This article is reproduced from the autocarweekly WeChat public account.
Author: Wild Xiao Chen
Today’s title may be a bit exaggerated.
We are not discussing whether automotive intelligence is omnipotent for automotive products, nor is it invincible for automotive users. What we are discussing is whether it is a complete free pass for automotive companies.
Since 2018, automotive intelligence has been repeatedly discussed as a hot topic. Electrification is a trend, a necessary and all-dimensional coverage situation, and the direction has no core competitiveness. The only thing that can be done is battery capacity and charging methods. However, the final dominant power belongs to the big policy. Even if it is remarkable, it cannot replace an oil gun with a charging station.
And the intelligence, also known as the singularity. It has not been defined completely, and the results of imagination and creativity in the technological friction are also unknown. In the next few decades or even one hundred years, “intelligence” may become the biggest motivation and identification for changing the automotive industry.
In the past, the weight of evaluating a car came from several keywords: design, power, safety, space, comfort, configuration, etc. However, since 2018, intelligence and technology as new reference values have become frequent waves of dividends, and the first person to eat the crab will benefit a lot. The first BYD that played with the screen, the first Roewe that claimed to be an Internet car, are beneficiaries of the new world.
From fuel to electricity, from function to intelligence, it is the most important X-axis and Y-axis in the history of 21st century automobiles. If the electrification process is a superstructure, then the importance of intelligence can be compared to the economic basis, which is the decisive battle for the modern automobile industry to move towards the Internet civilization.
It will promote the redistribution of value of the entire industry chain, and it is the most important adhesive and catalyst in the new four modernizations process. At the same time, it also gives birth to a brand new hundred-billion-dollar cheese.
First is safety, with the software support of “firewall”, to reduce the occurrence of vehicle security vulnerabilities.
Second is the connected car, enhancing the value of the surrounding area and transforming pure mechanical benefits into a more advanced information processing center.
Third is autonomous driving, and achieving the ultimate scenario of sharing RoboTaxi can not be separated from highly intelligent driving.
Fourth is 5G, namely bandwidth speed, a natural physical basis that promotes advanced interaction.The process of automobile intelligence can be microscopically compared to the process of smartphone intelligence. In the past, smartphones were solidly functional communication devices that could only be updated and iterated by continuously replacing the device with a new one. Nowadays, although there is still a gap between hardware, only software updates are needed for use. Fundamentally, there is not much difference in basic usage between iPhone 7 and iPhone 12. However, there is a big difference between the 2018 and 2021 car systems, which narrows the gap between high-end luxury brands and electric new forces in terms of the reflection of technology in age. Users also buy this idea, which is a major reason why electric new forces are directly linked to intelligence.
Whether intelligence can become the moat of automobile manufacturers as a core competitiveness has become a highly controversial issue.
Companies that hold optimistic attitudes towards developing intelligence heavily include Tesla, which is a forerunner in the race for intelligence. Musk, who is obsessed with intelligence upgrades, has repeatedly stated that “the time for smart cars to hit the road is faster than most people think”.
Represented by XPeng Motors in China, companies that see the development of intelligence as one of the most stubborn labels in their business.
XPeng Motors is currently the only fully self-developed vehicle company in China with self-developed automatic driver assistance software and intelligent cockpit. While everyone is focused on the process of electrification, XPeng places the focus of their technology on intelligence, which is also a vivid symbol. He has also repeatedly stated that intelligence will be the core of XPeng Automotive in the future.
Most automobile media that hold a wait-and-see attitude observe the overall market from a horizontal and vertical perspective, which is for short-term gains. Artificial intelligence and data are the basis for forming a deep defense moat, and models and products are better linked together.
However, with the generation of more data, models become better, and the predicted values of any single model tend to stabilize. In the market logic of maximizing costs, the solution to this problem will be largely achieved through deep cooperation in the industrial chain, using each other’s technical advantages to reduce research and development costs. This is also the path chosen by most traditional companies. Therefore, in this industry, technology will always penetrate and cooperate. At this time, intelligence is no longer a moat, but a threshold for admission.
On the contrary, successful companies can expand the business value of data generated by strategically using new, more powerful model groups and the product opportunities they unlock, and build a deep moat for intelligence in reverse.Simply put, intelligentization gives early entrants an opportunity to profit, which is the most common false moat that can improve short-term performance, but the problem arises when their products are copied. With the maturation of technology, it is difficult for any single technology to stably become an absolute domain of an enterprise, but it can bring the opportunity of brand promotion to the enterprise through time and technology accumulation.
Buffett once described the concept of “moat” at the 1995 Berkshire Hathaway annual meeting as follows:
“A wonderful castle surrounded by deep and dangerous moats. The owner of the castle is an honest and elegant person. The main source of power for the castle is the master’s genius brain; the moats permanently serve as barriers to the enemies who attempt to attack the castle; the owner inside the castle produces gold, but does not retain it all. Roughly translated, what we like are the large companies with controlling positions, whose trademarks are difficult to be copied and have great or even permanent operating capabilities.”
This kind of trademark may be the most difficult intangible asset to replace. Whether a brand can constitute a moat is determined by the market’s recognition (willingness to pay a premium and repeat purchase), not its fame. In essence, it is the ability to continuously innovate and launch new patented products. But ultimately, the conditions for forming a moat through legal licenses are regional barriers to form regional monopolies and the most important point is the freedom to price.
For a car company to have the freedom to price, unique product strength and a continuous stream of innovative patents are auxiliary conditions, and the sufficient condition is to recognize how much value they can create for the company while realizing how long this ability can last. What enables this ability, absent any accidents, is still the weight of the brand assets. From intelligentization to moats to brand assets, the three form a complete logical closed loop, complementing each other without absolutes.
As the saying goes, the Great Dao is formless, although brand assets cannot be seen or touched, looking back at history and forward to the future, they are undoubtedly the most valuable source of competitive advantage. How to become outstanding is largely a conscious choice.
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.