China's largest intelligent driving acquisition: Weichai bought the commercial ADAS ticket for 660 million yuan

In November 2019, Weichai Power Co., Ltd. (hereinafter referred to as "Weichai Power") and Tianjin Qingzhi Technology (hereinafter referred to as "Qingzhi Technology") signed a "Share Transfer Agreement", planning to acquire 55% of the equity of Qingzhi Technology for a cash consideration of RMB 660 million.

This acquisition in the field of intelligent driving did not attract much attention at the time.

It was not until March 2020 that Weichai Power released its 2019 annual report, and many details about the largest acquisition in China's intelligent driving field to date finally surfaced.

On one side is a global commercial vehicle powertrain and parts supplier with an annual revenue of more than RMB 170 billion. On the other side is an intelligent driving technology startup that was established less than 4 years ago.

The combination of the two companies has enough imagination.

Qingzhi Technology, which was founded less than four years ago, found a solid backer in Weichai Power and started a new journey on the road of entrepreneurship.

Whether the acquisition price of 660 million yuan will mark the beginning of mergers and acquisitions in China's smart driving industry remains to be seen.

Weichai Power paid the full cash consideration to Tsingzhi Technology on November 28, 2019. From that day on, Tsingzhi Technology officially became a part of Weichai Power.

The Shareholders Agreement signed by the two companies also includes a bet clause:

“The founding shareholders of Qingzhi Technology have promised that the actual main business income achieved in the three years of 2019, 2020 and 2021 should reach RMB 941 million.

If the performance commitment is not achieved on time, the founding shareholders of Qingzhi Technology will need to compensate Weichai Power for the performance. "

We have no way of knowing how much revenue Qingzhi Technology achieved in the past year, so we cannot judge whether it can win this bet. On average, Qingzhi Technology's annual revenue needs to be more than 300 million yuan.

There is one detail worth noting: Weichai Power's 2019 annual report mentioned:

From the completion of the equity acquisition of Qingzhi Technology on November 28, 2019 to December 31, 2019, Qingzhi Technology achieved operating income of 3,053,372.32 yuan, which means that the monthly revenue was slightly over 3 million yuan.

Judging from this figure, Qingzhi Technology will face considerable revenue pressure in the next two years.

1. Weichai Power and Tsingzhi Technology have a bond

Weichai Power was founded in 2002 and is headquartered in Weifang City, Shandong Province. Its current head is Tan Xuguang.

Speaking of Weichai Power, the first brands that come to mind are "Weichai Power Engine", "Fast Gear Transmission", "Hande Axle", "Shaanxi Automobile Heavy Truck", "Linde Hydraulics" and other brands. These brands and products are basically in a leading position in the domestic market.

Weichai's main products are vehicle powertrains including engines, gearboxes, axles and hydraulic products; Weichai also produces heavy-duty vehicles, construction machinery, special vehicles, light vehicles, etc.

In 2019, Weichai Power achieved operating income of 174.361 billion yuan and net profit attributable to the parent company of 9.105 billion yuan.

Compared with giants like Weichai Power, Qingzhi Technology, founded in April 2016, is undoubtedly a new force.

Qingzhi Technology is headquartered in Tianjin and is an enterprise incubated by the "Tianjin Intelligent Connected Vehicle Industry Research Institute".

Most of the company's founding team members studied under Professor Li Keqiang, an expert in the field of intelligent connected vehicles and professor of the Department of Automotive Engineering at Tsinghua University. Li Keqiang is currently also a shareholder of Tsinghua Zhizhi Technology.

Since its establishment, Qingzhi Technology has received three rounds of financing, with a total financing amount of less than 200 million yuan. Major investment institutions include China Merchants Venture Capital, Zhongguancun Development Group, Northern Light Venture Capital, Ruiyang Fund, Lenovo Star, and Everest Venture Capital.

In July 2017, Tsinghua University invested in Tsinghua Intelligence through intellectual property rights, and Tsinghua became a member company of Tsinghua Holdings.

Qingzhi Technology has focused on the field of commercial vehicle autonomous driving from the beginning. Its main business lines currently cover commercial vehicle advanced driver assistance systems (ADAS), military-civilian integration applications of intelligent chassis technology based on military special vehicles, and L4 autonomous driving solutions for specific scenarios.

In the ADAS business line, the automatic emergency braking system (AEBS) for commercial vehicles is Qingzhi’s flagship product.

As early as November 2017, they opened the first AEBS production line.

It was because of AEBS that Qingzhi Technology first became connected with Weichai Power.

Everyone in the industry knows that in order to improve the transportation safety of commercial vehicles, the country has issued a number of regulations and policies in recent years to force commercial vehicles to install AEBS. Many commercial vehicle manufacturers have to find corresponding suppliers in accordance with the regulations.

In 2018, Shaanxi Heavy Duty Truck and Qingzhi Technology started cooperation in AEBS.

In December of the same year, Qingzhi Technology successfully completed the AEBS test of Shaanxi Heavy Duty Truck and obtained the designated project.

Of course, cooperation is just an opportunity. The deep-seated reason that really drives Weichai Power to acquire Qingzhi Technology is the complementarity of their products and technologies, as well as their compatibility in corporate development strategies.

2. Why should Weichai Power buy?

In recent years, Weichai Power has also been looking for new driving forces for development.

A small detail worth noting is that in 2019, Weichai also launched a new corporate logo, which specifically highlights the word "AI" to demonstrate its determination to pursue intelligent technology.

At the end of 2017, Weichai Group held a "Revenue Exceeding 200 Billion and 2020-2030 Strategy Press Conference", and the head of Weichai, Tan Xuguang, formally proposed Weichai's "2020-2030 Strategy", which included "one goal" and "two stages".

"One goal" is to reach $100 billion in revenue.

The "two stages" mean that by 2020, Weichai's traditional business will surpass the world's first-class level, and by 2030, Weichai's new energy business will lead the global industry development.

Under the guidance of this strategy, Weichai Power plans to increase its R&D investment and establish a global new energy R&D team of 1,000 people, an electronic control R&D team of 1,000 people, an intelligent network R&D team of 1,000 people, and a craftsman R&D team of 1,000 people, in order to speed up technological innovation and accelerate the transformation of new and old growth drivers.

From this plan, we can see that Weichai Power’s future new business focus will include new energy business and intelligent connected vehicle business.

In fact, in 2019, Weichai Power has completed the development of a number of fuel cell engines and actively promoted the construction of hydrogen refueling stations and the promotion and application of fuel cell vehicles, with a cumulative running distance of more than 1 million kilometers.

At the same time as acquiring Tsingzhi Technology, Weichai Power also strategically reorganized Germany's ARADEX company with the goal of controlling its core motor controller technology.

In the field of intelligent networking and autonomous driving, Weichai Power has started the research and development of commercial vehicle ADAS technology, and strengthened its technical research and development capabilities in the field of ADAS and autonomous driving through the acquisition of Qingzhi Technology.

In October 2019, just one month before Weichai Power acquired Qingzhi Technology, Weichai Power's head Tan Xuguang talked about intelligent driving at an industry sharing session:

"Autonomous driving is impossible and can never replace human senses, but assisted driving has arrived, that's for sure."

This view also indirectly confirms the internal logic behind Weichai Power's acquisition of Tsingzhi. Weichai took a fancy to Tsingzhi Technology's technical strength in the field of commercial vehicle ADAS.

Before acquiring Qingzhi Technology, Weichai Power had already started the research and development of intelligent driving technology.

In November 2018, Weifang Weichai Intelligent Technology Co., Ltd. was registered and established with a registered capital of 100 million yuan.

Weichai Power invested 80 million yuan, and co-invested with Zhan Jun from Baidu's US autonomous vehicle research team. Zhan Jun also became the director and general manager of Weichai Intelligent.

According to the introduction, Weichai Intelligent Technology is mainly engaged in the design, development, production and sales of intelligent assisted driving and unmanned driving systems and related technologies; the design, development, production and sales of electronic products and components for automobiles, construction machinery and agricultural machinery.

At present, there is very little public information about the progress of Weichai's intelligent technology research and development.

Recruitment information shows that Weichai Intelligent is actively recruiting technical leaders in the fields of intelligent networking, with an annual salary starting at one million. The positions recruited include technical leaders in automotive electronic architecture, ADAS, domain controller, functional safety, intelligent networking, engine ECU, cloud platform and chip design, and the layout is global, including China, the United States, Germany, India, Japan and other regions.

It can be seen that Weichai Power is ready to make a big move in the field of intelligent driving.