Zhao Fuquan: Some thoughts and suggestions on the continuous influx of new forces into the car manufacturing ranks

The current capital market favors companies that build smart electric vehicles. The fundamental reason is that the automobile industry is undergoing unprecedented changes, and smart electric vehicles represent the direction of this round of industrial change. The traditional automotive industry, which was originally dominated by hardware, will become a new industry with deep integration of software and hardware. In fact, this evolutionary trend of the automobile industry is completely consistent with the trend of human society developing towards intelligence. If the Internet enabled connections between people in the past, then in the future the Internet of Things, or Industrial Internet, will enable connections between things, and these connected things will be empowered by AI (artificial intelligence), thus driving human society. Truly entering the intelligent era of the Internet of Everything. As a result, the competition in the ICT industry will enter the second half. In view of the increasing saturation of Internet-based businesses such as smartphones, traditional ICT (Information and Communication Technology) industry giants are also facing the challenge of transformation. Finding new breakthroughs in the industrial Internet is the key to their transformation. The automobile is the best carrier and breakthrough point for the industrial Internet.

In the future, automobiles must not only realize the interconnection between tens of thousands of their own parts, but also realize the interconnection between various enterprises in the entire supply chain, and also realize the interconnection between vehicles and people, vehicles and vehicles, and vehicles and the environment. It is precisely because of the realization of the great strategic value of the automobile industry that many ICT industry giants, including mobile phone manufacturers such as Apple and Xiaomi, have decided to enter the ranks of car manufacturing. In other words, on the one hand, the future transformation and development of the automobile industry requires the support of ICT technology. On the other hand, ICT companies also need to use automobiles as a carrier to achieve their transformation breakthroughs in the era of industrial Internet.

So, what are the development prospects of the ICT industry giants who have moved from the mobile phone field to the automotive industry? I believe that the automotive industry urgently needs these ICT companies to bring new technologies, new capabilities and new concepts in the Internet and software. In this sense, mobile phone giants entering the automotive field do have the opportunity and possibility to redefine automotive products and industries.

However, the essential difference between making cars and making mobile phones cannot be ignored. First of all, the difficulty of building a car is completely different from that of building a mobile phone. Compared with cars, the hardware of mobile phones is relatively simple, or it is only equivalent to a small assembly in a car. Obviously, the ability to build an assembly well does not mean the ability to build a car composed of tens of thousands of parts. For example, even though Tesla has developed to this day, the quality of its products is still criticized by consumers from time to time. Secondly, cars and mobile phones have completely different safety requirements. It doesn’t matter if the mobile phone crashes occasionally, but the car must not crash even once, otherwise it may crash and kill people. Future smart cars must be developed with safety as the most important basic attribute. Only when safety is achieved, other values ​​such as improved efficiency will be meaningful.

Thirdly, the supply chain management of automobiles is far more complicated than that of mobile phones. A mobile phone company only needs to manage dozens of suppliers, while an automobile company has at least hundreds of suppliers. Finally, mobile phones only have an application service ecosystem. In addition to the application service ecosystem, future cars will also have a function and performance development ecosystem. This ecosystem includes all the hardware and software of the car, and the development of these hardware and software must meet safety requirements. under the premise.

In short, although mobile phones are also a real industry, neither the complexity of products and technologies nor the complexity of the application environment can be compared with cars. Therefore, mobile phone companies that are new to the automotive field, no matter how large and powerful they are, must still be in awe of the automotive industry.

In the period of industrial transformation, automobile companies, whether "old or new", must face new tracks and form new capabilities if they want to succeed in the end. On the one hand, the step-by-step development path used by new entrants in the industry in the past is no longer applicable. When car companies such as Chery, Geely, and BYD entered the automotive field, they could only start with low-end products and rely on their cost-effectiveness advantages to gradually accumulate and improving capability. However, the current automotive industry landscape is being completely restructured. New entrants neither need nor should continue to compete along traditional paths. Instead, they must use new concepts to build new capabilities. This means that new car companies have a historical opportunity to catch up and catch up, and have the possibility to quickly establish a new brand and directly enter mid-to-high-end products. Of course, the challenges are huge, especially as new car companies must make up for the shortcomings in automotive hardware as soon as possible.

On the other hand, traditional car companies are not standing still, but are stepping up their efforts to plan and implement transformation. Currently, many traditional car companies are studying leading new car companies such as Tesla and working hard to cultivate new capabilities on new tracks. In fact, some traditional car companies started on the new track no later than new car companies, but their accumulation and experience in the automotive field are far beyond that of new car companies. Of course, for traditional car companies, cultivating new capabilities is not as simple as tackling some new technologies. It also requires building new ways of thinking and business models, and using external resources to improve their electrification, connectivity, and intelligence capabilities. , especially to make up for its own shortcomings in automotive software. In addition, traditional car companies must also achieve a reasonable balance between new and old businesses, not only to effectively rely on their heavy accumulation of capabilities, but also to avoid being burdened by heavy historical baggage.

In order to resolve the contradiction between survival and development and accelerate the transformation and upgrading of enterprises, it is recommended that traditional car companies consider introducing a "dual track" strategy, which is to split operations between traditional business and new smart electric vehicle business. This will not only help focus on traditional businesses, but also avoid the limitations and restrictions of "traditional thinking" on the innovative development of new businesses, thereby forming a win-win situation in which new and old businesses develop in parallel, and better realize the transformation and upgrading of the company's overall business.

Generally speaking, I think both old and new car companies have opportunities to stand out in this round of industrial change. In the end, those car companies that do the best in integrating software and hardware will become the final winners of the future automotive industry.

Looking to the future, cars will not only be "four wheels plus a shell", that is, a mobile physical space, but also "four wheels plus a computer," that is, a mobile intelligent platform. This means that automotive products will become a brand new species, and Integrate and apply a series of new technologies. In addition, services will become a very important part of automobile products, because only "products + services" can make users feel safe, convenient, comfortable and even pleasant when using cars. Technologies, products and services often come from different providers. To effectively combine these elements and provide users with the best experience, innovative business models must be relied upon. Take power batteries as an example. The battery itself has its own core technology, and charging and battery swapping also have different core technologies. The battery will eventually be recycled and reused. In this process, it is ensured that all parties involved have clear responsibilities and rights and each gets what they need. Business model design and resource portfolio solutions will become crucial. If new entrants such as Xiaomi and Apple can be based on the future industrial ecology, think clearly about automotive technology, products, services and business models, and even have more innovative ideas and clearer ideas than current leading new forces such as Tesla, then they will completely There is an opportunity to create a new pattern in the automotive industry. On the contrary, if newly entered companies only copy the car-making models of some current car companies, then even if they master key technologies in certain fields, it will be difficult to surpass the many forerunners who have already accumulated a lot.

In addition, some new car companies have chosen the OEM model of traditional car companies to launch products, which in itself is a direction of industrial re-division of labor under the new situation. But new car companies must first sort out the impact of the OEM model on their own brands and products. In this regard, Apple mobile phones manufactured by Foxconn are a typical case. However, it should be noted that, first of all, Foxconn has a very deep accumulation in the manufacturing field. Using it as an OEM will not question the hardware quality of Apple mobile phones. In fact, Foxconn does not only OEM for Apple. Secondly, the key to differentiating mobile phone brands lies mainly in product design, and "California design" is enough for Apple to win the trust of fans. Finally, the advantage of Apple’s mobile phone lies not only in its innovative design capabilities, but also in its service ecosystem, which is a series of application software based on the App Store.

In comparison, automotive OEM is probably much more complicated. First, traditional car companies have their own brand positioning and image, which may affect the brands of new car companies they OEM. Second, it is a challenge for new car companies to grasp the boundaries between product design and manufacturing. You must know that vehicle design and manufacturing is a multi-party, integrated system project. OEM is not a simple turnkey project. In response to diverse business needs such as automotive technology, product design, process technology, manufacturing equipment, and parts supply, vehicle companies must balance the business division of labor between themselves, OEMs, and supply chain companies. Capability matching and resource integration. A simple "1+1" physical combination or a "hands-off shop" type of commissioned production will definitely not be able to form a leapfrog competitive advantage. How to establish a partnership of mutual trust, complementary advantages, and shared responsibilities challenges the great wisdom of corporate business model design. Third, future automotive products will not only have an application service ecosystem, but also a functional and performance development ecosystem, both of which will work together to achieve users’ personalized experience and highlight the differentiation of automotive brands. Function and performance development undoubtedly need to be based on and implemented by hardware. To this end, new car companies must ensure that the hardware manufactured by OEMs can fully meet the hard requirements of matching the external ecology.

There is no doubt that the automobile industry is undergoing comprehensive changes. If the new car companies entering the market at this time simply copy the methods of the companies that have entered the market and compete on their extended lines, I think it will be difficult to achieve a fundamental breakthrough. Therefore, new car companies must have disruptive innovative thinking and adopt leap-forward innovation strategies, so that they have a chance to win.

In the era of Internet of Everything, the vertical automobile industry chain will evolve into a three-dimensional automobile travel ecosystem. Every company in this ecosystem needs to find its precise positioning, provide corresponding technologies, products or services, and achieve division of labor, collaboration and resource combination with other companies through innovative business models. If the hardware is the body of the car, then the software is the soul of the car. The perfect unity of body and soul is definitely not a simple combination of hardware and software. It must be the ultimate fusion of fully matched hardware and software. Ultimately, this fusion will be reflected in the design of innovative business models.

Although the value of software in future automotive products continues to increase, this does not mean that automotive hardware is no longer important. On the contrary, it is always a prerequisite to do a good job in automotive hardware, otherwise it will be meaningless no matter how good the automotive software is. At the same time, no matter how the automobile industry changes, vehicle integration capabilities are always crucial. In the future, software will be integrated into automotive hardware, which will undoubtedly greatly increase the difficulty of integration. Only by building an integrated vehicle development system that integrates software and hardware can car companies be able to maximize product functions, performance and experience. Those "new forces" with strong "soft power" must be in awe of automotive hardware; while traditional car companies that rely on "hard power" must fully realize that achieving "soft and hard integration" cannot rely solely on their own strength, especially Many new core technologies are neither good at nor fully controlled by car companies. Therefore, both old and new car companies must effectively divide and collaborate with relevant partners to jointly build a new developer ecosystem that adapts to future industry development trends, and ultimately seize the major opportunities of this round of industrial change through effective resource combinations.

In the future, automobile manufacturing will surely upgrade to intelligent manufacturing and enter the so-called "Industry 4.0" era. Under this prospect, I believe that automotive suppliers will have the opportunity to interact directly with users, which is the key to realizing intelligent manufacturing, that is, large-scale personalized customized production. Don’t think that this kind of customization is limited to software. In fact, it also applies to hardware. In the future, users can choose the bumper color or steering wheel style for their cars. Obviously, such user needs cannot be met solely by vehicle manufacturers. Only by passing them on to relevant suppliers in a timely manner can rapid and effective response and implementation be achieved. In this process, more and more suppliers will establish close interactive relationships with users. This is no longer something that is out of reach. For example, SAIC Maxus has already put it into practice in commercial vehicles.

Compared with the customization of hardware, there will be more business opportunities in the future using software to achieve personalized user experience. At present, many vehicle companies have begun to join forces with ICT companies to establish their own developer ecosystems, allowing many software developers to use their vehicle platforms to develop various new functions for users to better meet users' personalized experience needs. . Of course, since there are so many participants in the developer ecosystem, this involves who defines the product experience, who verifies the development results, who signs for release, how the quality responsibilities are divided after the product enters the market, and how the final benefits are distributed, etc. A series of questions. From the perspective of consumers, the responsible party is clear, that is, the vehicle manufacturer. However, in order to effectively solve problems and improve products, vehicle companies still need to identify the suppliers who should really be responsible. In fact, for vehicle companies, this is not only a product issue, but also a service issue. If the problem is not handled well, it will cause complaints from consumers and affect the company's brand reputation; conversely, if the problem is handled well, the car company's services will be recognized by consumers, and the brand reputation will be improved accordingly.

In terms of service, NIO's performance deserves recognition, which is one of the main reasons why it has been able to gain a large number of "fans" in a short period of time. I think the reason why NIO is able to provide excellent service is, firstly, because the company leader Li Bin himself has a high understanding of the importance of service, and secondly, because NIO has used the Internet to carry out many innovative attempts in service. One of the important values ​​of the Internet is that it makes it possible to reach users in real time, so that car companies can easily interact with users and learn and solve various problems encountered by users in a timely manner. NIO has won the recognition of users by making full use of Internet tools to understand users' feelings at any time and provide accurate services accordingly. In fact, for traditional car companies, such a thing is not impossible, so why haven't they done it or haven't done it well enough? I'm afraid we still have to find the answer conceptually. Therefore, I believe that in the critical historical period of comprehensive restructuring of the industry, both old and new car companies must use the concepts of change and innovation to face every detail of business operations and actively implement them. Only in this way can enterprises stand out in the complex situation of great industrial changes and fierce competition.

At this time of great changes in the industry, we must maintain an open and peaceful attitude to welcome more cross-border players to participate in the reconstruction of the automobile industry. It is not advisable to blindly approve or deny the entry of new forces into the ranks of automobile manufacturing. In fact, we have seen that not only Tesla, but also leading domestic new car companies such as Weilai, Xpeng, and Liantao have achieved good results for a period of time, but there are also many new forces that have fallen behind in the car-making competition. On the road. I think the reason why some new forces have achieved initial success is that the product hardware of these new car companies can meet the basic requirements of consumers, and their product software is good enough and has its own characteristics in the business model, thus gradually forming A selling point that differentiates it from traditional automotive products. Of course, we must fully realize that competition in the automobile industry is a marathon, and even Tesla, the most representative new car company at present, may not necessarily have the last laugh. In this sense, when outside giants such as Xiaomi, Didi, and Evergrande enter the car manufacturing ranks, they all have the opportunity to catch up and succeed. The key depends on whether these new car companies can seize this opportunity with their unique business wisdom. Industrial restructuring is a once-in-a-lifetime historical opportunity.

What I want to emphasize here is that we must have reasonable expectations and sufficient patience for the development of new car companies. There will always be a time lag between the planning goals proposed by new car companies and the actual delivery results. After all, car product development takes at least three years. We cannot deny the possibility that some new car companies that have entered later can make major innovations and create greater value in their thinking, product concepts and business models just because they have not yet produced products. New car companies themselves should also maintain an objective and calm attitude, not rush for success, and believe that as long as they follow the right path correctly, they will be rewarded. Of course, whether a new car company is serious about building cars and whether its car-making concepts are leading will ultimately have to be tested by the market. In fact, both old and new car companies must use tangible performance to continuously meet the expectations of consumers and investors.

Source: Automotive Industry and Technology Strategy Institute