The century-old automotive industry, defined by "software"?

Suddenly, when people talk about a new car, they rarely discuss the engine.

On the eve of the 2024 Guangzhou International Auto Show, a Dongfeng Lantu Zhiyin rolled off the production line in Wuhan, marking the achievement of 10 million new energy vehicles in China in 2024. This is also the first time that China's new energy vehicles have reached this milestone within a single year. In the just-concluded October, the penetration rate of Chinese brand new energy vehicles has climbed to 74.6%. These figures indicate that the vast majority of new cars sold today are new energy vehicles.

"This is a milestone event, indicating that the transformation of the automotive industry has already occurred in China," Lu Fang, CEO of Lantu Auto, told China News Weekly at the Guangzhou Auto Show. He added that the electrification of Chinese cars has been initially completed, and intelligence will also be rapidly popularized. Lu Fang predicts that sales of new energy vehicles in China are expected to exceed 12 million this year.

Image source: Dongfeng Motor Corporation

At the 2024 Guangzhou International Auto Show, which opened on November 15, electric vehicles were ubiquitous across all exhibition stands. Mercedes-Benz even brought an electric G-Class, a Dream Car for countless people, now powered by electricity. "Intelligence is not exclusive to electric cars; Mercedes-Benz's gasoline cars are also intelligent," said Zhang Yan, Senior Executive Vice President of Beijing Mercedes-Benz Sales Service Co., Ltd.

GAC Honda unveiled its new electric vehicle system at the 2024 Guangzhou International Auto Show, introducing the new pure electric brand "Ye P" and unveiling the mass-produced version of Ye P7, which is based on the new-generation intelligent and efficient pure electric exclusive platform, Architecture W (hereinafter referred to as the "W Architecture"). It is reported that the W Architecture is the most top-level pure electric architecture in terms of handling stability globally for Honda to date. It aims not only to satisfy users' "visible technological enjoyment" but also to provide an "invisible driving soul," realizing the Ye P brand's slogan of "Controlled by Me."

Tremendous changes in the industry have swept through the sector like a tsunami, reshaping it. If the traditional automotive industry was about engines, and the electrification process was about batteries, then in today's era of electrification and intelligence progressing in parallel, the automotive industry has arrived at a point where technology is at the forefront.

New forces in car manufacturing, the internet, and technology companies crossing over into car manufacturing were once referred to as "barbarians" invading the automotive industry, but now, intelligence is completely rewriting the industry's original competitive landscape.

"It has to be acknowledged that new forces in car manufacturing have a keener market sense. There was previously a disconnect between traditional automakers and users, and the historical burden was relatively heavy, leading to a relatively late transformation," Lu Fang candidly admitted.

Deep integration of technology and automobiles

Technology and automobiles were once two distinct industries, but now, they are deeply integrated. The wave of technology companies crossing over into car manufacturing is still gaining momentum, and automotive companies have now begun to collectively showcase their technological prowess.

On November 12, Baidu World 2024, a technology industry event, was held in Shanghai. Although the theme of Baidu World 2024 was "applications," within the exhibition area, Jiyue, Luobo Kuaipao, and the new XT5 and GL8 Luzun PHEV models equipped with Apollo occupied prominent positions, attracting the attention of numerous visitors.

Exhibited vehicles at the AI Application Town at Baidu World 2024 (Photo/Liu Shanshan)

In his speech, Li Yanhong, founder, chairman, and CEO of Baidu, mentioned that Silicon Valley investor Marc Andreessen had once stated that "Software is eating the world," but this world should not be consumed but created. Li Yanhong said, "In the era of AI, applications create the world."

Elon Musk made an astonishing prediction about the speed of AI development: He believes that AI's capabilities will improve tenfold every year, and by 2029, AI may possess computational capabilities equivalent to 8 billion humans.

The AI-equipped Xiaopeng P7+ was launched on November 7 and received 10,000 firm orders within just 12 minutes of its debut, making it a true "hit" new car under Xiaopeng Motors. "The speed of firm orders for the Xiaopeng P7+ has broken Xiaopeng's record for the fastest in its history," said He Xiaopeng, Chairman and CEO of Xiaopeng Motors. The most significant highlight of the P7+ is that it comes standard with mapless visual intelligent driving.

On the same evening as Baidu World 2024, BYD and Huawei jointly launched the new model of the Fangbiao brand, the super chaotic intelligent hardcore SUV Bao 8, in Shenzhen. The most notable feature of the new car is that it is equipped with Huawei's leading high-end intelligent driving solution, Huawei Qiankun Intelligent Driving ADS 3.0.

Intelligence is no longer exclusive to technology and new energy vehicle companies. Also, on November 12, Hongqi held a new energy night event, unveiling the Tiangong pure electric platform and the Jiuzhang intelligent platform, kicking off intense internal competition in the fields of intelligent driving and intelligence. The first medium to large SUV, Tiangong 08, based on these two platforms, began pre-sales at the Guangzhou Auto Show and is expected to officially launch in mid-December.

Hongqi Intelligent Driving (Photo/Liu Shanshan)

At the conference, Hongqi showcased a video of a vehicle easily navigating through a bustling downtown area using its intelligent driving system. The message Hongqi conveyed to the outside world was that in the era of intelligent driving, it is still domestic cars that understand domestic road conditions and Chinese driving habits the best.

As a representative of traditional automakers in the past, Audi's first new car in collaboration with SAIC Motor, an electric vehicle designed for the Chinese market, was also officially unveiled recently. Based on the Advanced Digitized Platform, Audi will create a new generation of high-end intelligent connected vehicles. In the collaboration between Audi and SAIC Motor, the German team is primarily responsible for design, engineering, and vehicle development, including interior and exterior styling, while the local engineering team in Shanghai is responsible for human-computer interaction and intelligence.

Other mainstream joint venture brands are also continuing their efforts. The first model of the "Ye P" brand, Ye P7, made its debut at the Guangzhou Auto Show, boasting the pouring in of Honda's most advanced global resources and technology to provide users with the three most needed values: functional value, emotional value, and asset value. Leveraging the comprehensive innovation of intelligence, safety, care, and quality capabilities of the W Architecture, it will directly address the pain points of eight major pure electric vehicle usage scenarios.

Lu Fang stated, "Regarding the electrification of automobiles in China, I believe that technological development has been largely completed. Of course, there may still be iterations in batteries, including possible iterations in voltage platforms, but on the whole, the electrification of automobiles has been initially completed. However, in terms of intelligence, we hope to further drive the development of a series of related industries in China, including intelligent cabins, intelligent driving, software, and chips, through the strong supply chain support requirements of the automotive industry. The automotive industry is a highly driving force in the economy, and with the popularization of automotive intelligence, it will certainly drive the upgrading of many related industries."

Why is the industry undergoing such tremendous changes?

The transformation of the automotive industry has come too fast, and behind it are the pressures and crises brought about by market changes.

Judging from the recently released financial data of automakers, traditional fuel vehicle enterprises are generally under significant pressure from declining sales.

SAIC Motor's net profit for the third quarter was 280 million yuan, a year-on-year decrease of 93.53%; GAC Group's net loss for the third quarter was 1.396 billion yuan, recording the company's largest single-quarter loss since its listing in 2010; Great Wall Motors' net profit for the third quarter was 3.35 billion yuan, a year-on-year decline of 7.82%; and Changan Automobile's net profit for the third quarter was 748 million yuan, a significant year-on-year decrease of 66.44%.

It's not just Chinese automotive groups that are "bleeding" financially; foreign brands are also affected. Data shows that net profits have plummeted for Audi, BMW, Volkswagen, General Motors, and others. Among them, BMW Group's third-quarter financial report revealed a 79.8% year-on-year decline in earnings before interest and taxes for its automotive business segment; Audi's operating profit plummeted by 91% in the third quarter; and General Motors recorded a net loss of US$137 million in China for the third quarter.

Therefore, for participants in the automotive industry, regardless of how dazzling their past achievements may have been, transformation is imperative if they want to win in the present and future. And this transformation encompasses not only electrification but also accelerated layout in the field of intelligence. This is also blurring the boundaries between technology and automobiles.

"As the penetration rate of new energy vehicles in China rapidly increases, so does the installation and penetration rate of intelligent driving technology," Cao Bin, General Manager of Software Architecture Engineering at Chongqing Changan Technology Co., Ltd., said at the 2024 China Automotive Software Conference. "For the century-old automotive industry, such drastic changes occurring in such a massive market are extremely rare, indicating that new automotive forms are accelerating their birth and emergence in the Chinese market."

Cao Bin stated, "After entering the era of intelligent manufacturing, computing power, algorithms, and data have become brand-new production factors, a unique state in industrial history. With the increase in data and the optimization of algorithms, our demand for computing power continues to grow; and the enhancement of computing power further promotes the generation of data, thereby facilitating the intelligent improvement of algorithms. The three will mutually promote each other and continuously iterate and evolve."

"Rather than going with the flow in an era of change or lamenting the difficulties of 'competition,' it is better to see the direction of the future and firmly push forward the emergence of new species and new automobiles according to the direction we envision. We should not only equip our automobiles with software technology and AI technology for intelligence but also explore traditional components such as powertrains, chassis, and even vehicle control systems," Cao Bin said. "Components we are accustomed to may undergo profound changes in the future, becoming software-based and AI-based, all centrally controlled in a central computing brain and continuously evolving. This is also our vision. Meanwhile, future transportation tools will not only be means of mobility but will possess comprehensive attributes ranging from travel products and services to ecological services, not only solving travel issues but also profoundly changing the state of our work and life."

Opportunities and challenges coexist

According to the "Intelligent and Connected Vehicle Technology Roadmap 2.0," the domestic penetration rate of intelligent and connected vehicles at L2-L3 levels will exceed 50% by 2025 and over 70% by 2030. In 2020, the penetration rate of L2-level models in China was only 15%. Over the next 5-10 years, China's automotive intelligence industry is expected to maintain a growth rate of over 30%. The focus of future changes in the automotive industry will undoubtedly revolve around intelligence.

With the rapid development of automotive intelligence and connectivity, the automobile has evolved from a mere means of transportation into a complex mobile intelligent terminal.

In this process, the amount of data collected and generated by automobiles has increased dramatically, encompassing personal information of passengers, vehicle operation data, environmental perception data, and more. The security and privacy protection of these data are not only related to individuals' privacy rights but may also affect road traffic safety, national security, and other aspects. Therefore, strengthening automotive data security and privacy protection is particularly important.

"The current development of the automotive industry has entered a new era of integrated software and hardware development. It is recommended that enterprises play a leading role in independent innovation, strengthen independent software research and development, and achieve security and controllability," Fu Bingfeng, Executive Vice President and Secretary-General of the China Association of Automobile Manufacturers, said at the 2024 China Automotive Software Conference. He also stated that it is necessary for vehicle manufacturers, component manufacturers, and software ecosystem enterprises to unite and accelerate the construction of a standard system. Fu Bingfeng further expressed the hope that the automotive software industry will form an open-source culture, join hands to build an open, open-source, shared, and collaborative automotive basic software ecosystem, and promote the long-term development of the industry.

He Jifeng, academician of the Chinese Academy of Sciences, believes that in the current era of rapid AI development, AI technology still has some limitations and challenges. For example, in terms of data acquisition and processing capabilities, there are still bottlenecks in obtaining and processing the large amounts of data required for AI technology, especially high-quality labeled data. In terms of adaptability to complex scenarios, road-vehicle-cloud AI technology needs to adapt to various complex traffic scenarios and weather changes, such as urban roads, highways, rainy, snowy, and foggy days, which places higher demands on the adaptability of AI technology. In terms of laws, regulations, and ethical issues, the application of AI technology still faces issues such as privacy protection, data security, and responsibility attribution for autonomous driving, which urgently need to be properly resolved. He Jifeng suggested that the next step should focus on advancing technical work in three areas: deep learning, federated learning, and explainable AI.

Compared to traditional hardware updates, software updates are more flexible and rapid. Through over-the-air (OTA) software updates, automakers can quickly fix vulnerabilities, add new features, or improve existing functions, thereby extending the service life of automobiles and maintaining their competitiveness.

However, Lv Gang, Chief Engineer of the Intelligent Connected Research Institute at Changchun Automobile Testing Center Co., Ltd., also stated at the 2024 China Automotive Software Conference, "Now, due to the existence of OTA technology, some companies directly push immature products to the market. Some customers have complained that the functions advertised by automakers are not present upon receipt, and companies explain that OTA will be available in six months. This is pushing an immature product to the market. They even begin sales without completing verification of some essential functions. Such half-finished products pose safety issues, and in fact, consumers are conducting public beta testing."

"Continuous software upgrades, matching of software and hardware, and sufficient verification? After software and hardware upgrades, accidents have occurred, and issues of rights and responsibilities have repeatedly arisen," Lv Gang said. "After software upgrades, issues such as cybersecurity in vehicles, inadequate safety assessment and verification, as well as privacy collection and data exfiltration, also require our supervision."

There is no doubt that intelligence is the future of the automotive industry and is replacing the engine as the focus of attention within the industry. However, this only indicates the industry's development direction and is not sufficient to serve as a basis for judging the demise of traditional automakers. In the marathon race of automobile manufacturing, victory or defeat is still far from being determined.