The largest acquisition of smart driving in China: Weichai bought the commercial vehicle ADAS ticket for 660 million yuan

Preface: Nowadays, ADAS  has become a must-have configuration for commercial vehicles. Not only that, intelligent driving is not only another development direction of commercial vehicles, but also the next outlet for trucks.

Weichai Holdings Limited

At the end of March this year, Weichai Power Co., Ltd.'s 2019 annual report stated that Weichai and the founding shareholders of Tianjin Qingzhi Technology Co., Ltd. signed the "Equity Transfer Agreement" on November 18, 2019, and acquired 55% of Qingzhi Technology's equity for RMB 660 million in cash, becoming the major shareholder of Qingzhi Technology.

Weichai Power mentioned in its 2019 annual report that the founding shareholders of Qingzhi Technology promised that the actual main business revenue achieved in the three years of 2019, 2020 and 2021 should reach RMB 941 million. If the target is not met during the commitment period, the founding shareholders should make performance compensation to Weichai Power.

The industrial chain behind Weichai Power

Weichai Power was founded in 2002 and is headquartered in Weifang City, Shandong Province. 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.

With the completion of this acquisition, Weichai Power's territory has expanded again. Weichai covers multiple fields such as trucks and buses, spare parts, and new energy. In the field of heavy-duty trucks, the person in charge, Tan Xuguang, is in charge of three companies: China National Heavy Duty Truck Group, Shaanxi Heavy Duty Truck Group, and Haixi Heavy Duty Truck Group. In 2019, the annual sales of heavy-duty trucks were 1.174 million units, accounting for almost 30% of the total sales of heavy-duty trucks.

Tan Xuguang not only manages the golden power chain under Weichai Power (Weichai Engine, Fast Gear, Hande), but also owns the parts industry of China National Heavy Duty Truck Group: MAN Technology Engine, Hangzhou Engine, Sinotruk gearbox and axle; and domestic parts companies such as Torch Spark Plug and Zhuzhou Gear are also under the control of Tan Xuguang.

In August 2018, Weichai announced that it had signed a strategic cooperation agreement with Ballard Power Systems Inc. of Canada, a global leader in hydrogen fuel cells, in Jinan, Shandong, becoming Ballard's largest shareholder.

On December 16, 2019, Weichai announced that it had completed the strategic acquisition of Germany's ARADEX GmbH to further promote its development in the fuel cell field.

At the beginning of 2020, Weichai signed strategic cooperation agreements with Germany's Odyssey, a technology leader in the field of high-power frequency conversion and power supply equipment, and Austria's VDIS, a well-known vehicle drive system development technology company, in Jinan, Shandong.

Under this series of Weichai's strategic layout, the industrialization process of Weichai's new business will be accelerated.

Why invest in Tsingzhi Technology

Qingzhi Technology was founded in April 2016. It mainly develops commercial vehicle intelligent driving assistance systems (ADAS) and specific scenario autonomous driving solutions. Faced with the gradual popularization of ADAS, major manufacturers have tried their best to seize the future market.

According to the official information of Qingzhi Technology, they currently have four core ADAS products:

1. Automatic Emergency Braking System (AEBS)

2. Intelligent Safety and Control System (ISPS)

3. Electronic Stability Control (ESC)

4. Intelligent terminal system

As of the end of 2019, some of their ADAS products have become standard in 11 commercial vehicle manufacturers, and 42 models have passed product announcements and have been put into mass production.

Unlike many autonomous driving technology companies, Qingzhi Technology adopts a product development approach that focuses on reliability, safety and low cost.

① From a technical perspective, the competitive advantage of Qingzhi Technology lies in its environmental perception and information fusion technology. In actual driving, the stronger the environmental perception capability of the product, the more driving safety can be guaranteed.

② From the user's perspective, the competitive advantage of Qingzhi Technology's ADAS products lies in their ability to match China's complex road conditions and driver characteristics, providing a relatively better user experience.

③ In terms of integrating resources across the entire chain, Qingzhi Technology participated in the drafting of the JT/T1242 2019 AEBS national standard and mastered the intellectual property rights of its own core algorithms.

The "Technical Conditions for Safety of Commercial Trucks" issued in 2019 stipulates that from April 1, 2021, tractor vehicles with a maximum speed greater than or equal to 90km/h should be equipped with AEB, and the performance of AEB should comply with the provisions of JT/T1242-2019. In other words, from April 1 next year, it has become a mandatory requirement for trucks to be equipped with ADAS.

Therefore, Weichai's investment, on the one hand, conforms to the trend that the driving assistance system will usher in a big explosion, and it may obtain a certain return on investment from it. On the other hand, it also represents that it "controls" the driving assistance system (ADAS) technology to a certain extent, thereby taking the initiative in market competition.

ADAS manufacturers are making efforts under the policy push

Based on policy factors, domestic related enterprises have begun to deploy in the ADAS field on a large scale. Xiamen Ruiwei Technology's "ADAS+DSM" Recadas series products have shipped more than 30,000 pieces in total, accounting for about 15% of the domestic market. It is mainly deployed in the commercial vehicle field, based on image recognition technology, to monitor the driver's behavior and vehicle driving status in real time. When the alarm condition is triggered, the system automatically issues a warning voice to intervene in the driver's driving behavior, and uploads the data to the vehicle operation monitoring platform to visualize the vehicle management.

JIMU Intelligence currently focuses on L0-L3 and has integrated multiple sensors based on visual algorithms. On the product side, all of JIMU Intelligence's products are oriented towards mass production, such as road environment perception systems and driver monitoring systems. Judging from the current situation, JIMU Intelligence will actively cooperate with OEMs to promote the development of autonomous driving. It hopes to participate in the development of autonomous driving through its technological advantages.

Shenzhen Huabao Electronic Technology Co., Ltd. has launched a series of supporting "ADAS+DSM" products, which have functions such as front collision warning (FCW), headway detection warning (HMW), lane departure warning (LDW), driver face identity verification, fatigue driving warning, etc. At the same time, it has also launched new energy vehicle terminal products for the "three electrics" safety of new energy vehicles.

In the short term, the implementation of ADAS will be policy-oriented, and commercial vehicles will become the main market for the commercialization of "ADAS+DSM" technology. In the long term, if ADAS wants to enter the entire automotive market, it needs to be market-oriented to make users truly aware of the role of ADAS in improving safety.

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The current scale of the commercial ADAS market is approximately tens of billions of RMB. Through the acquisition of Qingzhi Technology, Weichai Power has its own commercial vehicle ADAS and intelligent driving technology supplier, which means Weichai Power has huge potential for future development.