Fuel vehicles have passed their glory days and entered the post-Nokia era; intelligent electric vehicles have risen from humble beginnings and are now a shining flame.

01 Weekly Report

At a symposium organized by a relevant department, automakers' top executives shared their thoughts. Qin Lihong, co-founder and president of NIO, suggested eliminating weekly sales rankings.

Firstly, NIO has never authorized such a report. Secondly, the data is not rigorous, and as a listed company, business figures must undergo auditing before being released. NIO never releases order data, and only five people in the entire company know the true figures.

The Chinese automotive industry is extremely competitive, to the point of being pathological. Listed companies typically disclose quarterly reports, but now Chinese people are not satisfied with monthly reports; they want weekly reports.

This concerns me. Almost every company talks about long-termism and plans for the next ten years, but their actions are honest indicators of an extreme focus on short-term profits, competing on weekly sales figures.

Just as ChatGPT's emergence reinforced the consensus that the US excels in underlying technological innovation, China excels in technology application.

Facing industrial transformation and a turning point in the era, China needs to address its shortcomings in underlying technology. This truly requires a long-term vision and sustained investment (not just lip service).

'Excellence in technology application' has driven China's industrial success. When smartphones emerged, Chinese brands quickly caught up, with most focusing on cameras because good photography is the most noticeable feature to users. By leveraging differences from iPhones and focusing on user-perceptible features, they rapidly increased sales, adopting a rural encirclement strategy to gain time and space, ultimately achieving success.

Early in the automotive industry, a similar strategy was employed. By leveraging differences from Tesla and focusing on user-perceptible features like interiors and massage seats, Chinese automakers expanded their vehicles' sizes. Chinese consumers were willing to pay for these features, leading to the inclusion of refrigerators and TVs and the branding of family-oriented vehicles. This past success is now a path dependency to be wary of.

In 2024, as the industrial cycle enters a new phase and geopolitical dynamics shift, Chinese automakers are no longer weak and impoverished but possess competitive prowess.

China's electric vehicle development has transitioned from nothing to something and is now moving from 'having' to 'excellence.' There are now many more important issues than weekly reports. Chinese automakers, as significant technology drivers, should demonstrate responsibility and determination, promoting industry progress from a holistic perspective.

02 Conductor

In the intelligent electric era, the core technology underlying the redefinition of automobiles, manifested in chips and software, is paramount.

Regarding the 'soul'—the operating system—Qin Lihong likened it to a conductor leading an orchestra.

An automobile is an 'orchestra' comprising over 30,000 components, urgently requiring unity and coordination in the intelligent electric era. Behind this ecosystem lies a century of magnificent automotive history.

Since its inception, the automobile has been a pillar of industry, with each revolution transforming not only the automotive sector but also the entire industrial landscape.

Henry Ford popularized the assembly line, ushering in three significant changes: the adoption of assembly line production, product standardization (made by unskilled workers using machines and molds), and paying workers wages above average living expenses to enable them to afford the products they made. Ford's innovation ultimately drove the development of an economic and social system based on industrialization, standardization, mass production, and mass consumption.

Toyota's Just-In-Time (JIT) production method profoundly transformed the automotive industry's understanding of inventory and efficiency, extending beyond automotives to impact the entire industrial sector. From its inception, Toyota focused on safety, durability, and economy. During the 1970s oil crisis, when American consumers shifted from large cars to fuel-efficient compact cars, Toyota seized the opportunity to enter the US market. Toyota's innovation elevated Japanese manufacturing to new heights and launched the internationalization of Japanese brands.

The core technology of fuel vehicles revolves around the engine. Volkswagen has deeply cultivated this area, refining FSI (Fuel Stratified Injection) and TSI (Twincharged Stratified Injection) technologies, coupled with VW's unique transmission and engine matching. The 1.4 TSI engine is a prime example, contributing significantly to VW's market share and brand reputation. Volkswagen can be credited with pushing fuel vehicles to their pinnacle.

This was the era of shining stars in the fuel vehicle industry, with various players focused on refining various aspects, ultimately driving industry progress.

Early in the electric vehicle era, pain points included safety, range anxiety, and intelligence. However, over the past two decades, we have witnessed continuous advancements in battery technology, the improvement of charging infrastructure, the proliferation of internet connectivity, and the widespread adoption of autonomous driving technology. Now, in the intelligent electric era, the focus is on redefining the core technology underpinning automobiles—chips and software.

After experiencing 'choking points,' the consensus within China's industrial sector is that core technologies must be independently controllable. PC and mobile operating systems are well-known. However, many have yet to realize that with the rapid advancement of intelligence, automobiles have become terminals on par with PCs and mobile phones.

However, developing an automotive operating system is far from simple.

This is because the automotive industry has evolved from a mechanical to an electrical and then to a digital age. For over a century, automobiles did not require an operating system. It was only when electronic components became prevalent that Bosch, a century-old company rooted in the mechanical era, coined the phrase 'software-defined vehicle,' necessitating an operating system within this ecosystem.

'Even today, almost none of the software code (in the car) is written by us.' This remark by Herbert Diess, CEO of Volkswagen Group, in June 2020, serves as both an epigraph of an era and an industrial dilemma.

Creating a robust automotive operating system necessitates exceptional cross-disciplinary integration capabilities, requiring deep understanding of both automobiles and software.

Several options exist for automotive operating systems, including the established QNX, the subsequent AutoSAR (more accurately, a global collaborative development organization), and Linux and Android, which aspire to make their mark. However, these operate in silos, making it challenging for automakers to integrate across systems and form a cohesive whole at the system level, rendering them less than ideal. Traditionally, the automotive supply chain followed a 'pyramid structure' from Tier 1 (first-tier suppliers) to Tier 3 (third-tier suppliers), with automakers at the top. Tier 1 suppliers directly supplied automakers, and Tier 2 suppliers supplied Tier 1 suppliers.

This has now transformed into a web of cross-collaboration. Firstly, to increase autonomy, and secondly, to enhance development efficiency, automakers bypass Tier 1 suppliers and engage in joint development directly with chip and software suppliers. Over a century of a stable pyramid power structure has been disrupted, leading to a fragmented automotive supply chain ecosystem reminiscent of 'heroes arising from chaos.'

This is a pain point shared by all automotive brands, with NIO feeling it keenly due to its high-end positioning and top-quality hardware, such as the 2022 ET7, which remains the computational benchmark in the automotive industry.

Returning to Qin Lihong's earlier metaphor, NIO's 'orchestra' engages the best pianist and violinist. Therefore, to hold the entire ensemble together and showcase their best performance, the conductor must also be the best.

At this year's NIO IN Innovation Day, Li Bin announced two significant developments. Firstly, the self-developed intelligent driving chip 'Shenji NX9031,' announced last year, has successfully taped out. Demonstrations of its ISP capabilities were conducted on-site against competitors. Secondly, the release of SkyOS, China's first vehicle-wide operating system.

NIO now possesses both 'chips and souls,' marking a milestone in China's automotive manufacturing history.

03 Foundation for a 100-story building

In the development of intelligent electric vehicles, chips and software serve as the foundation, much like how Apple evolved with its electronics. At a certain stage, Apple began manufacturing its own chips, understanding better than Qualcomm how to balance energy consumption and performance in product definition and functionality. When Huawei established itself in the high-end market, it also aimed to adopt its own Kirin chips, but US sanctions halted those plans. Later, Huawei ventured into automotives, bringing its deep technological expertise, notably advancing the entire industry in intelligent driving. Tesla, as a pioneer in electric vehicles, needs no introduction for its contributions.

In intelligent driving solutions, while others rely on LiDAR, Tesla innovatively forgoes it, opting for pure vision, which is increasingly recognized within the industry and has sparked interest in 'end-to-end' solutions. Elon Musk stated that neither Mobileye nor NVIDIA could better meet Tesla's chip requirements, leading Tesla to insist on self-developed chips. NIO has also achieved this dual capability. In a small exchange after the launch, Li Bin said that building a five-story building versus a 100-story one requires a different foundation, which is often invisible. Li Bin shared that NIO now boasts the world's best microkernel team, handpicked by him and Qin Lihong from Silicon Valley to Cambridge, seeking top talent in underlying technologies. They discovered that these individuals pay meticulous attention to details, often concerning themselves with several decimal places.

I've written several articles analyzing why ChatGPT emerged. The key figure, Ilya Sutskever, co-founder and chief scientist of OpenAI, is someone who cares about those decimal places. In my view, more significant than any individual is the soil beneath them. Companies in Silicon Valley and Cambridge genuinely embrace long-termism, offering numerous positions focused on underlying technologies and fundamental research. Top talents like Sutskever are often idealistic, obsessive about their beliefs, and uncompromising. They frequently jump between companies, waiting for the right time and circumstances to explode onto the scene and revolutionize industries.

I often say that instead of searching for China's Sutskever, we should cultivate such a soil in China. Simply put, more companies focused on long-term underlying technologies are needed, offering more positions and environments less influenced by short-term sales fluctuations. Starting with these most tangible and fundamental improvements. NIO's focus on automotive core competitiveness and investment in the industry's weakest links aligns with China's advocacy of new-quality productivity. Some argue that there are no super apps after ChatGPT, but I believe the biggest super apps are right at our fingertips—mobile phones and automobiles. AI is revolutionizing safety and convenience. Facing this historic opportunity, being trapped in low-quality competition ensures long-term failure. If we must compete, let it be at the foundational level, building a deep and solid foundation. This is both the way out for the industry and the direction of the times. Collaborating to tackle the industry's toughest challenges is when stars truly shine in the intelligent electric era.