Promoting Green Consumption Implementation Plan

Written by: Leng Zelin and Wu Xianzhi

Edited by: Wang and Pan

Recently, the National Development and Reform Commission and other seven departments issued the “Implementation Plan for Promoting Green Consumption”. The emphasis on “vigorous development of green transportation consumption” has once again activated the market’s enthusiasm for new energy vehicles.

New energy vehicles have been the main line of development in the automotive industry in recent years. Since the State Council officially identified the strategic position of new energy vehicles in “Made in China 2025” in 2015, Chinese automakers, who have long been in a disadvantaged position in the automotive industry, have tried to change their passive status in the new era.

Looking back at the capital market in 2021, new energy vehicles have achieved relatively good results. Especially Chinese new force companies, represented by “We Xiaoli”, have given people a lot of surprises in terms of product experience and capital return.

However, what people are surprised about is that, in this round of the automotive revolution, who is sitting at the table is not only the new force manufacturers.

In the rankings of new energy vehicle sales, Chinese automakers occupy nine of the top ten sales in China in 2021. The first-ranked BYD’s sales are nearly twice that of the third-ranked Tesla. China’s highest-ranked XPeng among the new force enterprises, only occupies the seventh place. The rest are undoubtedly the “old forces” of Chinese automakers.

Chinese automakers, known as the “old forces” in the eyes of the people, may also be the core of this round of automotive revolution.

On the other hand, even in 2021, when new energy sales accounted for a record high proportion of total vehicle sales, China’s new energy vehicles still only accounted for 13.4% of the entire automotive market. Traditional vehicle manufacturers that have been constantly criticized, still firmly grasp the absolute stock of the automotive industry and are undoubtedly the true mainstream of the automotive industry.

New energy has not overturned everything.

For Chinese automakers, after experiencing the first wave of new energy trends spurred by emerging manufacturers, perhaps the key to achieving a turnaround lies in how to seize opportunities and achieve the transformation and evolution of the automotive industry on a broader level.

Energy is not the key

In the eyes of many industry insiders, energy conversion is only the surface of this round of automotive revolution. The digital revolution promoted by the new energy wave is the key.

“To manufacture cars, we have to directly change the basic logic of the manufacturing end,” a component entrepreneur told the Photon Planet. Most of the time, the automotive industry chain relies on manual labor to solve problems. “Only skilled technicians know whether a wiring harness is qualified or not,” and this seemingly inconspicuous component still relies mainly on manual labor.Automated processes are not enough, so manual labor is needed. This is a familiar concept to many independent brand owners who, in order to improve their independence rate, could not acquire certain Tier1 machines and thus had to rely on hundreds of workers to manually polish components.

Changes in energy sources does not necessarily mean that the entire industrial supply chain can be completely rebuilt at will. The key processes in the key links of the supply chain, whether for new energy or fuel cars, still remains the core problem to be solved. Faced with the inability to overcome core technologies or improve production efficiency, the changes in energy can only become a tool for car manufacturers to “cheat subsidies”.

Tesla was once a “good teacher” for some Chinese car companies. In 2021, with a sales volume of 936,000 units, Tesla won the title of the world’s best-selling new energy automaker, and behind this was the efficient operation of Tesla’s Shanghai factory.

In a previously released video about the Shanghai Super Factory, Tesla’s current efficiency is revealed, and under the peak manufacturing speeds of the entirely digitized production line, the average production time for a Model Y car has been compressed to only 45 seconds.

In 1913, Henry Ford invented the industrial assembly line for car production, standardized auto parts, and adopted a mechanical conveyor belt in the final assembly workshop, which for the first time shortened the car manufacturing time to 93 minutes. Prior to this, each car required 728 hours of manual labor, with an annual output of about 12 cars.

Production speeds are far from meeting the growing demands of the consumer market, and to achieve higher efficiency and quality, upgrades to the production line will never stop.

In 2018, Li Bin, the CEO of NIO, made a statement that “Porsche’s factories certainly cannot compare to JAC’s factories,” which overturned many people’s perception. At that time, the standard production pace of the entirely digitized JAC factory for NIO’s ES8 was 15JPH (240 seconds per vehicle). From the data, it is true that JAC’s production efficiency and mechanization automation level were higher than Porsche’s.

Of course, this is not the only standard for judging the superiority or inferiority of a product, but emphasizes the advantages that all latecomer carmakers have in efficiency, automation, and standardization. NIO’s recent efforts, although still in the early stages, have already demonstrated that Chinese car companies can achieve full digitization in the manufacturing end.

Mainstream traditional automakers face more complex challenges compared to new brands as their plates are bigger and supply chains are more mature. In order not to fall behind new carmakers in the new energy trend, traditional automakers have been actively seeking change in recent years. Starting out is always difficult, and the first challenge in digital transformation is how to take that first step.Long ago, Great Wall Motors, which owns both new energy brands such as Euler and fuel vehicle brands such as Tank, realized that digitalization of the industry chain was the key to solving the problem from the source. However, due to the diverse brand matrix and complex production lines, it faced an unusual challenge in quickly implementing a digital process. The management regarded the data center project as the number one digital transformation project, but found no qualified personnel when it came to implementation. So, they put together an inexperienced project team with the willingness to learn, and named it DEX, meaning data enable X, empowering data in the future.

With the help of partners such as Alibaba Cloud, the team gradually built Great Wall Motors’ own all-domain data center, including real-time visualization of core operating indicators, logistics visualization, etc., which gradually became a reality. Great Wall Motors is not the only automaker realizing this issue in China. BYD, the leading player in China’s new energy sector, is also making aggressive advances in digitalization. Its Shenzhen factory is the first in the country to produce pure electric cars, hybrid cars, and traditional fuel cars, all on the same flexible production line, and has undergone years of digitization in production and logistics to help BYD switch from the fuel track to the new energy track.

According to the 2021 annual results posted by BYD, it achieved a revenue of 216.142 billion yuan in 2021, a year-on-year increase of 38.02%, thanks to the rapid development of new energy vehicles. In 2021, BYD sold more than 600,000 units of new energy vehicles, a year-on-year increase of 218.30%.

Another rising star in China’s auto industry in 2021, FAW Hongqi, also realized the importance of digital transformation early on, and has already started to see results in its production process. In July last year, it launched the first “Automotive Industry Digital Factory” for the production of FAW Hongqi’s new energy vehicles.This factory is jointly established by Red Flag, China Jiuyuan Machinery and Aliyun, and is also a fully data-driven digital factory. Its self-developed data acquisition and monitoring platform connects millions of device points, and the data frequency can reach 200 milliseconds. Thanks to Aliyun’s processing capability for high-concurrency data, the platform surpasses other mainstream manufacturers in real-time and completeness of numerical control.

Workshop workers can immediately know the health status of “robots”, receive early warning of faults, and perform timely maintenance. In the welding and assembly workshop, the algorithm can also automatically identify the quality of welding points and provide decision-making references.

Decision-making is the most headache for most automakers. Because the automotive manufacturing is interlocking and vertically segmented in various departments, any decision will lead to lengthy disputes. An automotive engineer told Guangzhixingqiu that a colleague wanted to modify a headlight scheme, at least several departments, including headlights, front covers, and sizes, were brought together, and the first sentence they said was: Are you full yet?

In addition to improving decision-making efficiency, digital twin technology can also simulate the real factory environment one-to-one, reducing the difficulty of management and workers’ understanding of data. In other words, under the same production pace, the factory equipment utilization rate and product quality can be greatly improved.

Thanks to this, as an industry benchmark, FAW Prosperous Factory has now surpassed most car companies in terms of automation. The automation rate of stamping production line is 71.4%, the 628 robots of welding production line are 100% automatic, the robot utilization rate of painting production line has been increased by 15%, and in addition, there are 28 robots and 95 AGVs in the final assembly production line.

“If you want to summarize the ‘automotive digital factory’ in one sentence, it is to help car companies obtain production data, understand data, and use data well, so that the factory’s operators also have the ability of digital innovation.” An industry insider said.

The Overtaking in Bends Has Just Begun

Digitization throughout the automotive industry has become a core competitiveness for Chinese automakers in the era of new energy.

According to incomplete statistics from third parties, including FAW, Great Wall, Geely, BYD, Changan, and UXR, many Chinese automakers have started to introduce digitization into management, research and development, production and other processes independently or with external teams.

Considering the complexity of the automotive industry, digitization in the manufacturing process may still take some time to fully release advantages in sales, but its initial effectiveness has begun to show.

Based on the digital plan of Global Data Middle Platform, Great Wall welcomed a new round of organizational restructuring in 2020. The “decentralization” proposal seems to be a cultural transformation of the enterprise, but it is actually intended to achieve the flatness of organizational management and unblock the flow of data between departments.# Long Xi Automotive owns six major brands with dozens of vehicle models.

In order to allocate resources effectively for those directly involved in the competition, CDO of Long Xi Automotive, Chen Xianling, stated that the radical changes made were primarily to increase efficiency, reduce communication matrices, and learn from the models of internet enterprises. Now, as we are about to enter uncharted waters, the changes will only intensify.

Similarly, FAW presented a digital solution and saw significant growth in Hongqi sales while Volkswagen dipped dramatically.

Last year, the annual sales volume of FAW’s Hongqi brands increased more than 50% on the same period the previous year and has achieved several-fold growth in recent years. As Dong Wei, the Chief of Production and Assembly Technology at FAW Group’s Engineering and Production and Logistics Division and project leader of the FAW Hongqi New Energy Automobile Plant, stated: “In the future, data intelligence is a core technology, and industry leaders must master this core technology.”

From supply chain management, production, quality inspection, marketing, and even intelligent automation, numerous domestic automakers have tasted the sweet fruit of digitization.

For years, the automotive market monopolized by joint ventures has gradually been broken apart by the transformation into new energy. As more and more Chinese automakers build digital processes, and even smart factories, the outer world will witness the outcome of the digital transformation journey of Chinese automakers, and companies such as Alibaba, which has been working hard in industry and services for the real economy, will join in and accelerate the greater transformation of Chinese automakers.

After all, in the midst of a great transformation, achieving overtaking on curves is not only competition on a single aspect but requires surpassing from the back-end to the front-end.

Whoever can gather data and understand it may occupy the leading role in the next market.

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.