China is emerging as the first real test of big tech ambitions in the automotive world. Giants from Huawei Technologies Co. to Baidu Inc. are investing nearly $ 19 billion in electric and self-driving vehicle companies widely viewed as the future of transportation.
While Apple Inc. has long had plans for its own car and Alphabet Inc. has Waymo, its autonomous propulsion unit, the size and speed of the move by the Chinese tech titans have pioneered this larger push. The bait is an industry that is becoming increasingly high tech as it turns away from the internal combustion engine. Sensors and operating systems make cars more like computers, and the prospect of autonomy considers how people will use them.
As the world’s largest market for new cars, China is an important battlefield. Established car manufacturers such as Volkswagen AG and General Motors Co. are already dealing with local climbers such as the market treasure Nio Inc. and Xpeng Inc. For the past three months, Huawei, smartphone giant Xiaomi Corp., Baidu has been doing China’s top search engine and mapping app – and even Apple’s Taiwanese manufacturing partner Foxconn have joined the battle to connect and make their own plans for to unveil automobile manufacturing.
Nowhere was that more seen than at last month’s Shanghai Auto Show, which has become one of the world’s premier events showcasing the hottest new trends in the automotive industry. Visitors queued for hours to gain access to the Huawei and Baidu pavilions, huddled on their displays, and snapped photos of sensor systems, high-tech dashboards, and model vehicles. Despite the keen interest, the new car era in China is highly competitive and the tech giants still have a lot to prove.
“There’s a lot of confidence in the tech companies’ bets,” said Stephen Dyer, managing director of Shanghai-based consultancy AlixPartners and former managing director of Ford Motor Co. “This is about creating something new that doesn’t exist now. This is where the element of belief comes into play. “
Huawei was at the forefront, recently announcing plans to invest $ 1 billion in electric vehicles and its own self-driving technology, which it claims have “already outperformed” electric car pioneer Tesla Inc. in some ways.
Better known for its cellular networks and the subject of crippling US sanctions, the Shenzhen-based company has unveiled its first car developed with BAIC BluePark Mew Energy Technology Co. The mid-size Arcfox S sedan uses HI or Huawei Inside, an intelligent automotive software package that allows driving more than 1,000 kilometers in urban areas without human intervention in autonomous driving mode. Delivery is scheduled to begin in the fourth quarter.
Huawei’s auto show display drew more visitors than nearby China Evergrande New Energy Vehicle Group Ltd., an EV upstart who showed off nine models at one of the largest booths despite not selling a car under its own brand . In addition to the Arcfox S limousine, a Seres SF5 Coupé equipped with Huawei Inside was on display, together with the HiFin Intelligent Antenna Solution from Huawei, a new generation in-vehicle communication system and a 4D imaging radar for monitoring roads and traffic.
The Arcfox Alpha-S electric sedan, manufactured by BAIC Motor Electric Vehicle Co. of BAIC Group, will be exhibited at the Shanghai Auto Show in April. | BLOOMBERG
One of the biggest challenges for new entrants in the automotive sector is the capital and resource intensity of manufacturing cars. How tech companies negotiate will be crucial and potentially provide opportunities for established players in the industry. Huawei repeatedly said it had no plans to produce its own vehicles. Rather, the company works with three Chinese automakers – BAIC Motor Corp., Chongqing Changan Automobile Co., and Guangzhou Automobile Group Co. – to make self-driving cars that will bear their names as a sub-brand.
Guangzhou Auto will jointly build a “truly unmanned car” that will be produced in 2024, President Feng Xingya said last month. The automaker will also work with Huawei on big data, intelligent cockpits, and hardware and electronics chips, Feng said.
“China adds 30 million cars every year and the number is growing,” said Eric Xu, vice chairman of Huawei, in April. “Even if we don’t enter the market outside of China, we can make an average of 10,000 yuan ($ 1,550) for every car sold in China. That is already very big business.”
Apple seems to be considering a similar route and once spoke to automakers like Hyundai Motor Co. before the discussions wavered. Unlike China’s tech giants, Apple is largely keeping its plans a secret. The company lost a key executive overseeing its self-driving car program in February, and it’s unclear what impact this could have had on Apple’s progress in delivering an economically viable car.
The rise of intelligent vehicles and autonomous driving are opening up a number of opportunities for technology companies, not least of all with access to data like real-time insights into popular destinations and the routes that lead to them. In addition, some have the option of charging for technical add-ons and system improvements, and essentially treating the vehicle like computer hardware, the software of which is constantly updated.
“You will definitely focus on being smart,” said Yale Zhang, general manager of Shanghai-based consultancy Autoforesight Co. “Building a good electrified car is a” passport “while a good smart car is an” A grade. ” These tech giants are good at that – their main income will come not from selling the car, but from finding other ways to make money after the sale, such as wireless system upgrades or software subscriptions. “
Baidu, which began investing in robot taxi technology back in 2013 and financed the Chinese EV startup WM Motors, is now planning to spend $ 7.7 billion over the next five years on developing smart car technology via its new established unit to issue Jidu Auto. The division plans to launch its first model in three years, followed by new releases every 12 to 18 months, said CEO Xia Yiping.
“The core value of cars in the future will be how smart they are,” said Xia, repeating a familiar refrain. “The earlier a company plans, the more control it will have over technologies it has developed, the more advanced the technology, the more power it will have in the market.”
Elon Musk, CEO of Tesla Inc., dances on the REUTERS stage during a delivery event for Tesla’s China-made Tesla Model 3 cars in January 2020
Jidu has a core team of around 100 employees and will expand to up to 3,000 employees by the end of next year, including up to 500 software engineers. The first batch of cars will be based on the pure EV manufacturing structure of Zhejiang Geely Holding Group Co., while Jidu will work with Baidu’s Apollo autonomous driving unit, with a special focus on smart cars and the mass production of autonomous driving functions. The unit will shortly begin its next round of fundraising, with further investment expected from Baidu and outside investors.
Chinese smartphone maker Xiaomi has also announced plans to invest around $ 10 billion in electric car manufacturing over the next decade, but hasn’t released many details or set a timeframe for delivery. Billionaire co-founder Lei Jun announced in March his intention to lead a new stand-alone division and drive the electric vehicle journey in what he called his last major startup.
“We have deep pockets for this project,” said Lei, who is also Xiaomi’s chief executive officer, when he unveiled the plan. “I am fully aware of the risks in the automotive industry. I am also aware that the project, with tens of billions in investments, will take at least three to five years. “
While China’s tech giants may be late for the game and step into uncharted territory, it could be to their advantage, AlixPartners’ Dyer said.
“This is not an industry where you have to be first to win,” he said. “In the auto industry, the first mover usually never wins. It is always the follower who wins. Because when you are the first pacemaker, you pay to learn through all mistakes. “
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