more than 5,000 people worldwide, and has also gathered a group of software supply chain companies through investment and acquisition, such as the acquisition of Hella’s ADAS visual perception software department for 100 million euros.

In April of this year, CARIAD officially announced the establishment of a Chinese branch in the Chinese market, aiming to accelerate the localization research and development of automobile software in China. At that time, the official revealed that CARIAD already has a team of more than 600 people in China, and is expected to expand to 1,200 by the end of 2023, with more than 90% being local software talents.

Through this series of efforts to build software capabilities in the global and Chinese markets, it can be seen that Volkswagen really wants to become a software-oriented car company.

However, it is not enough for Volkswagen to rely solely on its own CARIAD. Smart cars require complex supply chain support, which requires both a self-developed system and capabilities, as well as the help of local third-party suppliers, especially in the field of intelligent driving, where intelligent driving software and chips have become a battleground in the era of smart cars.

Additionally, the new leader of the Volkswagen Group, Oliver Blume, listed managing the Chinese market as the third item on his list of 10 priorities as CEO, and building CARIAD’s software capabilities as the fifth item. Therefore, it is clear that constructing a strong automotive software capability in the Chinese market will be a key focus for the new CEO.## Why Joint Venture with Horizon?

If Volkswagen simply announced the procurement of Horizon’s Journey series chips, this supply chain cooperation would not be significant, and would only mean that Horizon had obtained larger-scale mass production orders.

However, this time the cooperation of the two parties is a joint venture company, and the investment is at the level of 2.4 billion euros, so joining hands in this way makes things more interesting and worth interpreting.

Many people will ask why Volkswagen needs to establish a joint venture company with Horizon?

Because if the joint venture company is controlled by Volkswagen, Volkswagen will be more independent in the cooperation between the two parties in the future, and can integrate its chip + software solution earlier, faster, and more efficiently.

On the other hand, through the joint venture company, Volkswagen can also obtain more basic capabilities and Know-How related to intelligent driving chips and software from Horizon, and this localized operation method is also more conducive to Volkswagen’s differentiation of products and solutions in the Chinese market.

There are also many questions about why Volkswagen had chosen Horizon, a hardware-based company specialized in intelligent driving chips, to establish a full-stack intelligent driving solution joint venture company.

In fact, in the years since its establishment, Horizon has not only developed chip hardware, but also a leading intelligent driving solution enterprise with a complete technology stack。

On the one hand, Horizon has been polishing chip performance and improving chip reliability, and on the other hand, it has developed a complete technology stack in the software field such as core visual algorithms for autonomous driving.

Currently, Horizon’s product ecology includes:

-A chip product suite covering from several TOPS to hundreds of TOPS, with high and low configurations;

-A complete IP and software technology, including operators and some middleware

-A complete intelligent driving hardware and algorithm reference design, and can also provide white-box level delivery;

-A complete development toolchain and AI platform.

Based on its chips and algorithms, Horizon has launched intelligent driving solutions such as the Mono series of single-camera front ADAS solutions, the Pilot series of multi-sensor fusion solutions based on high-performance chips, and even higher-level FSD solutions.

Therefore, Horizon is not only a chip company, but also an intelligent driving solution company. For example, it participated in the development of the NOA software solution for the 2021 Ideal ONE, and will work with Ziyoujia Auto to develop the SupeDrive AAD system based on the Journey 5 chip in the future.In the past few years, Horizon Robotics has relied on its performance and cost advantages, and after shipping over 1.5 million units of Journey 2 and Journey 3, has also won the recognition of many automotive companies with the release of Journey 5.

In addition to deep collaboration with Ideal Auto, Journey 5 will also be put into production by BYD, ZYJ, SAIC Motor, FAW Hongqi, and a certain East China host plant from 2022 to 2024, involving single J5, double J5, and multiple J5.

Recently, new cars based on the Horizon chip + ADAS algorithm solution have also been launched and exhibited in a cluster, including ZYJ NV, Roewe RX5, NETA U-II, Geely Yuanjing L, and more.

Horizon has also obtained orders and investment from the vast majority of domestic independent brand automakers, including BYD, SAIC, Great Wall, GAC, FAW, Chery, Geely, etc. The favor of these automakers is a testament to Horizon’s strength.

This is also why Horizon is so attractive to Volkswagen.

In fact, this is not the first time that Horizon has established a joint venture with international giants. In September 2021, Horizon and Continental Group signed a joint venture contract to jointly establish a joint venture company focusing on providing advanced assisted driving and autonomous driving software and hardware solutions.

From here, it can also be seen that Horizon is an intelligent driving solution company that combines hardware and software, with chips as the core. Therefore, it is not surprising that Volkswagen established a software company with them.

Next, Volkswagen’s intelligent driving chip and solution supply in the Chinese market will more often be in partnership with Horizon, and companies like Nvidia and Qualcomm are not Volkswagen’s first choice in the Chinese market.

This is related to the current international situation, the instability of China-US relations, and sanctions in the chip industry, all of which may affect the relevant supply chains in the Volkswagen Chinese market. This is why Volkswagen initially looked for such cooperation targets in China, including Huawei and Horizon.

So this may be a small factor driving Volkswagen’s establishment of a joint venture with Horizon.

In conclusion

It can be foreseen that in the future, Volkswagen models equipped with Horizon chips and intelligent driving solutions will become a new choice for consumers in the market.

No matter what form of cooperation Volkswagen and Horizon will reach, it is an important milestone for the development of China’s intelligent automotive industry, and also has a great promoting effect on the development of the domestic intelligent driving chip industry.

Finally, it is hoped that such cooperation can accelerate the popularity of intelligent cars and intelligent driving functions, benefiting more consumers.

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.