FAW Speeds Up Its Intelligent Transformation

Author: Wang Lei

Editor: Qin Zhangyong

The deal is sealed: FAW has finally decided to make a substantial investment in Zhuyu.

According to the announcement from the State Administration for Market Regulation regarding FAW Group Corporation's acquisition of a portion of Shenzhen Zhuyu Technology's equity, FAW will acquire a 35.8% stake in Zhuyu through a combination of capital increase and equity acquisition. The original controlling shareholder, New Territory, will see its stake reduced to 34.85%, with both entities jointly controlling Zhuyu.

The announcement did not reveal the specific transaction amount, leaving the rumored 'over $800 million equity transaction' unverified and the claim of 'control' unconfirmed. Nevertheless, this move has positioned FAW as the largest single shareholder of Zhuyu.

Notably, FAW Hongqi recently announced an enhanced collaboration with Huawei, with new models set to feature Huawei's Qiankun Intelligent Driving and HarmonyOS Cockpit systems. Now, with its investment in Zhuyu, FAW is poised to capitalize on both Huawei and Zhuyu's strengths, underscoring its commitment to accelerating its development.

01 FAW Had Been Eyeing Zhuyu for Some Time

Had it not been for the State Administration for Market Regulation's announcement of this equity acquisition, we might still be in the dark about who would invest in Zhuyu Technology, as FAW Group was not the only contender.

Although the announcement is concise, it provides a clear overview of the transaction and the operator structure.

According to the announcement, China FAW Group Corporation ('FAW') entered into an agreement with New Territory Technology Company Limited ('New Territory') and Shenzhen Zhuyu Technology Co., Ltd. ('Zhuyu Technology') to increase capital and acquire equity in Zhuyu held by New Territory.

The transaction involves 'operators with upstream and downstream relationships, each holding less than a 25% market share in their respective markets.'

The announcement also disclosed that in the 2024 Chinese market for advanced driver-assistance systems (ADAS), New Territory (through Zhuyu Technology) held a 0-5% market share. Downstream, in the 2024 Chinese passenger vehicle market, FAW held a 10-15% market share.

Prior to the transaction, New Territory held a 70.65% stake in Zhuyu, exercising sole control. Post-transaction, FAW will hold a 35.80% stake, while New Territory will hold a 34.85% stake, with both entities jointly controlling Zhuyu.

Zhuyu Technology, originally DJI's Automotive Division, was established in 2016 and spun off as an independent entity in 2023. It officially adopted 'Zhuyu' as its brand name in June 2024 and has since secured external capital. It has received investments from automakers and institutions such as BYD, SAIC, China Merchants Capital, Cornerstone Capital, and Guangyuan Capital, with cumulative financing exceeding 2.5 billion yuan.

Notably, prior to this transaction, Zhuyu's largest shareholder was New Territory, which held a 70.65% stake. Founded in Hong Kong in 2022, this company may not be widely recognized.

However, based on the announcement's description of the operator, New Territory's ultimate controller is a natural person whose company is primarily involved in the R&D, design, production, and sales of drones, handheld imaging, robotics education, and related solutions. This makes it relatively straightforward to deduce the identity of New Territory's actual controller.

Although the announcement did not specify the exact transaction price for the 35.8% stake, if we calculate based on the previously reported $800 million investment corresponding to a 35.8% stake post-transaction, Zhuyu's post-money valuation in this transaction can be roughly estimated at around 16 billion yuan.

This estimate aligns with media reports mentioning a 'post-money valuation exceeding 10 billion yuan.'

In fact, FAW's investment in Zhuyu is not surprising. Prior to this, Zhuyu and FAW had been strategic partners, and FAW led Zhuyu's Pre-A round of financing in 2023 when it was still known as DJI Automotive.

At Zhuyu's Tech Day in March this year, FAW's Hongqi Tiangong 05 stood out with Zhuyu's Chengxing Intelligent Driving 3.0+, featuring the world's first 10V vision-based intelligent driving assistance system, the first inertial navigation tri-lens solution, and the global debut of the Snapdragon Intelligent Driving Platform SA8650P in mass production, achieving the 'industry's only' bionic vision end-to-end full-scenario solution.

Additionally, the newly launched FAW-Volkswagen Sagitar L, featuring the IQ.Pilot enhanced driving assistance system co-developed with Zhuyu Technology, became the first and only mainstream fuel-powered sedan to offer map-free end-to-end highway pilot assistance.

02 The Cost-Effective Leader

Currently, autonomous driving technology primarily falls into two categories: one is the high-computing-power, multi-sensor fusion approach, which achieves higher-level autonomous driving functions through the integration of high-computing-power chips, LiDAR, high-definition maps, and other sensors, albeit at a relatively high cost. Huawei is a prime example of this approach.

The other is the low-cost, vision-centric approach, which advocates for reducing reliance on high-cost hardware through algorithmic optimization to achieve advanced intelligent driving functions at a lower cost. Zhuyu Technology falls into this latter category and was the earliest supplier to bring intelligent driving solutions to vehicles priced around 100,000 yuan.

As early as 2024, the Baojun Yep Plus, equipped with Zhuyu's intelligent driving solution, introduced highway pilot assistance functions to vehicles priced around 100,000 yuan. Subsequently, the Baojun Yunhai model, equipped with seven cameras, a bi-lens vision system, and a low-computing-power chip delivering 32 TOPS of computing power, brought map-free end-to-end intelligent driving to vehicles priced below 100,000 yuan.

Zhuyu Technology's core strength lies in the low computing power requirements of its pure vision system, enabling cost-effective deployment. Its Chengxing platform solution, featuring a 7V+32TOPS domain controller computing power, can achieve a minimum vehicle installation price of under 7,000 yuan.

The extreme product cost-effectiveness of the 'affordable route' was once Zhuyu Technology's 'secret weapon.' However, with the trend of democratizing intelligent driving this year, a large number of competitors have entered the 100,000-200,000 yuan market segment, exerting significant pressure on Zhuyu.

As a result, there have been increasing voices suggesting that Zhuyu is falling behind in the first tier of intelligent driving suppliers, which once included 'DiDaHuaMo' (DJI, Pony.ai, Huawei, and Momenta). This year, in particular, Baojun's orders were even taken by 'Huawei ADS.'

Therefore, expanding its partner network and achieving scaled deployment have become top priorities for Zhuyu Technology. Currently, the industry's impression of Zhuyu's collaborative models is mostly limited to Wuling Baojun and Hongqi Tiangong.

At the Shanghai Auto Show in early May this year, Zhuyu publicly announced its nine major cooperative clients for the first time, including Volkswagen, SAIC-GM-Wuling, BYD, Chery, Great Wall Motor, China FAW Group, Dongfeng Motor, Audi, and BAIC Group. Zhuyu also stated that over 20 models have already entered mass production, with more than 30 additional models set to follow soon.

This year, Volkswagen Group's first batch of fuel-powered vehicles in China equipped with highway pilot assistance officially hit the market. While the solution for Audi models comes from Huawei, all solutions for Volkswagen brand models are provided by Zhuyu.

Moreover, Zhuyu is already preparing for the future of intelligent driving exports. Zhuyu's test fleet has appeared on the streets of Munich, Stuttgart, and Ingolstadt, Germany, officially commencing local testing in Europe.

During the recently concluded Munich Auto Show, Zhuyu officially unveiled its European strategy, announcing the establishment of its headquarters in Braunschweig, Germany. Its business will primarily focus on two areas: collaborating with European OEMs and assisting Chinese automakers in expanding overseas.

It is expected that within the next year, Zhuyu's test vehicles and test scenarios in Europe will cover the entire country of Germany, with plans to continue increasing investment in computing power and infrastructure across Europe. In the near future, at least six Volkswagen Group models equipped with Zhuyu's driver assistance systems are set to be launched.

It is evident that Zhuyu Technology is intentionally accelerating its mass production and deployment towards scaled operations. With FAW's strategic investment in Zhuyu Technology, the latter, bearing the title of 'China's First,' will gain additional confidence.