Jointly Exploring the Future

Collaborations among car companies are becoming increasingly prevalent.

In early November, GAC Motor Parts, Changan Automobile, China Changan, and Chenzhi Technology officially signed a strategic investment agreement. Under the terms of the agreement, GAC Motor Parts and Changan Automobile will collaborate with Chenzhi Technology to jointly develop smart drive-by-wire chassis system solutions.

Regarding this deepened collaboration, GAC Motor Chairman Zeng Qinghong remarked: "As the global automotive industry undergoes a significant transformation, the partnership between GAC and Changan is not only a responsive move to industry trends but also an effective way to share resources and complement each other's strengths."

Previously, BMW and Mercedes-Benz jointly established a joint venture to operate supercharging networks in the Chinese market; NIO has signed battery swap agreements with multiple car companies, including Changan, Geely, JAC, Chery, Lotus, GAC Group, and FAW Group; Changan Automobile's subsidiary Avitar invested in Huawei's subsidiary "Yinwang," and both parties will focus on the development of intelligent driving and other technologies. Following Volkswagen's investment in XPeng, the latter has completed three phases of collaboration with Volkswagen, including the development of mid-to-high-end vehicles and investment cooperation. Following Chinese brands, joint venture brands such as FAW-Audi, Dongfeng Nissan, and GAC Honda have also announced collaborations with Huawei in areas of smart cockpits and intelligent driving. Changan Automobile has deepened its collaboration with Tailan New Energy, a leading domestic solid-state battery company, to jointly promote the industrialization of solid-state batteries...

As Dieter Zetsche, the former Chairman of the Board of Mercedes-Benz, once said, "The cost of the electrification transformation is enormous, and it is difficult for car companies to handle it alone. We must unite."

At the 2024 Auto Innovation Conference held on November 16, multiple experts also stated that the global automotive market is undergoing a stage of multi-technology route transformation and multi-industry integration. Technological innovation, open collaboration, and cross-border integration are the only paths for industrial development.

Accelerated Collaboration Pace

After more than a decade of rapid development, China's new energy automotive industry has moved from the first half of electrification to the second half, where intelligence determines victory or defeat. The competition in the intelligence field is more complex, so compared to the first half, the collaborations between companies have significantly accelerated.

Changan and GAC have successively invested in drive-by-wire technology companies based on their judgments about intelligent development trends. Changan Automobile stated, "Investing in Chenzhi Technology is investing in the core components of smart cars."

Publicly available information shows that Chenzhi Technology was founded in 2022 as a wholly-owned subsidiary of China Changan Automobile Group Co., Ltd. It is dedicated to achieving breakthroughs in key core technologies such as steer-by-wire, brake-by-wire, and suspension-by-wire, focusing on providing solutions for smart drive-by-wire chassis systems for global OEMs.

Image source: Changan Automobile

Not only traditional automotive groups like GAC and Changan but also new car companies with intelligence as their core competitiveness are strengthening drive-by-wire technology. On November 14, Lei Jun, the founder of Xiaomi, officially unveiled Xiaomi's pre-research technology for smart car chassis. XPeng Motors also released the AI Tianji XOS 5.4.0 intelligent system at the "AI Technology Day" on November 6, which includes four parts: AI intelligent driving, AI cockpit, AI chassis, and AI interconnection. On August 28, NIO officially released the new version of its intelligent system, Banyan Banyan 3.0.0, covering five major areas: NOMI, panoramic digital space, AI intelligent chassis, NIO Link panoramic interconnection, and enhanced driving experience.

In the intelligence race, the smart chassis is the next competitive frontier in the industry after intelligent driving and intelligent cockpits. Changan Automobile stated that the investment in Chenzhi Technology by GAC Motor Parts and Changan Automobile is not only a complementarity of technologies and resources but also a new practice in deepening central-local cooperation, further demonstrating the strategic layout of the two OEM groups in building future capabilities through collaboration between OEMs and parts suppliers.

In addition, Changan Automobile has also reached a strategic collaboration with a solid-state battery company through investment. On August 26, Tailan New Energy successfully completed a Series B strategic financing round of hundreds of millions of Chinese yuan. This round of investment was jointly completed by multiple funds from Anhe Fund, a subsidiary of Changan Automobile, and the China South Industries Group Corporation. More than two months later, Tailan New Energy and Changan Automobile jointly announced a solid-state lithium battery technology without a separator. This innovation marks the first successful removal of a battery separator in the industry, which not only significantly improves the intrinsic safety of the battery cell but also overturns the traditional safety strategy that relies on multiple layers of protection, achieving multiple key technological breakthroughs in the field of all-solid-state lithium batteries.

Due to its advantages in energy density, safety, and operating temperature, the solid-state battery is considered the ultimate form of lithium batteries. This year, car companies and battery manufacturers such as Chery, SAIC, Toyota, Nissan, BYD, Geely, FAW, NIO, Dongfeng, BMW, Porsche, EVE Energy, Weilan New Energy, Samsung, and Great Power have successively announced their progress and plans in solid-state batteries. As the winning point for the next-generation battery technology, every company is trying to seize the initiative to gain a competitive advantage. Faced with a huge market and competitive landscape, collaboration will also become the choice of more companies.

The collaboration between XPeng Motors and Volkswagen has become a model for the integration of old and new forces. In July 2023, Volkswagen announced plans to invest $700 million in XPeng Motors and jointly develop pure electric vehicle models based on their respective core competencies. Within a year thereafter, Volkswagen and XPeng signed three agreements in succession to jointly develop electronic and electrical architecture technology and strengthen their strategic partnership. This collaboration allows XPeng to achieve profitability through technology monetization, while Volkswagen leverages XPeng to solve software issues and advance its electrification transformation. In XPeng's latest research report, the feedback on technology monetization has been received.

In the third quarter, XPeng Motors reported sales revenue of 8.8 billion Chinese yuan, an increase of 12.1% year-on-year; service and other revenue amounted to 1.31 billion Chinese yuan, an increase of 90.7% year-on-year. The growth in service and other revenue is due to the increase in income from technology research and development services related to strategic collaborations on platforms, software, and electronic and electrical architecture technology with Volkswagen. In fact, starting from the first quarter of this year, income from "platform and software technology services" has become an important source of financial revenue for XPeng Motors. Amid declining profitability in the entire vehicle segment and most new force brands still incurring losses, the importance of this change is self-evident. The pace of collaboration is accelerating, whether it is between JAC and Huawei, Volkswagen and local enterprises, or even between car companies and the industrial chain. At the recently concluded Guangzhou Auto Show, multiple brands including Toyota, FAW-Audi, Dongfeng Nissan, and GAC Honda announced collaborations with Huawei.

In the view of industry insiders, the intelligent new energy vehicle industry chain covers multiple fields such as software, hardware, communications, system integration, and artificial intelligence, and the industrial boundary is facing reconstruction. In the future, cars will develop into green and intelligent mobile living spaces, and open collaboration and cross-border integration are the only paths for the development of automotive enterprises.

Policy Boosts Industry Expansion

In addition to increased collaboration among enterprises, the state is also helping the industry "break the ice." At the sub-forum on "The Future of Global New Energy Vehicles" at the 7th Hongqiao International Economic Forum held on November 6, Xiong Jijun, Vice Minister of Industry and Information Technology, stated that the Ministry of Industry and Information Technology will further optimize the development environment, encourage mergers and acquisitions among high-quality new energy vehicle companies, help them grow stronger, and promote industrial concentration. This is not the first time the Ministry of Industry and Information Technology has encouraged mergers and acquisitions among car companies. As domestic competition in the new energy vehicle market intensifies, "mergers and acquisitions to grow stronger" have become an urgent priority for further development of enterprises and the market. The Ministry of Industry and Information Technology has also publicly encouraged this multiple times. Although mergers and acquisitions in the automotive industry mean a reduction in the number of enterprises, they also bring opportunities. On the one hand, they can effectively promote enterprises to expand their scale and reduce costs. On the other hand, "grouping together" to advance the intelligence process more efficiently can also promote the export of automobiles on a larger scale. Cui Dongshu, Secretary-General of the Passenger Car Market Information Joint Conference, believes, "The state's encouragement of mergers and acquisitions is of great significance to the development of the automotive industry. Concentrating efforts to accomplish great things can enable the Chinese automotive industry to develop faster."

Image source: Volkswagen

At the same time, six departments including the Ministry of Commerce recently issued the "Administrative Measures for Strategic Investment by Foreign Investors in Listed Companies." The new regulations lower the threshold for strategic investment and broaden investment channels, which will help attract more high-quality foreign investment in listed companies and promote the healthy and stable development of China's related industries and capital markets.

In recent years, as Chinese brands have continued to break through, China has lifted all foreign shareholding restrictions in the automotive sector: dedicated vehicles and new energy vehicles in 2018, commercial vehicles in 2020, and passenger vehicles in 2022, while also lifting the restriction on no more than two joint ventures. Nowadays, restrictions on foreign shareholding in the automotive industry have been almost fully lifted. Based on this, car companies such as Tesla, Volkswagen, and BMW have intensified their layout and investment in China for electric vehicle production. BMW and Mercedes-Benz jointly established a joint venture to operate supercharging networks in the Chinese market; Volkswagen Group established its largest research and development center outside of Germany, focusing on the development of intelligent and connected vehicles; Tesla's Shanghai Gigafactory has become Tesla's main export center globally, accounting for more than half of its global production capacity in 2023...

From 2021 to 2023, China's new energy automotive industry successively broke through key technologies such as batteries, motors, and electronic controls, gradually establishing a complete industrial system connecting upstream and downstream. In the second half of the intelligence race, in the first ten months of this year, represented by Robotaxi and advanced intelligent driving, iterations and innovations in automotive intelligence technology have continued to emerge, providing new momentum for the development of new energy vehicles. As the electrification transformation continues to deepen and market competition intensifies, car companies have occasionally shut down or merged. The collaborations between car companies, in addition to their strategic layout for efficiency enhancement and cost reduction, can also jointly resist risks during the transformation period, promoting the healthy development of the automotive industry to a certain extent.

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