If a single word were to encapsulate the current state of the automotive manufacturing market, "transitional" would be most apt.

From the perpetual reshuffling of players in the automotive landscape to the fierce rivalry between traditional and emerging automakers, these dynamics embody the market's current juncture.

As the automotive market inches closer to this critical point, the next phase will undeniably usher in a new era. To define this phase, one could argue that it marks the dawn of a genuinely transformative epoch in automotive manufacturing.

A pivotal reason for this assertion lies in the fact that prior automotive endeavors primarily focused on transitioning from traditional fossil fuels to electric powertrains.

With the low cost and reduced carbon footprint of new energy sources, automakers have secured a stronghold in the industry. However, the question remains: is merely swapping out energy sources the ultimate goal of automotive manufacturing?

Tesla's performance elucidates that future automotive competition will inevitably shift from energy propulsion to driving methods, particularly autonomous driving.

More specifically, in the forthcoming year of 2025, emerging automakers and pioneers will reconvene in the realm of autonomous driving, engaging in a fierce contest.

This is evident in Lei Jun's lavish investment of $10 billion, which he views as the entry threshold for this game.

In other words, Lei Jun's vision that the automotive race has entered a new cycle should not be underestimated.

I

This assessment is far from alarmist.

In recent years, the surge in popularity of new energy vehicles, particularly those from emerging automakers like Tesla, BYD, NIO, XPeng, and Li Auto, has led many to believe that these newcomers now dominate the industry, relegating traditional automakers to the sidelines. However, defining the current automotive landscape solely through this lens is overly simplistic.

Contrary to the widely held belief that the automotive race is already decided, I prefer to view the impressive performance of current players as a sign of their solid footing.

Observing how major automakers hover on the brink of profitability and how traditional manufacturers are venturing into new energy and autonomous driving, it's clear that the automotive race is far from settled. Even those sidelined newcomers still have a chance to turn the tide.

If this turnaround opportunity were to be defined, autonomous driving, epitomized by driverless technology, would undoubtedly be a significant aspect.

It's almost certain that in 2025, if both emerging and traditional automakers aim to stay competitive and achieve new breakthroughs, they must shift their focus from new energy to AI-driven autonomous driving.

For every automaker, true participation in the autonomous driving arena is the only path to success in this new cycle.

II

In fact, the competition in autonomous driving within the automotive race has already commenced.

Whether it's Elon Musk promoting Tesla's FSD technology, Baidu's driverless taxis operational in various cities, or Huawei integrating autonomous driving technology into its products and those of its partners, autonomous driving is increasingly becoming a new focal point of competition for automakers.

For any player aiming to stay in the new energy game, establishing a firm foothold in electric vehicle manufacturing and deploying autonomous driving to create a gap from previous players is crucial for reaching new heights.

As the automotive race enters a new phase focused on autonomous driving, the capital market's attention will no longer solely center on energy propulsion methods but will increasingly focus on new areas represented by autonomous driving.

As capital concentrates on this shift, we will also witness intensified shuffling in the automotive race, exemplified by the collapse of companies like Geely-Volvo's Polestar.

Recently, Lu Weibing, Xiaomi Group Partner, President of Mobile Phone Division, and General Manager of Xiaomi Brand, shared the backstory of Xiaomi's independent automotive endeavors on Weibo. He revealed that in February 2021, when Xiaomi decided to manufacture cars, there was considerable internal debate about using Xiaomi's own funds or establishing an independent company to raise capital.

After extensive discussions, a consensus emerged: the automotive business, as a vital part of Xiaomi's ecosystem, must remain entirely within the Xiaomi system, hence using Xiaomi's own funds for manufacturing.

At the March launch event, Lei Jun announced an investment of $10 billion (approximately RMB 70 billion) in the automotive business, emphasizing that in the face of the automotive industry's centennial transformation, this is the threshold for entering the game.

Furthermore, Lu Weibing stated that they are acutely aware of cash flow's importance for a company's healthy operations. After announcing their automotive plans in 2021, their cash reserves have surged from RMB 100 billion to RMB 150 billion in just over three years.

Not only is the automotive industry undergoing rapid shuffling, but the smartphone industry remains unsettled. All industries are evolving rapidly, and continuous self-transformation is essential for adaptation.

For automakers to enter the automotive arena, they must either invest $10 billion like Xiaomi, integrating capital within the group, or have already accumulated a significant market share like BYD, NIO, XPeng, and Li Auto. Relying solely on external funding, as Polestar did, renders such a development model unsustainable.

Xiaomi serves as a typical example, but other automotive race players face similar situations.

This indicates that the automotive race has entered a new phase, representing a new direction that is gradually becoming clear.

III

Unlike emerging automakers struggling to enter the automotive industry, traditional automakers are also making two-pronged preparations.

On one hand, they are integrating new energy into their models; on the other, they are deploying in new directions represented by autonomous driving.

For instance, in 2024, Mercedes-Benz became the first international automaker approved for L4 autonomous driving on urban and high-speed roads in Beijing. Compared to L3, the L4 system can autonomously handle most driving tasks without driver intervention, including parking, turning, entering and exiting roundabouts, and unprotected left turns in bustling urban areas.

If we consider traditional automakers' deployment of new energy vehicles as a 'half-step behind,' when the automotive race enters the autonomous driving stage, they are 'early risers.'

Emerging automakers like BYD, NIO, XPeng, and Xiaomi can compete with pioneers due to their layout in new energy propulsion. However, to firmly establish their footing, especially to win in the new cycle, they must also prioritize autonomous driving.

If we view the new energy era as the starting point for competition between traditional and emerging automakers, autonomous driving will be the moment when both forces truly compete on the same stage based on their hard power.

This is also evident from Polestar's aftermath and statements by Wang Yunpeng, Vice President of Baidu Group and President of the Intelligent Driving Group.

According to Wang Yunpeng, Baidu will be responsible for Polestar's autonomous driving and navigation systems. What does this imply? It suggests that to truly revive Polestar and continue its narrative, efforts must focus on autonomous driving, leveraging Baidu's technology to empower Polestar.

Connecting this with Musk's promotions for FSD rollout, it's evident that in 2025, traditional and emerging automakers will reconvene in autonomous driving, engaging in a genuine battle.

Conclusion

In 2025, traditional and emerging automakers will engage in a genuine battle in autonomous driving.

This is apparent from the deepening shuffling in the automotive race and Xiaomi's $10 billion investment, which serves as the entry threshold.

In a sense, $10 billion is both Xiaomi's threshold for entry and the inception of a new automotive battle.

Never underestimate Lei Jun and Xiaomi's vision that the automotive industry has entered a new battlefront.

If the automotive industry's transition from fossil fuels to new energy is the starting point, the shift from traditional to autonomous driving represents its climax.

This is the dawn of a new competition between traditional and emerging automakers, a needle-to-needle confrontation that will ultimately determine the victor.