Is it just a dream?, Internet car building

On August 28th, Didi announced a partnership with Xiaopeng Motors to sell its intelligent car development business assets to Xiaopeng and instead provide technical support. This means that Didi's car making business, codenamed "Da Vinci", is coming to an end.

Just two weeks ago, Geely Holding Group released its new automotive robot brand "Jiyue", and Baidu withdrew from the second tier through strategic cooperation, with Geely taking control of the car manufacturing industry.

Looking back at the eve of the Shanghai Auto Show two years ago, most of the Internet circles gathered along the Huangpu River and were still scrambling for "getting on": Alibaba, Tencent, Baidu, ByteDance, Shangtang Technology, iFLYTEK, JD, etc. followed closely. "They sat down in the Expo Center and were ready to discuss some things that might change subversively on the four wheels." At that time, the Internet people said: "To miss a car is to miss a mobile client in those years."

Now, this massive Internet car building tide is like wet firewood, with only residual temperature. Most people who still have sparks choose to huddle together for warmth. Looking around, only Lei Jun is still persisting in this "last major entrepreneurial project of his life" that "surpasses all the accumulated achievements and reputation in life": he posted a Weibo account "Fighting for Xiaomi Motors", suspected to be participating in the summer test of a new car in Xinjiang. There are reports that Xiaomi Motors has obtained the qualification for car manufacturing and is entering the trial production stage. It is expected to be launched in the market by 2024.

However, even Lei Jun no longer has the same boldness as before: compared to shouting "10 billion US dollars in ten years" with boundless enthusiasm, he did not mention a word about this grand car making dream in this year's three hour annual "growth" speech.

Among them, the reasons are complex and intricate: either because China's new energy vehicle manufacturing became increasingly "competitive" in the second half, and competition became more intense under the price war, making capital gradually unprofitable; Or perhaps because Europe has raised the threshold for car manufacturing several times, the export dividend is gradually disappearing; In addition, the threshold of car building technology has been raised again and again, which has caught the novice Internet car makers unprepared. Other factors will not be analyzed one by one.

The only thing that is certain is that the once Internet car making boom is now empty.

Huddle together for warmth

Baidu and Geely, as well as Didi and Xiaopeng, are widely regarded by the industry as a strong alliance: big companies produce software, car companies produce hardware, and each team is much more reliable in the long run than fighting alone.

This kind of reunion is actually an inevitable result.

One is the issue of vehicle manufacturing qualifications. This is a big barrier for most Internet enterprises to build cars. New forces such as Ideal Automobile, Xiaopeng Automobile, Weima, and Lingpao all obtain production qualifications through mergers and acquisitions of qualified enterprises.

Starting from July 1, 2017, due to frequent incidents of new car companies defrauding and supplementing vehicles, there was a severe overcapacity of automobiles nationwide, and production qualifications were basically suspended. Therefore, later Internet enterprises must find a car enterprise with car manufacturing qualification to cooperate with "backdoor" car manufacturing.

Those who are not qualified can only leave early. For example, the self entertainment company founded by Li Yinan withdrew early and refunded the deposit to all prepaid users because it failed to obtain production qualifications in a timely manner. The Jidu ROBO-01 lunar exploration version made its debut at major auto shows in 2022, but has never been declared to the Ministry of Industry and Information Technology,

At the beginning of 2022, the Ministry of Industry and Information Technology once again issued a notice on carrying out pilot work for commissioned production of new energy vehicles, and put forward clear requirements for the OEM model: both commissioned and commissioned enterprises must have production qualifications in order to carry out OEM production. This requires both Internet enterprises and automobile enterprises to have "double qualifications" before continuing the previous cooperative production.

So the current model of big companies producing technology and car companies producing hardware combinations emerged: for example, in the joint venture between Geely and Baidu earlier, Baidu held 55% of the shares in Jidu, while Geely held 45%. This year, the automotive robot brand Jiyue, jointly developed by both parties, is headed by Zhang Quan, Senior Vice President of Geely Holding Group, as the Executive Director, and Xia Yiping, CEO of Jidu, as the General Manager. Geely holds 65% of the shares, while Baidu holds 35%, which means that the initiative in car manufacturing has been handed over to Geely.

Second, most Internet enterprises that lack the ability to build cars independently just want a piece of the cake. Embracing a group is the best shortcut from the beginning.

For example, when Alibaba first stepped down in 2020, it jointly invested with SAIC and Pudong New Area to establish Zhiji Automobile. At that time, Baidu also wanted to directly cooperate with car companies and implement autonomous driving technology. In the same year, Didi and BYD jointly launched the first ride hailing D1. Prior to this, they also planned to launch a pure electric MPV with Ideal, but the latter eventually teamed up with Meituan. Huawei, on the other hand, chose to cooperate with Changan and Ningde Times in Avita, holding hands with Selis to explore the industry.

An industry insider once revealed that Didi actually doesn't want to personally go out and make cars, after all, making cars is much more difficult than being a ride hailing platform. The reason why they ultimately chose to leave in person was due to the ups and downs of cooperation with car companies, which made them lose confidence.

However, with changes in the market, many of these group heating activities have not continued. For example, in the A-financing of Zhiji Automobile in 2022, Alibaba's presence has disappeared.

Carrying weight forward

From getting on the bus at the head to getting off the bus collectively, behind the differences between Internet enterprises before and after, is the earth shaking environment of car building.

Looking back to 2015, which is regarded as the first year of new energy vehicle manufacturing, the three companies of Wei, Xiao, and Li were established in the same year. In this year, there were more than 20 major encouragement and guidance policies for new energy vehicles issued at the central level alone, involving batteries, charging stations, vehicle and vessel taxes, and almost covering all fields related to the production, manufacturing, and application promotion of new energy vehicles.

Catching the trend, "PPT car making" can all take off: in 2017 alone, the top four new forces raised a total of 96 billion yuan in financing. Taking Weima as an example, two years after its establishment, it completed a total of 12 rounds of financing from A to D, with Baidu, Tencent, Sequoia, and others providing 35 billion yuan in funding. In 2020, all three companies of Weixiaoli were listed on the New York Stock Exchange. Everyone realizes that new energy vehicle manufacturing is a good business: almost every once in a while, new forces in car manufacturing emerge, with a peak number exceeding 500.

Even though the subsidy standard for new energy vehicles has declined by 50% on average since 2019, Internet enterprises are still working hard. Many analysts believe that with strong capital and technological advantages, large car manufacturers are indeed another trend.

However, no matter how much money is spent on making cars, it can be burned out. Two years after the establishment of the company, He Xiaopeng once said that he used to think that 10 billion yuan was too exaggerated when watching others make cars, but now he only realizes that 20 billion yuan is not enough to spend on his own car. As for Internet enterprises, the announcement shows that Didi will lose 763 million yuan in car manufacturing business in 2021, accounting for 1.5% of Didi's annual loss; By 2022, the loss amount had increased to 2.638 billion yuan, a year-on-year increase of 245%. And this is still based on the fact that Didi did not build a factory to manufacture cars, but only conducted large-scale research and development.

On the other hand, the automotive industry is becoming more competitive: traditional joint venture brands are turning around like elephants, international brands are constantly falling out, independent brands are gradually gaining wings, and product iteration speed is astonishing. At the beginning of this year, Tesla led an unprecedented price war, and car companies once again faced unprecedented survival pressure: taking the top new forces as an example, the 2022 financial report showed that Xiaopeng Automobile's net loss expanded from 4.863 billion in 2021 to 9.14 billion, NIO Automobile's net loss for the whole year was 14.559 billion yuan, a significant increase of 37.7% year-on-year, and the ideal loss with good sales still reached 2.032 billion yuan.

Former foreign giants, Audi's global pure electric vehicle delivery volume in the first half of this year was only 75600 units. Mercedes Benz was reported to have stopped production at its Shunyi factory due to poor sales of the EQ pure electric series. They began to turn their heads and form a "reverse alliance": not long ago, Volkswagen Group announced that it would purchase 4.99% of Xiaopeng's A-class common shares, with a total value of about $700 million. The two sides also signed a framework agreement on strategic technology cooperation. Both sides will plan to jointly develop two electric models under the Volkswagen brand for the mid size car market in China. Audi has also signed a strategic memorandum with SAIC Group to further deepen existing cooperation. As the first step in planning, Audi will enter the previously untapped segmented market in China by launching a brand new electric vehicle model. In addition, Geely Automobile Company, Geely Holdings, and Renault have entered into a capital contribution agreement and joint venture agreement to establish a new joint venture company. It is understood that this new company will serve the global market, with Chinese automotive brands taking on the role of technology export.

The scroll doesn't move, let alone come out now. On August 17th, the EU Battery and Waste Battery Regulation officially came into effect. On September 13, European Commission President Ursula Vondrein announced that the European Commission would launch a countervailing investigation on electric vehicles imported from China. It can be foreseen that the concentrated "sea going tide" of the past few years will no longer be prosperous.

The exit of Internet enterprises is also a reflection of the car circle in recent years. After the excitement, what will remain will soon be revealed. The only suspense is, how will Lei Jun and Xiaomi's car manufacturing end?