Source | BohuFN

As new forces continue to penetrate the heartland of BBA, the latter's market share is being eroded. As everyone struggles to find a way to transform, Audi unexpectedly threw out an olive branch, announcing that its new model A5L will be equipped with Huawei's intelligent driving system, officially joining Huawei's "circle of friends" in intelligent driving.

In fact, even though BBA has resorted to price cuts, collaboration, and accelerated electrification in the past two years, it has still struggled to reverse its declining trend. In the first half of this year, BBA's global deliveries declined to varying degrees, with a more significant decline in the Chinese market. Notably, both Mercedes-Benz and Audi saw their net profits in the first half of the year decline by over 40% year-on-year.

Faced with this dilemma, Audi chose to entrust its "soul" to Huawei. Moreover, Audi took an unconventional path, with its first model equipped with Huawei's intelligent driving technology being a fuel vehicle, not an electric vehicle.

As the first to take this leap, Audi's collaboration with Huawei on "fuel vehicles + intelligent driving" may bring new inspiration to the global automotive industry's development and is expected to rewrite the landscape of the domestic luxury car market.

01 The First Taste of "Fuel + Intelligent Driving"

Audi and Huawei have had intentions to collaborate for many years. In 2018, both parties announced their cooperation in the field of intelligent connected vehicles. Although they have not disclosed further details of their collaboration, they have maintained communication, such as when the head of Audi China R&D, Hoffmann, publicly stated in 2021 that "Huawei could be Audi's autonomous driving partner."

In April this year, news about Audi building Huawei's entire intelligent driving assistance system continued to escalate, and the industry began to speculate about the mode of collaboration between the two parties. However, there are still many challenges to overcome.

Firstly, the technical logic of the two is completely different. While intelligent driving systems are already mature, that is because electric vehicles have a core architecture that naturally suits intelligent driving systems with only "three electrics"; however, the mechanical structure of fuel vehicles is much more complex. For intelligent driving systems to control the entire system, including the transmission, drive system, and engine, disruptive adaptability modifications are required.

Secondly, the battery remains a core issue. Traditional fuel vehicle cabins generally only have a small screen, unlike new energy vehicles, which are equipped with large screens in both the front and rear rows, and can even include fridges and hot pots.

Because fuel vehicle batteries are small, their primary task is to provide starting energy for the vehicle, with maintaining the operation of electrical equipment in the cabin being secondary. In such a scenario, how to "charge" the intelligent driving system in a fuel vehicle has become a headache.

Of course, solutions do exist, such as the hybrid plug-in technology promoted by Toyota and Honda. However, whether Audi will simply replicate previous technical solutions remains to be seen.

Judging from official disclosures, Audi has prepared a significant move to introduce Huawei's intelligent driving system.

Firstly, Audi directly gave its latest PPC fuel vehicle platform to the A5L series for its debut. This platform upgrades the vehicle's functional network at the bottom layer, enabling fuel vehicles to exhibit more intelligent performance.

Secondly, the collaboration between Audi and Huawei is not limited to the Audi A5L model. According to Audi's plans, more Audi models will be equipped with Huawei's intelligent driving system in the future, including its first locally produced electric model, the Audi Q6L e-tron, which will utilize the PPE luxury pure electric platform jointly developed by Audi and Porsche and will also be equipped with Huawei's intelligent driving system.

Of course, Huawei is also full of sincerity. It is reported that the Audi A5L will be equipped with Huawei's latest Kunlun Intelligent Driving ADS3.0 system, which is Huawei's first intelligent driving system on a pure fuel vehicle and is expected to set a good example.

As early as June this year, SAIC Volkswagen's new-generation Tiguan L PRO proclaimed its intention to break the perception that "fuel vehicles cannot be intelligent" and claimed to have Volkswagen's most intelligent cockpit and intelligent driving system to date.

According to some evaluations, compared to new energy vehicles, the intelligent driving system of the Tiguan L Pro is mediocre, but it is a breakthrough within the fuel vehicle community. Therefore, when the baton of "fuel intelligent driving" was passed to Huawei, the outside world naturally had higher expectations for the Audi A5L.

02 Audi Sells Its "Soul" to Huawei

It is reported that the Audi A5L will be produced by both FAW-Volkswagen and SAIC-Volkswagen. Among them, FAW-Volkswagen's A5L has confirmed Huawei's Kunlun ADS as its intelligent driving system, but the intelligent driving system supplier for SAIC-Volkswagen's A5L remains to be determined, as SAIC also has its intelligent driving system besides Huawei.

In October this year, SAIC's IM Motors announced that the IM AD intelligent driving model, developed jointly by IM Motors and Momenta, has pioneered the generational evolution from "most human-like" to "intuitive." IM Motors has become the first brand in the industry with mass production capabilities for L2, L3, and L4 levels of intelligent driving.

This inevitably brings to mind the "soul theory" of Chen Hong, Chairman of SAIC Motor Corporation Limited, who once stated, "The soul must be kept in our own hands, so (SAIC) does not accept any supplier's overall solution, at most, it is a collaboration."

Four years have passed, but the controversy over the "soul theory" seems to persist, even for SAIC itself, which is struggling with its intelligent driving system.

After the "soul theory," SAIC launched two independent brands, Feifan and IM, with Feifan being more affordable and IM being more premium. However, earlier this year, rumors spread that Feifan's intelligent driving business development team had been disbanded, with nearly 300 employees laid off. Subsequently, Feifan Automobile responded that everything was "fine" and that it would further deepen its "asset-light" strategy.

Although the above information is only a rumor, from the perspective of deepening its asset-light strategy, even though SAIC values its "soul," it must also consider cost reduction and efficiency enhancement amidst fierce competition in the new energy vehicle market.

While promoting the "asset-light" strategy for its self-developed intelligent driving team, SAIC has also increased its investment in Momenta. This reveals its strategy in intelligent driving, which, although not to the extent of "selling its soul," inevitably involves "sharing its soul" with others.

Of course, it is normal for automakers to adjust their strategies at different stages of market development. However, it also highlights the difficulties faced by traditional automakers in self-developing intelligent driving systems.

Firstly, traditional automakers are at a disadvantage in the starting time. Compared to new force automakers and internet giants like Huawei and Baidu, they started later. Even if they can catch up technologically, they may still lag behind in data collection and application.

Currently, among the top five smartphone manufacturers, all are Chinese brands except Apple, which is an American brand. This indicates that European and Japanese automotive brands lack software development capabilities. For example, Volkswagen's software department, Cariad, has been in a state of loss since its inception, with losses reaching 2.1 billion euros from January to September this year.

Secondly, transitioning to intelligence requires more than just courage and capital. Previously, He Xiaopeng, Chairman of XPeng Motors, revealed that XPeng Motors' intelligent driving R&D team has over 3,500 members, with an annual investment of up to 3.5 billion yuan.

However, for traditional automakers, they must consider both traditional fuel vehicles and new energy vehicles. How to allocate internal resources, whether the mindset of vehicle manufacturing can be transformed, and whether to fully invest in self-developed intelligent driving systems will all face greater challenges.

For various reasons, traditional automakers' intelligent driving systems tend to adopt the "self-developed + supply" approach. For example, GAC and SAIC have chosen to collaborate with Momenta, the most well-known company in the industry; Great Wall Motors has reached collaborations with Haomo.ai and Yuanrong Qixing.

In this context, rather than saying that automakers choosing intelligent driving suppliers is "selling their souls," it is more accurate to say that it is a mutually beneficial arrangement that allows traditional automakers to catch up with new force brands.

Obviously, Audi is aware of this and has even considered more. Currently, 90% of its users are fuel vehicle owners. While promoting the transition to electrification, attempting to meet the advanced intelligent driving needs of traditional fuel vehicle owners is a lower-cost strategy for trial and error.

For Huawei, the current domestic market for fuel and new energy vehicles is roughly evenly split, and the growth of new energy vehicles has reached a bottleneck, making it impossible for them to completely replace fuel vehicles in the short term. Therefore, Huawei also needs to explore intelligent driving systems for more vehicle models to further expand its "intelligent driving circle of friends."

03 Foreign Automakers Abandon "Arrogance"

In recent years, it has been an undeniable fact that joint-venture automotive brands have gradually weakened, which has also changed the attitude of overseas automotive brands from hesitant "learning" to open "collaboration."

According to statistics from the China Passenger Car Association, from January to September this year, the market share of mainstream joint-venture brands was only 41%. Among them, the retail share of German brands was 18%, a year-on-year decrease of 2.5 percentage points; the retail share of Japanese brands was 14%, a year-on-year decrease of 3.1 percentage points; and the retail share of American brands reached 6%, a year-on-year decrease of 2 percentage points.

At the same time, from January to September, the cumulative retail sales of narrow-sense passenger vehicles nationwide were 15.574 million units, an increase of 2.2% year-on-year, with autonomous brands growing at a rate of 19% year-on-year. Chairman Wang Chuanfu of BYD even stated in an interview that in the next 3-5 years, the share of joint-venture brands will drop from 40% to 10%, with 30% being the growth space for Chinese brands in the future.

With a sales crisis looming, overseas automotive brands have had to abandon their past "arrogance." Price cuts were the first step, but collective price cuts by BBA since last year have seemingly failed to stem their sales decline.

Since they cannot compete, they must join. Since last year, Volkswagen has invested 700 million US dollars in XPeng Motors, and both parties have jointly promoted the development of pure electric vehicle models; before collaborating with Huawei, Audi has collaborated with SAIC to jointly develop an "intelligent digital platform"; and behind Toyota's first electric vehicle in China equipped with a fully autonomous driving system, the bZ3X, are the contributions of three Chinese enterprises: GAC, Momenta, and Huawei.

In addition, overseas automakers are also accelerating their collaboration. According to foreign media reports, Toyota, Honda, and Nissan have reached an agreement to strengthen their collaboration in automotive software development and consider deeper collaboration in the field of autonomous driving.

As Audi China President Roland Krüger stated, faced with the acceleration of the electrification and intelligent transformation of automobiles and intensified market competition, Audi needs to continuously introduce new products and technologies to meet market demand. The collaboration with Huawei is an important step for Audi in its intelligent transformation and one of the key initiatives for Audi to maintain its competitiveness in the Chinese market.

In the long run, the acceleration of overseas automotive brands' collaboration with domestic automakers is also a process of realizing resource complementarity. Currently, issues such as the slowing growth rate of the Chinese new energy vehicle market and the imposition of tariffs on Chinese electric vehicles by overseas countries cannot be ignored.

Therefore, in addition to choosing to export complete vehicles, domestic new energy automakers should also explore more paths to enter overseas markets, including collaborative research on intelligent driving solutions between China and foreign countries and "going overseas" through intelligent driving solutions and software systems.

Moreover, just like Audi's collaboration with Huawei, which is not only a new attempt at "fuel intelligent driving" but also an initiative that can break down barriers among different entities in the entire automotive industry and jointly prosper the intelligent automobile ecosystem.

Although the new energy vehicle market is growing rapidly, in the long run, the demand for fuel and electric vehicles will reach an equilibrium stage, and the competition between traditional automakers (including overseas automotive brands) and new energy automakers is far from reaching its climax.

Against this background, compared to the cautious "fine-tuning" of traditional automakers, Audi's unconventional approach to finding partners and creating new products is expected to break the traditional automakers' past transformation limitations and find a "new glory" for traditional automakers in this sales-driven market environment.

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