Leapmotor claims to surpass Tesla in 3 years, and the security industry behind it

Author | Yu Kuai Tianzhe

Editor | Zhang Dong

Leapmotor, which has repeatedly threatened to surpass Tesla, has finally put its slogan on the calendar: to surpass Tesla in full-scenario autonomous driving technology within three years.

In fact, Leapmotor is not the focus of attention in the automotive industry, but in the security circle, there are many legends circulating about it.

People in the industry say that it is the last gamble of the behind-the-scenes controller Fu Liquan to build a "company with a market value of hundreds of billions": Dahua Technology, founded by Fu, has become the second largest security company in the world, but its market value has remained at tens of billions.

Hu Yangzhong, president of Hikvision, the world's largest video surveillance company, told Leifeng.com an industry truth: only deep water can raise big fish, and the security industry is just a shallow pool of water that cannot raise many big fish.

In 2015, Fu Liquan, who was standing in the shallow water and felt quite unwilling to give up, took Zhu Jiangming and entered the most imaginative market in the manufacturing field: new energy vehicles.

Leapmotor is not only an extension of Dahua's manufacturing strength, but also Fu Liquan's dream of breaking the circle.

And this dream, after repeated benchmarking with Tesla and a financing event, has officially brought it into the forefront of the automotive industry.

Recently, Leapmotor officially announced that it had completed a Pre-IPO round of financing of over 4.5 billion yuan, led by CICC Capital, of which the Hangzhou Municipal Government invested 3 billion yuan.

The establishment of Leapmotor, although not to say it was the center of public attention, at least it was placed with high hopes.

"Although Dahua shares have a dream of a market value of 100 billion, the global market for the security industry is only over 100 billion, so it is impossible for one company to monopolize it. The pie in the automotive industry is big enough."

Zhu Jiangming, co-founder of Dahua Technology and chairman of Leapmotor Technology, once indirectly revealed Leapmotor's mission.

What this means is that the security market is a small pond, but the automotive industry is a big blue ocean. Dahua’s dream of a market value of hundreds of billions does not have to be confined to one small area.

Zhu Jiangming's personal establishment of Leapmotor also hinted at this point.

In the view of AI Gold Rush, Dahua’s layout in the new energy vehicle track is actually not difficult to understand, which is mainly reflected in five aspects.

1. Enterprise level.

At that time, the first AI wave began to emerge in China, and AI companies were established like mushrooms after a rain, turning into unicorns that attracted both money and attention. At that time, Huawei had been involved in the security industry for many years and gradually revealed its ambition to invest heavily in smart video.

With the siege and fierce suppression from various forces, it is not impossible that a situation of multiple forces standing side by side will be formed in the future.

More importantly, Dahua is also facing the dilemma of increasing revenue but not profits: in 2014, Dahua's net profit was less than 10%, hitting the bottom.

So Dahua did two things.

First, the transformation of the main business. In 2015, Dahua adjusted its internal personnel structure, market development model, IT system structure, talent incentive model, etc., and transformed its business model from a product supplier to a solution provider, and established subsidiaries to enter the fields of intelligent manufacturing, civilian AI security, etc.

2014 also marked a turning point in Dahua's net profit growth, and 2015 was a year of harvest.

This year, Dahua's revenue scale just entered the 10 billion yuan club in the security industry. Prior to this, Hikvision had achieved this goal in 2013.

Dahua, which has achieved the 10 billion yuan target, is facing the double pressure of its enterprise size entering a new stage and the bottleneck of market value growth. Finding new breakthroughs to achieve secondary rapid growth is the inevitable path for Dahua to maintain sustained growth.

At the same time, Hikvision’s market value reached 100 billion yuan in 2015 and has gradually grown since then.

In contrast, although Dahua's revenue is catching up, its market value has been nearly 90 billion yuan at its highest in the past 10 years, and now it is hovering around 70 billion yuan, always just a little short of the 100 billion yuan market value.

With this, Dahua did another thing: it changed lanes to overtake, established Leapmotor, and entered the field of new energy vehicles.

2. Product level.

At the beginning, Dahua's third transformation had not yet arrived, and its now popular To B business was still in the early stages of research and investigation, while new energy vehicles had already begun to generate new sparks.

On the one hand, Zhu Jiangming believes that the automobile market is the largest market after the real estate market and there is still huge market space in China.

The automotive industry pie is big enough, so Dahua certainly wants to have a taste of it.

On the other hand, as early as the beginning of the project, Dahua may have realized that electrification, intelligence and networking are the future trends of automobiles.

In the early days, Zhu Jiangming had stated many times in public that the reason why he continued to invest heavily in this industry was that he had identified this trend and they must seize the node of this technological transformation.

"Because if you want to do intelligent driving, you must use electric cars, not gasoline cars. Autonomous driving and unmanned driving will definitely be the direction in the future, and we will definitely see it within 5-10 years."

Zhu Jiangming said that based on the early entry of artificial intelligence into the security field, they believe that driverless cars will eventually be realized, it is only a matter of time.

Subsequent market trends did verify their judgment.

According to data from the China Business Industry Research Institute, the market size of the autonomous driving industry will exceed 235 billion yuan in 2021. Data also show that by 2030, the size of the smart driving market will reach 490 billion yuan.

3. Technical level.

Whether in video IoT or transportation, Dahua has profound technology and data accumulation. Its IT gene is one of the basic points for Leapmotor to get started.

Leapmotor's logic is that Dahua can transplant its management experience and R&D processes in the IT field, as well as the speed and efficiency application advantages of IT companies, to the automotive industry to participate in competition.

For electric vehicles, batteries, BMS and intelligent driving systems all require embedded control.

As for embedded-level technology, Dahua has accumulated 20 years of experience in automated control using low-power built-in processing modes.

Dahua's AI embedded technology, from sensing, computing, control to execution, the entire process can be reused in automobiles.

"We have a better understanding of the know-how at the underlying embedded software and algorithm level," Zhu Jiangming once told Jujinzhi.

In other words, Dahua, which originated from the electronic product industry, knows better how to control costs and maintain cost-effectiveness, and is better at combining software and hardware.

In fact, Dahua Technology provides more than just technical support to Leapmotor.

When Leapmotor was first founded, Dahua Technology invested another 400 million yuan. It was not until the launch of its first mass-produced model S01 that Leapmotor received a Pre-A round of financing led by Sequoia Capital.

In addition, Dahua Technology's advanced technologies such as artificial intelligence, big data and cloud computing can all be used by Leapmotor.

4. Policy level.

Just as "there is no era without enterprises, only enterprises in the era", many times, policy support is greater than the efforts of individuals and enterprises themselves.

Equipment manufacturing, known as the heart of the industrial economy, is the cornerstone of the national economy and reflects the technological level, manufacturing capabilities and comprehensive strength of a country or region.

Under the wave of digital reform, Zhejiang or Hangzhou needs to embark on an innovative path of digitally driven development and transformation and promote high-quality development. High-end manufacturing is an inevitable path.

This is also confirmed by the “14th Five-Year Plan” for the development of high-end equipment manufacturing industry recently released by Zhejiang Province.

This year, Hangzhou started the construction of the "Factory of the Future" to further accelerate the digitalization of the industry and promote the in-depth integration of digital technology and manufacturing.

For Hangzhou, which is eager to seek change and innovation in high-end equipment manufacturing, Leapmotor is not only a local enterprise in Hangzhou, but also is currently gaining momentum. It is understandable that the two parties hit it off.

5. Personal level.

For 20 years, Hikon, the leader in video IoT, has firmly attracted the attention of the market.

Although Hikvision's revenue is only twice that of Dahua, the former is far higher than Dahua and Fu Liquan (Chairman of Dahua) in terms of market value and personal reputation of its leader.

This seems to be mixed with the prejudice against Dahua and Fu Liquan that the outside world has been unable to get rid of.

From a poor family to being admitted to Zhejiang Electronic Industry School, from leaving the system to starting his own business, from an unknown small factory to leading Dahua to break through the siege and become the second largest AI security company in the world, Fu Liquan has been unwilling to be mediocre all his life.

Hikvision’s achievements today are certainly inseparable from its own business management methods, but the support of a state-owned enterprise does allow it to forge a heavy sword with black iron in the bloody market, and it also has more confidence.

In comparison, Dahua, as a private enterprise, is like competing with a group with individual strength. Against such a background, it has still kept up with the former for 20 years. The courage, tenacity and hardships it has experienced are beyond the reach of ordinary people, and are enough to garner respect.

After fighting for twenty years, Fu Liquan can now even find an appropriate opportunity to cash in his resources and return to the countryside.

Perhaps, the reason why Fu Liquan did not do so was due to his nature of being unwilling to be mediocre and his underlying desire to realize his personal value.

Perhaps just as Lei Jun chose to build cars as his last entrepreneurial venture, Leapmotor is the last gamble of Fu Liquan, a 54-year-old stubborn IT man, on his entrepreneurial journey.

If you win, everyone is happy; if you lose, so what.

If Dahua has the right time, right location and right people to enter the smart car market, then why doesn't it just be a supplier, but choose the hard, tiring and risky path of making cars?

Speaking of this, we have to admire the experience and foresight of people like Fu Liquan and Zhu Jiangming who come from an industrial background.

As mentioned earlier, Dahua chose to build cars directly for two reasons: first, the market is large enough; second, it sees the advent of the driverless era.

In the era of driverless cars, the car is no longer a car in the traditional sense, but a mobile robot, and the resulting benefits will be exponentially doubled.

Previously, Leifeng.com New Intelligent Driving wrote an article saying that becoming heavy and hard is a step that autonomous driving players may not be able to avoid. Making cars may also be the ultimate fate of autonomous driving players.

From a product perspective, we have to build cars; from a market perspective, building cars has more advantages.

Let’s first talk about why we have to build cars.

Autonomous driving and cars are like the relationship between the soul and the body. If we don’t build cars, our souls may be left without a safe place.

Many players in the industry choose to become travel operators.

This model usually requires purchasing (or cooperating with OEMs) for unmanned transformation and system deployment, and then providing continuous autonomous driving transportation services to the market. In this way, the initial investment is huge and the monetization cycle is very long.

More cross-border players choose to be technology suppliers.

From the perspective of autonomous driving, it is not commercially feasible to implement L4 in consumer-oriented mass-produced passenger cars at this stage.

On the one hand, OEMs are extremely sensitive to costs, and L4 technology usually requires expensive sensors to support it. On the other hand, L4 technology is not a rigid demand for pre-installed mass-produced passenger cars.

For ordinary consumers, there is no essential difference between L2 and L4. After all, in critical situations, manual control is required. If it is L5, which is completely unmanned driving, it will be different. This is a qualitative leap.

During the productization process, all the pitfalls that progressive players have encountered cannot be escaped by leaps and bounds players.

From Dahua's own perspective, after more than 20 years of hard work in the traditional manufacturing industry, Fu Liquan, Zhu Jiangming, or Dahua, have met too many technology suppliers.

Whether it is video IoT or autonomous driving, there must be a middleware between technology and users. What is this middleware?

In security, it’s the camera; in autonomous driving, it’s the car.

CV unicorns started out with algorithms, but in the end they still couldn’t escape the fate of making hardware. The same is true for the automotive industry. Cars are the core middleware that connects technology and people. If they are not extended to the front end, it will be difficult to reach C-end users.

To put it bluntly, no matter what form of autonomous driving is implemented, the initiative in the road to commercialization has always been in the hands of the OEMs.

In other words, if you want to truly change the travel market and implement driverless technology on a large scale, you must build cars.

Let’s talk about the advantages of car manufacturing.

Logically speaking (without discussing the possibility of success), autonomous driving companies making cars will indeed be more convincing than any other cross-border car-making players.

On the commercial level, autonomous driving players choose to build cars, which can not only verify their own technology and provide a platform for large-scale implementation of their technology; they can also package and integrate the technology into automotive products and sell and lease them to consumers or taxi fleets.

On the technical level, by building their own cars, autonomous driving players can firmly hold the right to speak in their own hands, and the coupling degree between the soul and the body will be higher, which is convenient for optimizing the user experience; at the same time, the massive return of driving data can help players better iterate technology and form an accelerated closed loop from technology to product and then to technology.

Facts have also proved that Baidu has made it, Didi has made it, Xiaoma may make it, and AutoX has also invested in making it.

Perhaps Dahua anticipated that it would have to make cars, which is why it firmly chose the path of making cars from the very beginning.

Yesterday, Zhu Jiangming also stated that "it is expected that full-scenario autonomous driving technology will be achieved in 2024 and surpass Tesla within three years."

Zhu Jiangming also told Leifeng.com that since 2017, Leapmotor has begun to prepare to plan AI-based autonomous driving chips with Dahua.

It is reported that Leapmotor's self-developed autonomous driving chip Lingxin 01 will be installed on the Leapmotor C11 and will be launched in October this year.

In short, although the outside world teases Dahua for making cars, this is actually a necessary step and it is very likely to be the right one.

Car manufacturing is in line with the trends of new energy, intelligence, and high-end manufacturing; it is in line with Dahua's transformation requirements; it is in line with the trend of technological extension and the policy environment.

No matter how you look at it, this is a win-win situation.

Moreover, when Leapmotor was born, the autonomous driving track was far less crowded than it is today. Leapmotor has Dahua as its backer, and it has money, people and technology. Since it has seen the opportunity, why not take a chance and turn a bicycle into a motorcycle?

Hikvision has already attacked other technology suppliers, and Dahua does not want to follow Hikvision forever.

Back to today, the market capitalizations of NIO, Xpeng and Li Auto are nearly US$70 billion, over HK$270 billion and approximately US$27.4 billion, respectively.

If Leapmotor successfully goes public, the market value it brings is likely to far exceed that of Dahua itself.

In addition, with the adjustment of Dahua's business system in the past two years, the enterprise-centered To B business has become an increasingly sharp spear: According to Dahua Technology's 2020 annual report, its enterprise business revenue accounted for 42.28% of its domestic business.

In the new blue ocean of urban and enterprise digitalization, it is an indisputable fact that To B business has become a new growth engine.

The To B business is gaining momentum, and coupled with the trillion-dollar track of new energy vehicles, is there any reason to predict that Dahua’s dream of a trillion-dollar market value is not far away?

"Leapmotor will enter the top three of new car-making forces in 2023, and its market share in the domestic new energy vehicle market will reach 10% in 2025."

It is no wonder that Zhu Jiangming remained confident even when performance was not good.

But we must understand one thing: making the right judgment is one thing, and success or failure is another.

Making cars seems to be a feasible transformation direction, but it will take several years for a new car product to be on the road.

In December 2015, after internal incubation, Leapmotor was born with the bloodline of security company Dahua.

However, cars are different from cameras. While the former carries a market space that is several times larger than the security market, it also requires companies to pay a greater price.

For Leapmotor, which has no experience in car manufacturing and no relevant background team, it is not easy to survive in the larger automotive industry.

First of all, the process of producing its first car by Leapmotor was full of twists and turns.

"When I first wanted to make cars in 2015, I really had no idea what majors were available in the automotive industry. When I went to recruit people, I had no idea what kind of people to recruit," Zhu Jiangming, founder and chairman of Leapmotor, once told the media.

After nearly a year of team building (Leapmotor stated in 2017 that 80% of its more than 400 employees were R&D personnel and the core team had no automotive industry experience), Leapmotor held a meeting in Qiandao Lake in October 2016, convening investors and partners to discuss vehicle positioning.

According to Zhu Jiangming's plan, Leapmotor's first new energy vehicle, the S01, must be special enough to attract attention and then gradually enter the market segment.

However, production qualifications are a difficult problem that all new car manufacturers cannot avoid.

In 2015, the National Development and Reform Commission and the Ministry of Industry and Information Technology jointly issued the "Management Regulations for Newly Established Pure Electric Passenger Vehicle Enterprises", which stipulate that automobile companies must have "production qualifications" and "product qualifications" before they can produce pure electric vehicles.

In order to solve this problem, Leapmotor, while actively applying for a new energy vehicle production license, cooperated with a third party to jointly complete the production of the entire vehicle. This third party is Changjiang Passenger Vehicle.

According to information, Changjiang Automobile obtained the new energy vehicle qualification access from the Ministry of Industry and Information Technology in 2017, and its Changjiang pure electric passenger vehicle segment officially started operations in 2018.

Leapmotor produces the body-in-white and three-electric components at its self-built Jinhua factory, and then hands them over to Changjiang Passenger Vehicle for final assembly.

This also means that S01 may be the first batch of "practice" models for Changjiang Passenger Vehicle, which has just obtained the qualification to produce new energy vehicles.

In January 2019, Leapmotor launched its first model, the S01, for market testing. However, due to the S01's peculiar shape and its positioning as a coupe with a small audience, the S01's market performance was not satisfactory.

As of May 2020, a total of about 1,000 S01s have been sold, far from the sales target of 10,000 units set by Leapmotor for 2019.

Secondly, Leapmotor’s quality control and intelligence have also encountered multiple rounds of turmoil.

Zhu Jiangming might not have expected that the T03, which he hoped would open up a wider market, would be plagued by negative news on its listing day.

On the day when T03 was launched in May 2020, more than 200 S01 owners collectively issued a rights protection letter on the Internet, directly pointing out the four major quality problems of S01.

According to the rights protection letter, the failures of Leapmotor cars mainly manifest in the braking system, power system, vehicle-computer system, control system, etc.

This may be related to the fact that Leapmotor is unable to control the quality as it outsources the final assembly to a third party.

In addition, Leapmotor has also been pointed out that its products do not match its publicity.

Leapmotor once declared at a press conference: "Leapmotor is the second manufacturer in the world after Tesla to have complete independent research and development capabilities for smart electric vehicles."

According to the data, Leapmotor has independent research and development capabilities in the fields of three-electric systems, intelligent network systems and intelligent driving systems, and its proportion of invention patents is the highest among new car-making forces.

However, Leapmotor, which is madly competing with Tesla, may not have the strength of Tesla.

During the media test ride of T03, the facial recognition, L2 intelligent driving assistance, and automatic parking of T03 experienced different degrees of failures; many car owners also said that the assisted driving system promoted by Leapmotor in T03 has not been pushed for a long time.

It was also in this year that Zhao Gang, vice president of Leapmotor and former head of Honor brand overseas business, chose to leave.

He even said bluntly that it was "too difficult".

Among the new forces in car manufacturing, Leapmotor is a relatively special one: it can be said to be lucky, but also unfortunate.

Fortunately, Leapmotor was born out of the global security giant Dahua Technology, grew up in the first wave of car manufacturing, and is expected to become the first new car-making force to be listed on the Science and Technology Innovation Board.

Unfortunately, it took four years for the company to launch its first mass-produced model, and the amount of financing before 2021 was only 3.26 billion yuan, and its sales volume was zero for half a year.

After sitting on the bench for four years, Leapmotor has seen a turnaround this year.

In terms of sales, according to the data released by Leapmotor, its first-quarter orders reached 10,019, of which 3,227 were in March, a month-on-month increase of 33%.

In terms of production qualifications, Leapmotor obtained the qualification for complete vehicle production through the acquisition of New Ford, and passed the approval on April 30 this year to obtain the qualification for new energy vehicle production.

It is understood that Leapmotor's C11, a mid-size SUV, will soon go into production at its Jinhua factory.

In terms of algorithms, the Leapmotor team won first place in the 2D real-time detection challenge of the Waymo Challenge.

Previously, Zhu Jiangming had expected to achieve self-sustaining growth by 2023. With the recent financing of 4.5 billion yuan, Leapmotor's road to car manufacturing may become smoother.

Everything has changed, and not everything seems to be.

At least, Zhu Jiangming is still the chairman who loves to make tough statements. Whether his recent claim that "autopilot technology will surpass Tesla within three years" can come true remains in doubt.

Some people say that Leapmotor skipped the C round of financing and went directly to the Pre-IPO round. Is it a bit too hasty?

There were indeed not many strong competitors in the market back then. Today, NIO, Xpeng, and Li Auto are firmly at the top, while WM Motor and Nezha are trying hard to catch up, and Huawei, DJI, and 360 are coming on strong. The situation is different from the past.

If Leapmotor successfully goes public as planned, it will become the first automobile company to be listed on the Science and Technology Innovation Board.

If Leapmotor had failed to successfully IPO after they had consolidated their position, it might have been a different story.

In other words, Fu Liquan and Zhu Jiangming's original calculations may have changed.

This article is originally written by Leifeng.com, and the author is Yu Kuai Tianzhe. Please reply "reprint" to apply for authorization. Reprinting without authorization is prohibited.

Recommended: Leifeng.com Auto Channel "New Intelligent Driving"