Outbound Hundred People Media, focusing on the evolution of the automotive industry chain
Author: Zheng Wen
At the end of September, two out of three newspapers prominently featured a major event: “Li Shufu’s high-end mobile phone project settles in Chegu” and “Geely continues to increase investment in Wuhan” at the newsstand in Wuhan Tianhe Airport. These reports showcased the significance of the event very clearly.
At the same time, a forum themed “China Chegu 2021 Smart Automotive Industry Innovation Summit” was vigorously taking place in Wuhan Economic and Technological Development Zone, 40 kilometers away from there, which was also of great significance to Wuhan. The forum, co-hosted by Wuhan Economic and Technological Development Zone and Dongfeng Motor Group Co., Ltd., mainly focused on the innovative development of smart cars, involving multiple hot fields such as human-machine co-driving, map positioning, vehicle-road co-coordination, sensor fusion, artificial intelligence and chip, simulation testing, etc.
As this heroic city of Wuhan seeks and explores its own role in the new era, just like many other cities, opportunities and challenges coexist.
Opportunities and Challenges
On the traditional map of China’s automobile industry, state-owned enterprises such as FAW in Northeast China, SAIC in East China, Dongfeng in Central China, Changan in Southwest China, GAC in South China, and private enterprises including BYD in Shenzhen, Great Wall in Baoding, and Geely in Ningbo have already occupied a place.
Nowadays, smart cars have become an important strategic direction for the sustainable development of China’s automobile industry. New technologies, new business models, and new patterns emerge in endless streams. The market penetration rate of L2 level passenger cars has reached 20%, and it is still growing rapidly. The era of everything connected and “No intelligence, no car” has arrived.
This means that the industry landscape of interests may be redefined, and various places have started a new round of crazy bidding for projects. In particular, in 2020, after Hefei government seized multiple industrial opportunities including NIO, Volkswagen-JAC, BOE, and Zhaoyi Innovation, the tension will only increase, and Wuhan, also a second-tier provincial capital, is facing double the pressure.
In the competition of the new era, Hefei took the lead with NIO and Volkswagen-JAC; Beijing successfully retained Xiaomi Auto; Shanghai has Tesla, and is working hard to cultivate its own intelligence; Guangzhou has XPeng and GAC Aion…
As an old-school automobile capital, Wuhan used to be the stronghold of traditional automobile enterprise Dongfeng Motor Group. Nowadays, as an attempt to regain its status in the era of traditional fuel vehicles, the Chegu, which facilitated the establishment of XPeng’s base, the incubation of Dongfeng’s Landtrek, and Geely’s launch of Lotus and high-end mobile phone projects, still faces considerable challenges.## Challenges Facing the Automotive Industry
One of the challenges faced by the industry is how to attract new players and create experimental zones to help companies achieve the commercialization of technologies. This was noted by McKinsey’s Managing Partner, Ming Guan, who identified three key drivers of industrial development: many emerging players, technology implementation and market expansion, and increased access to capital.
Xu Yanhua, Vice Secretary General of the China Electric Vehicle Hundred People’s Association, Vice Secretary General of the China Automotive Chip Industry Innovation Strategy Alliance, and Secretary General of the China Automotive Power Battery Industry Innovation Alliance, pointed out that technological challenges such as perception, algorithms and data empowerment are difficult to solve in the given situation. Therefore, commercial landing plays an important role in technical implementation and market expansion, which was also noted by Ming Guan.
At the same time, industry changes have greatly increased the demand for highly skilled professionals. These professionals often have higher salary expectations and higher demands for work and living environments, which poses a great challenge for urban managers. Therefore, how to cultivate local talents in large numbers and attract talented individuals from elsewhere is an important factor for the Wuhan government.
Wu Songquan, Senior Chief Expert of the China Automotive Technology Research Center, believes that local governments can do more in the era of smart automobiles. At least in three aspects, they can play an important role:
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In terms of technology research and development, local governments can build research and testing environments, encourage innovation by various means, promote cooperation between academia, industry, and research, and promote the formulation of relevant local standards and group standards.
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In terms of commercial applications, local governments can explore the pathways of policy and regulation breakthroughs through trial and error, support enterprise to carry out commercialized demonstration applications, and improve the supporting commercial application environment.
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In terms of industry cultivation, local governments can build industrial alliances to create development synergy, create a good development environment from various fields, incubate competitive leading enterprises, and promote industrial cluster development.
At least ten provinces and cities are fiercely competing at these three levels, such as Beijing, Jiangsu, Chengdu, Zhejiang, Tianjin, Anhui, and many more. For instance, Anhui Province’s “Intelligent Automobile Innovation and Development Strategy Implementation Plan,” released in January this year, systematically and comprehensively laid out four major goals and six major tasks.At present, China has formed a pattern of competing development between the national intelligent vehicle demonstration zone and the vehicle networking leading zone, with 9 national demonstration zones and 4 leading zones. As of August 2021, 18 provinces/cities have issued testing and demonstration-related policies. Cities such as Beijing and Shanghai have revised policies according to the progress of the testing, and further improved the public road testing environment.
Some regions are gradually opening up testing and demonstration scenes and constantly enriching relevant types. In January of this year, Shanghai proposed to build an innovation demonstration area for intelligent driving and full travel chain, and Guangzhou proposed to launch a trial of automatic driving mixed traffic. Beijing proposed to open automatic driving high-speed scenarios.
Shanghai’s top-level design is very clear, and it promotes this work from the perspective of smart city and new infrastructure construction. As early as 2017, Shanghai issued an implementation plan for innovative projects, and fully considered the combination of local industry foundation and local characteristics during the testing and demonstration work. Different regional demonstration applications also focus on differentiated positioning.
Beijing has a strong foresight in policy planning and has proposed the concept of policy leading zone. The Municipal Bureau of Industry and Information Technology issued an overall plan in April of this year.
Shenzhen takes advantage of its special legislating power and directly issued the Shenzhen Special Zone Intelligent Networked Vehicle Management Regulations, proposing management measures in the areas of access, registration, use, network security and data protection, vehicle-road collaborative infrastructure, road transport, traffic accidents and violations, and legal liability.
In Wu Songquan’s speech, he also gave suggestions:
- Combine with the development experience of other regions, promptly clarify and formulate relevant development strategic planning and action plans.
- Organize superior resources in related fields to jointly carry out technical research, build relevant innovative platforms and industrial incubation platforms, undertake major scientific and technological projects.
- Accelerate commercialization. Facing the demand for commercialization of intelligent vehicles, jointly carry out relevant demonstration operation projects, explore related demonstration operation modes, organize the development of local standards, group standard formulation, etc.
Looking at it this way, there are many opportunities in Wuhan Auto Valley, but the challenges are not small, and the competition will become increasingly fierce.
“Heavy Investment” Auto Valley
There is no doubt that in the past, as the pillar of China’s automobile industry, Wuhan’s automobile genes have been deeply rooted in the hot land of the Wuhan Economic and Technological Development Zone. In this land, the automobile industry chain is very complete, with 7 automobile manufacturers, 12 automobile assembly plants, and over 500 automobile parts enterprises. It is one of the six major passenger car bases in China and known as the “China Auto City”.During the 13th Five-Year Plan period (2016-2020), approximately 5.5 million vehicles were manufactured in Wuhan, with the automotive industry’s total output value exceeding 1.16 trillion yuan.
However, at the “Hubei High-Quality Development Capital Conference” last September, Wuhan announced that it would transition from the “China Car Capital” to the “China Car Valley.” The reason for this change is that “valley” is a synonym for technology, and after 30 years of development, China’s automobile industry has arrived at the moment of digitalization, intelligence, network connection, and sharing. It is clear that Wuhan wants to accelerate its progress in this round, and its ambitions are all laid out on the table.
From “car capital” to “car valley,” Wuhan is crossing a critical moment. So, we are seeing one piece of news in the Car Valley after another.
First, let’s take a look at Shufu Li’s gifts to Wuhan: car networking, vehicle manufacturing, chips, flying cars, and smartphones.
In February 2017, Geely’s car networking project, Ecarx, established its headquarters and R&D center in Wuhan, mainly developing core technology products for intelligent cabins and intelligent driving. In just four years, the company’s output value has grown 14-fold.
In July 2018, Lotus signed a contract with Wuhan for a manufacturing base. The Lotus Wuhan Smart Factory Project is progressing smoothly, and it is expected to go into production next year, with an annual output of 150,000 vehicles after reaching full capacity.
In November 2019, Geely’s car chip project, Cenat, established its headquarters and R&D center in Wuhan. Cenat is developing China’s first domestically produced in-car digital cockpit chip with a 7-nanometer process technology. It is expected to be integrated into a vehicle and tested by 2022.
In August of this year, Lotus Technology’s global headquarters broke ground in the Car Valley Smart Ecological City. It is being built with a total investment of 6.3 billion yuan by Geely. Lotus Cars will fill the gap in Wuhan’s ultra-high-end pure electric intelligent vehicle field.
And then there is the recent hot topic: Geely has entered the mobile phone market with a landing in Wuhan.
What made Li Shufu, who started in Zhejiang, invest heavily in Wuhan? Li Shufu says, “Wuhan is a great place and has become one of Geely’s most important industrial layout bases. Wuhan’s favorable business environment has enhanced our confidence in investment and business development.” It sounds more like talk at the table, but the real reason is something else. As intelligent terminals, smartphones share more and more technical characteristics with cars. With the deployment of the vehicle networking and car chip businesses in Wuhan, smartphones, as an important part of the ecosystem, have many technical businesses that are interoperable. Bringing them together in the same place is more conducive to an overall layout.Li Shufu believes that “mobile phones are rapidly iterating mobile terminals, and also serve as application carriers for electronic product market validation and software innovation. They can help users share innovative achievements as soon as possible and transfer a safe and reliable part of the achievements to apply in cars, realizing the close interaction between car and mobile software technology.”
In the future, smartphone projects will become an important booster for Geely’s transformation into a technology company. Once Geely’s automobile manufacturing, vehicle networking, vehicle chip, and mobile phone businesses achieve scale-linked effects in Wuhan, the industrial effects brought to the auto valley will be even more powerful than expected. In fact, not only Geely, XPeng and Huawei, which have emerged in Guangzhou and Shenzhen respectively, often visit the car valley, and other industrial ecology is also expanding here.
On April 8th, XPeng Motors and Wuhan Economic and Technological Development Zone held a signing ceremony, and its Wuhan Intelligent Networked Automobile Manufacturing Base and R&D Center project officially settled in the Wuhan Economic and Technological Development Zone. The project covers an area of about 1,100 mu, with a planned capacity of 100,000 vehicles, and is expected to be put into production in 2023.
In June, Huawei laid out an intelligent networked industry innovation center in Wuhan. In addition, Dongfeng Motor Corporation, China FAW Group, China Three Gorges, and the car valley jointly invested 800 million yuan to establish a battery company, which will operate battery assets under the battery swap model. The headquarters projects of iFlytek, Harbin Institute of Technology Robotics and others have also settled in the car valley…
There is no doubt that this is a great victory for the car valley, and these projects will also give birth to more opportunities.
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.