Didi Chuxing splits off its autonomous driving business, and the pressure behind it is intriguing

Didi Chuxing announced that its autonomous driving department has been upgraded to an independent company, which will focus on the research and development of autonomous driving technology, product commercialization and related business expansion.

Didi Chuxing CTO Zhang Bo will also serve as CEO of the new company, Meng Xing, former executive director of Didi Capital Fang Shunwei Fund, will serve as COO, and Didi's autonomous driving team technical experts Jia Zhaoyin and Zheng Jianqiang will serve as heads of the US R&D team and China R&D team respectively. All three will report to Zhang Bo.

A week ago, Didi released the news of the spin-off of the autonomous driving department. According to LatPost on July 29, Meng Xing, the former executive director of Didi Capital Fang Shunwei Fund, may become the head of the new company and take charge of the financing of the new company. However, from the current situation, although the autonomous driving business has been spun off, Zhang Bo, the head of Didi's autonomous driving business, is still in charge, which shows that Didi still wants to keep the autonomous driving business firmly in its own hands.

The spin-off of Didi's autonomous driving business can be considered an important move by Didi to accelerate the implementation of autonomous driving. If Didi's development of autonomous driving business was just to accumulate technology for the future, now Didi's autonomous driving business has risen to the company's strategic level. The establishment of an independent subsidiary will accelerate the research and development and implementation of Didi's autonomous driving technology. According to Chedongxi, the recent acceleration of autonomous driving companies such as Waymo and Uber 's driverless taxi projects has put some pressure on Didi.

From another perspective, Didi's move to spin off its autonomous driving business is also likely to be a signal that the company is seeking to go public. Didi's largest global competitor, Uber, has already spun off its autonomous driving business before Didi. Through this move, Uber has successfully reduced its own business losses and raised its pre-IPO valuation. In this way, Didi's spin-off of its autonomous driving business has become somewhat intriguing.

1. Didi’s autonomous driving business is spun off, and current CTO Zhang Bo serves as CEO of the new company

Didi officially informed Chedongxi that its autonomous driving department has been officially upgraded to an independent company, which will focus on the research and development of autonomous driving technology, commercialization and expansion of related businesses.

Didi Chuxing's current CTO Zhang Bo will also serve as the CEO of the new company, Meng Xing, former executive director of Shunwei Capital, will serve as COO, Jia Zhaoyin and Zheng Jianqiang will serve as heads of the US R&D team and the Chinese R&D team respectively, and all three will report to Zhang Bo.

▲ Zhang Bo, CTO of Didi Chuxing and CEO of the new company

Earlier media reports said Meng Xing, executive director of Shunwei Capital, Didi Capital's partner, would serve as CEO of the new company, but official news showed that this information was not true.

Chedongxi asked Didi Chuxing about the specific progress of its autonomous driving business. It is understood that Didi currently has more than 40 autonomous driving test cars. Previously, its CTO Zhang Bo also revealed in an interview with Chedongxi that Didi's autonomous driving business is led by him personally and has carried out autonomous driving road tests in four cities in China and the United States, and has obtained an autonomous driving road test license in California, the United States.

In terms of the autonomous driving business team, Didi has fully established multiple professional teams including high-precision maps, perception, behavior prediction, planning and control, infrastructure and simulation, data annotation, problem diagnosis, vehicle modification, cloud control and Internet of Vehicles, vehicle-road collaboration, information security, etc. Currently, the team is conducting R&D and testing in many places in China and the United States, with a scale of over 200 people.

The official announcement from Didi shows that the newly established autonomous driving company will integrate the resources of Didi's travel platform with its existing technological advantages, increase investment in the research and development of core autonomous driving technologies, and gradually deepen its cooperative relationship with more than 20 vehicle manufacturers such as BAIC New Energy, Guoneng Automobile, and CHJ Automotive, as well as related upstream and downstream companies.

Zhang Bo previously pointed out that Didi's autonomous driving business will open up a new business model: car manufacturers build cars, then put them into Didi's platform with one click, and let the car manufacturers share in every order. In the future business model of Didi's autonomous driving subsidiary, such a business model is likely to be implemented.

Zhang Bo, CTO of Didi Chuxing and CEO of the new company, said: "The new company will deepen its strategic cooperation with automobile OEMs and industry partners to jointly promote the commercialization of driverless technology." At the same time, Didi will also apply its operating experience in the online car-hailing field to driverless operations, and discuss safety standards for autonomous driving operations with relevant departments.

2. Didi’s autonomous driving spin-off will accelerate the implementation process

Judging from the autonomous driving companies around the world focusing on the travel sector, Didi’s move to spin off its autonomous driving business is likely to be a “precursor” to a series of major moves.

It is understood that Didi's autonomous driving business previously only belonged to a business group under the parent company. Didi's overall investment focus was on online car-hailing and travel safety, and its continued investment in autonomous driving business was limited.

After the split, Didi's autonomous driving business was upgraded to an independent company, able to obtain independent financing and acquire more resources than within the company. The expansion speed of the entire team and the research and development speed of autonomous driving can be improved.

Didi's global competitor Uber has spun off its autonomous driving business before its listing. Its autonomous driving company received a $1 billion investment from SoftBank and Toyota, and the new company is valued at $7.25 billion.

Its potential rival Waymo was spun off from Google early on and became an autonomous driving subsidiary of its parent company Alphabet. Although it does not need to raise funds with the support of the giant Google, its autonomous driving business has also made rapid progress after the spin-off.

From this perspective, one of Didi's main intentions in spinning off its autonomous driving business is to speed up the research and development and implementation of autonomous driving technology, and thereby seize the travel market in the future driverless era.

Another major intention of Didi to spin off its autonomous driving business is probably to prepare the company for its listing.

The research and development of autonomous driving technology is a long-term, large-scale investment that is unlikely to pay off in the short term. Public data shows that after General Motors acquired Cruise, an autonomous driving company, its R&D investment in the autonomous driving business reached $728 million in 2018. Since then, there have been voices within GM hoping that Cruise would go public independently; Waymo internal employees have also revealed that the company's annual investment in technology has reached $1 billion; domestic Internet giant Baidu has also been rumored to be spinning off its autonomous driving business. Robin Li has publicly stated that when the company's driverless car business matures and needs more funds and partners, they intend to divest it and will cooperate with traditional automakers.

The same is true for Didi. It is likely that Didi alone will not be able to sustain long-term, large-scale investment in the research and development of autonomous driving technology. If it is believed that Didi is laying the groundwork for a listing, then the spin-off of the autonomous driving business will also be beneficial to Didi's future financial performance.

Uber spun off its autonomous driving business before going public for this purpose. By spinning off the "big spender" autonomous driving business, Uber successfully reduced the company's losses. In May 2019, Uber officially went public. At the close of the day of listing, Uber's market value reached US$69.711 billion.

Conclusion: Didi is working on driverless ride-hailing

The significance of autonomous driving to the online car-hailing industry is self-evident. Mature autonomous driving cars will be able to save a lot of manpower costs for operating companies and can drive more safely and in a more standardized manner than ordinary drivers. Didi has been planning for autonomous driving since 2016. Previously, it was reported that it was discussing financing for autonomous driving business with shareholders such as SoftBank and Toyota. Didi has been accelerating the research and development of autonomous driving.

However, the spin-off of the autonomous driving business and its upgrade to an independent company can be seen as a major milestone in Didi's autonomous driving development. From this point forward, Didi's autonomous driving business will be able to obtain more resources from the capital market, while also reducing Didi's financial pressure on autonomous driving R&D investment. After this, Didi's autonomous driving technology R&D and implementation will accelerate, and the era of autonomous driving online ride-hailing can already be envisioned.