On October 11, 2021, the third Global New Energy and Intelligent Automobile Supply Chain Innovation Conference was held in Nanjing. The conference focused on “Automobile Supply Chain Under Global Changes and Carbon Neutrality Goals”. At the high-level forum on “Automobile Supply Chain Under Global Changes and Carbon Neutrality Goals”, Chen Qingtai, Chairman of China Electric Vehicle Hundred People Association, delivered a speech. Below are the rough notes.
Chen Qingtai, Chairman of China Electric Vehicle Hundred People Association
Respected guests, welcome to the third Global New Energy and Intelligent Automobile Supply Chain Innovation Conference. In the process of global automotive electrification, the Chinese automotive industry has taken the first step and achieved a certain first-mover advantage. If we exaggerate a little, this global automotive revolution actually originated from the electrification of the Chinese automotive industry. At present, new energy vehicles are moving from the early stage of development to the middle and high stage of development, which means that they are moving from the 1.0 era of electrification to the 2.0 era characterized by networking and intelligence. Below, I would like to share my thoughts on industry development trends and hotspots with everyone.
First, electrification and “carbon neutrality”.
Carbon peaking and carbon neutrality have become a global consensus and a target to be achieved by each country on their own timetable and regional basis. Compared with developed countries, China’s road transport transformation towards cleanliness is under greater pressure mainly because the number of cars in developed countries has already stabilised while China’s number is still growing for a long time to come.
In China, road transport is the third largest carbon emission source, accounting for about 10% of the total carbon emissions. However, the problem is that most other high-energy-consuming industries have already reached or are close to reaching the peak of carbon emissions, while the number of cars in China is still increasing rapidly. A survey report by the International Finance Corporation in China pointed out that from 2008 to 2018, China’s carbon dioxide emissions from transportation increased by 580 million tons, of which 510 million tons came from road transportation, accounting for 88% of the total increase. The reason behind this is that during this decade, China’s passenger car ownership has increased by 557% (more than 5 times), which is the main driving force for the increase in carbon emissions. In the foreseeable future, China’s car ownership will still be in a growing period, which increases the pressure of reducing emissions.
In fact, China’s road transport development is at a critical crossroad. In 2020, China’s car ownership has already reached 270 million, with only 192 cars per thousand people. The US is first in the world, with 837 cars per thousand people, and Japan, with a high population density, has 519 cars per thousand people. Malaysia, with a per capita GDP equivalent to China’s per capita GDP, has 433 cars per thousand people, Russia has 373 cars per thousand people, and Brazil has 350 cars per thousand people. Looking at the global development process, as per capita GDP grows, there is a high degree of similarity in the trend of personal mobility consumption. China’s per capita GDP is still growing every year, and there is still room for China’s total car ownership to double.## If the increase in the number of vehicles still relies on gasoline vehicles, it will lead to a great disaster. Only by adding zero-emission or ultra-low-emission vehicles and updating existing vehicles with electric vehicles can the target of road traffic emissions be achieved. To achieve this, China’s electrification of automobiles must be faster than other countries. It is necessary to formulate a “dual carbon” timetable for road transportation based on the national carbon peak and carbon neutrality schedule, and to take corresponding measures to promote implementation.
Another important issue is that the electrification of automobiles must be based on green energy. Currently, China’s renewable energy sources, such as wind and solar, are in good development status. However, if electric vehicles are to complement intermittent renewable energy sources, it will involve the integration of energy and transportation systems, technological innovation support, infrastructure protection, standardization, and more. This massive system engineering requires the government to plan and coordinate according to China’s timeline for achieving carbon peak and carbon neutrality.
Second, the challenges and opportunities brought about by chip shortages.
In the process of global electrification of automobiles, China’s automobile industry has achieved remarkable results based on its first-mover advantage. However, this is only the first half of the automotive revolution. The second half will be based on high-tech networking, intelligence, and digitization. This area is full of opportunities and challenges. Among them, chips and operating systems, as the basis of digitization, will be the focus of competition. China’s chip companies, software companies, Internet companies, and communication equipment companies must seize this trend, come to the forefront, meet this rare innovative development opportunity, and cross-border integration and complementarity with automakers to achieve the grand goal of building China’s automotive power.
Under the impact of the COVID-19 pandemic, our shortcomings in the car chip supply chain were quickly exposed, which also became a shortcoming in the global supply chain. Over the past 30 years, the concentration of the global semiconductor industry has been increasing, bringing the advantage of continuously improving product performance and reducing costs. However, this excessive concentration also makes it easy for a region or country to encounter natural disasters, infrastructure obstacles, or geopolitical frictions, resulting in a supply disruption of different scales and duration in the global chip industry. The pandemic this year has concentrated on the risks it brings. China is the world’s largest automobile production and sales country. It should learn from experience, and plan and deploy appropriately for the long term.
China started car chip design relatively late. The domestication rate of critical chips involving automobile safety, such as engine, chassis, and vehicle control, is only 3%. At the same time, we do not have the certification standards of vehicle regulations, and the user’s trust in domestic chips is also relatively low. China has the largest and most innovative Smart car market, which is driving the innovation of smart car chips. Domestic automakers, especially new automakers, upgrade their products’ intelligence very quickly, which also raises high demands for chip incremental progress. Almost all global major chip companies’ chips are first installed on Chinese brands of cars.In recent years, China’s chip design enterprises have grown rapidly and made continuous breakthroughs in the design of automotive chips. With the traditional chip supply chain bottleneck, domestic automakers have also strengthened their willingness to choose domestic enterprises to conduct research and design of chips. It is encouraging that the domestic chip bulk shipment validation effect is good, and can be used in cars, which enhances the confidence of both supply and demand sides in domestic chips.
In recent years, a group of domestic chip companies such as Huawei, Horizon Robotics, and Black Sesame have already established a good foundation, with fast iteration speeds. Experts say that the speed of Chinese enterprise chip iteration and progress is about two to three times that of foreign companies. Chinese chip companies also have the characteristics of fast response to the needs of automakers, strong interaction with automakers, which can well support the continuous and rapid innovation of domestically produced intelligent cars.
As a latecomer in the innovation and development of the chip industry, Chinese chip enterprises face a difficult hurdle in entering the market, namely the barrier of the solidified supply and demand pattern of the chip market. The chip crisis that began last year presented two situations: one is the shortage of supply in the traditional chip supply system, and the other is that the current global high-performance vehicle computing chip industry pattern has not yet solidified. These two factors have created a window of opportunity for China’s newly launched vehicle chip enterprises to rise in competition. We must seize this rare historical opportunity and break into the global chip supply chain.
In addition, the economic and technological value of the control system software for intelligent cars is comparable to that of PC and later smartphone software systems. China’s intelligent connected vehicles are leading the world in terms of technology capabilities, industry scale, and innovation activity. Currently, various new energy vehicle companies are developing operating systems independently or in cooperation with professional software companies. With some accumulation, this has laid the foundation for creating a self-developed Chinese version of the intelligent car operating system.
The future of intelligent cars is diverse, but the programming and actions of the operating system should be similar or the same, meaning that licensed drivers do not need to be trained again to drive different brands of cars safely. Therefore, the development of an operating system that can adapt to different scenarios, can connect with diverse software and hardware, and can be adapted to various types of car models is the direction of research.
Currently, there is no unified pattern for the operating system of intelligent cars. In the process of unifying the operating system, each enterprise has the opportunity to win in the competition, but developing such an operating system is difficult. China is the country with the most active innovation in intelligent connected cars and the most urgent diversified user requirements. It is also the country with the largest industry scale and relatively complete industry chain. It is not falling behind in the relevant aspects of internet, IoT, big data, cloud computing, and speech recognition involved in basic software. If handled properly, there are conditions for developing a self-controlled Chinese-version intelligent car operating system that is more suitable for China’s needs from both the demand and supply sides.
Lastly, the foundation of an automotive powerhouse lies in building a strong nation in automotive parts.From the perspective of the history of automobile development, every important breakthrough in automobile technology is the result of close cooperation between vehicle and parts enterprises. Generally speaking, the vehicle manufacturers are indispensable in technology integration, but most of the core technologies and key components come from parts manufacturers. For example, gasoline injection, turbocharging, anti-lock braking system, airbag, and radial tire.
In the era of fuel-powered vehicles, the Chinese government and enterprises paid more attention to vehicle production scale than to R&D and parts, resulting in a hollowing out of technological capacity in the automobile industry. With new energy vehicles, a new beginning is being made, and China is taking a lead in the industrialization of electric vehicles. Major companies place unprecedented emphasis on R&D and parts investment in terms of manpower, finances, and resources, in the absence of mature foreign technologies or parts to learn from or purchase. Cross-industry enterprises have seized this opportunity and entered the new energy vehicle industry, quickly establishing an industrial chain in cooperation with vehicle manufacturers. Within a few years, a batch of specialized companies has grown in the field of components such as batteries, motors, and charging piles. Companies like CATL, Guoxuan, and Funeng specialize in batteries, while Enpower Motors and China Railways specialize in traditional motor systems, and TTC develops IGBT, TELD develops charging systems, and ZTE develops wireless charging systems for hybrid power systems. The rapid establishment and improvement of this supply chain, especially the doubling of energy density in batteries within a few years, the continuous decline of costs, and the increasing safety guarantee, ensures that China’s new energy vehicles obtain new breakthroughs every year, and consumer satisfaction increases year by year, making it possible for us to smoothly pass through the incubation period of the new energy vehicle industry.
The development of China’s electric vehicle for more than ten years has reminded us that a strong parts industry is the foundation of an automobile country. If a powerful supply chain is not established domestically, China’s electric vehicle industry would never have come this far. The future automobile industry chain has not yet solidified and is still in the process of improvement.
The disruptive nature of future automobiles will lead to the reconstruction of more than 70% of traditional parts systems. The concept and scope of automobile parts have changed due to these new species. The storage battery, hydrogen fuel cell, motor, electric control, power semiconductor of the power system, as well as components and software related to intelligent driving, intelligent cockpit, and networking, including chips, computing platforms, sensors, laser radar, controllers, and actuators, as well as onboard control systems, high-definition maps, network communication, cloud control platforms, AI algorithms, and speech recognition, are all essential components of the industry chain.Meanwhile, the value chain is also evolving rapidly, and software will become the foundation and core competitiveness of future automobiles. Some institutions predict that software will rise from 15% to 60% of the total cost system for the entire vehicle. Currently, the technology barrier for new parts has not yet formed, leaving a great space for innovation. This presents a historic opportunity for the development of our country’s parts enterprises, especially technology-oriented small and medium-sized enterprises. Fortunately, the fields involved in the new industrial chain, such as informatization, interconnection, and artificial intelligence, are areas in which our country has developed well in recent years. We must seize the opportunity and work hard on those “stuck” links, striving to make breakthroughs step by step. This will cultivate a group of strong new parts companies, foster more small giants, achieve independent control under open conditions, and lay a solid foundation for China’s automobile industry.
The software and hardware systems involved in future automobiles cannot be fully covered by a single industry or enterprise. Cross-border integration and enterprise cooperation are the keys to success. Only by establishing a stable and efficient supply chain and industrial ecology can we consolidate our foundation and strengthen our base. We must rely on a strong parts industry to support a strong automobile industry and rewrite the history of technological hollowness with continuous efforts.
That’s all for my speech. Thank you, everyone!
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.