Wen / Ge Ding
Source: brocade (ID: jinduan006)
The specific logic is as follows.
01. Car making gene
1) Supply chain management
15 years ago, enthusiasts saved computers, 10 years ago Internet companies saved mobile phones, and five years ago, new forces built cars to save new energy vehicles.
Apart from automatic driving, Xiaomi has a car making gene. At the beginning of its establishment, no one believed that Xiaomi could succeed. Starting from 0, Xiaomi ran the supply chain and was rejected to despair. Under such circumstances, Xiaomi Leng squeezed Huawei out of the neck and became the third largest mobile phone company in the world in 2020q4. The experience and process accumulated in the mobile phone supply chain can be said to be Xiaomi's gene, and this core competence is directly suitable for car building.
The automobile industry chain based on automatic driving can be divided into three parts
1. Perception: various radar and camera sensors;
2. Decision making: algorithm, operation, high-precision map, Internet of vehicles, etc;
3. Implementation: Bosch, Germany and other traditional Tier1 suppliers.
Therefore, based on the analysis of the most basic elements, the main systems to be integrated and the core suppliers that may be involved in Xiaomi saving a car are listed as follows:
Three electric systems. Battery, Ningde times, GuoXuan high tech; BMS, Junsheng electronics, United electronics; motor, Jingjin electronics, founder motor; electronic control, Bosch, Huichuan technology.
Perception system. Vision chip, Mobileye; camera, Junsheng electronics; millimeter wave radar, Bosch.
Chassis system. Air spring suspension, Continental Germany; front brake disc, bramble; rear brake disc, Fanbo brake; EPS, ThyssenKrupp.
Interior and exterior trim. Wiper, Bosch; tire, Pirelli; skylight, webars.
Figure 1: supply chain of three electric systems for new energy vehicles, source: wind and Tianfeng securities
Taking this figure as a reference, Xiaomi's current supply chain management level in China's industry and economy will be the core advantage of its car manufacturing.
2) Industrial Design
What is industrial design and how important is it to car building?
Figure 2: Industrial Design for Ford and General Motors
Data show that product design cost accounts for about 10% of product cost, but it determines 70% - 80% of product manufacturing cost. About 50% of product quality accidents are caused by bad design.
The success of IOT and consumer goods business, one of the three major divisions of Xiaomi, is inseparable from the success of the ecological chain and its good industrial design ability. Xiaomi is the first Chinese company to complete the Grand Slam of four international design awards (if, best of the best, good design best 100, idea) in one year.
It can be said that industrial design is also one of Xiaomi's core competencies in car building.
Qualcomm has been in the automotive field for 18 years. It disclosed at the 2020 CES conference that by the end of 2019, more than 100 million vehicles in the world have adopted its automotive products and solutions. The layout of its automobile field mainly focuses on four fields: 1. Internet of vehicles (telematics and c-v2x); 2. Intelligent cockpit digital platform; 3. ADAS and autopilot; 4. Cloud device management.
Figure 3: layout of Qualcomm in the automotive sector, source: CITIC Securities
This time, even if Xiaomi doesn't see any specific content in the field of automotive intelligence, it can't solve the ultimate problem of autonomous driving, which is a new energy vehicle. However, the close cooperation with Qualcomm can effectively smooth this short board and provide strong support for it.
4) Brand awareness
Who is the most afraid of millet making cars? The first is Tesla, the number one price butcher; the second is Land Rover, the crown of the most unreliable car may be lost; the third is Toyota, the number one hungry Marketing Master in the auto industry.
What spirit do you want it to inherit from Xiaomi mobile phone? First, let Wuling know who is the first car for young people and who is the king of cost performance; second, go to India to dominate the Indian market like Xiaomi mobile phone and win glory for the country; third, use the money earned to enter real estate and build the first house for young people as soon as possible.
Then it should not inherit the spirit of Xiaomi and live for a fever. After all, electric cars are most afraid of burning, so I suggest it change its slogan, are you OK.
02. Three shackles
There are some basic dishes, but there are also many difficulties to be solved in the process of making Xiaomi's car.
【1】 Bad weather
Different from making mobile phones, Xiaomi is far behind in making cars
Tesla can be said to be apple in the field of electric vehicles. The first mass production car model s was delivered in June 2012. Three years later (2015), new forces of Chinese car manufacturing swarmed to establish. Six years later (2018), new forces of Chinese car manufacturing began mass production and delivery.
What is the new energy market like in 2023
Tesla has a high probability of annual delivery of more than 1 million.
The annual delivery volume of Weilai automobile, ideal automobile and Xiaopeng automobile may exceed 100000.
Figure 4: global electric vehicle deliveries, source: Gesch
In a word, the competitive environment for Xiaomi to build cars is much worse than that for mobile phones. Strong hands are like a forest, but you are like a child.
In addition, we need to see that the technology maturity curve of the new energy vehicle has gone to the fourth stage (1 the promotion period of the technology birth, 2 the bubble of high expectations, the low period of 3 bubble, the 4 bright rising period and 5 plateau stage).
In a word, up to now, Xiaomi's competitive environment is not friendly.
【2】 The money is not in place
In addition to the fierce competition visible to the naked eye, another big problem restricting Xiaomi's car making is the problem of funds.
The industry has already passed the bubble and the trough period, the capital regret of the wrong car, the capital pot of the car, who will go gambling to millet and catch up from behind to go to recharge Lei's personal charm? It's no joke to build a car. Two or three hundred billion dollars will be thrown into the water and there will be a big bubble.
With an annual adjusted profit of more than 10 billion yuan, Xiaomi's capital will be tight. It can't be measured by cash flow here, because the cash flow of Xiaomi's regular business is relatively poor, and the reason for the improvement in 2020 is the overweight of Internet financial business.
Figure 5: financial business pushes up Xiaomi's cash flow, source: notes to Xiaomi's 2020q3 financial report
Before Baidu made cars, the market reaction was money is not a problem, Baidu has money. When Xiaomi makes cars, the market may ask, how does the money come from? In view of the fact that Lei Jun has always wanted to see profits in the short term, there must be a problem in the source or sustainability of the funds for car building.
Based on this, we can even deduce that with the recovery of this wave of Hong Kong stock market, the share price of Xiaomi has nearly quadrupled from the low point. This trend may indicate that it is not far from a large-scale private placement.
【3】 Multi line operations
It must also be pointed out here that the more essential reason why Xiaomi is still ambiguous about car making is that it is already in the situation of multi line combat, and its consumption is extremely huge
Second, in order to establish a more long-term competitive advantage, we need to invest in communication technology (6g), chip design and R & D, and artificial intelligence technology, so as to make up for the shortcomings as soon as possible and realize the premium of high-end brand;
How to accurately raise and allocate the troops and food in the three major battlefields is a great wisdom test for Xiaomi and Lei Jun. Invisibly, these factors are uniform and constitute the pressure Xiaomi carries when considering the car building strategy.
03. Cutting Era
Let's put aside the specific practical problems for the moment and continue to talk about competition.
Behind the times of millet car, we must find a way to cut the times. The so-called cutting era is to cut the market into who you and others love.
Tesla cutting era: cool electric car, the only mass-produced electric car, intelligent factory.
Weilai (once highly valued at 680 billion RMB) cutting era: what you buy is not a car, but a home.
Ideal (recently delivered the most fierce new force of car building) cutting era: far distance (mileage) than electric vehicles, fast start and energy saving (electric drive) than fuel vehicles.
Figure 6: Apple's patent application for intelligent skylight in 2020. Source: USPTO
What about Xiaomi? How does Xiaomi cut the era?
Figure 7: four symbolic brands of automobile industry in the past 100 years. Source: Soochow securities
When you think that Tesla is just a model 3 price butcher, just down to 270000, and then down to 250000, you are too young. It has planned to upgrade from a price butcher to a price fool.
Zhu Xiaotong, President of Tesla China, said in an interview that a low-cost version of Tesla is being developed and is expected to retail at 160000 yuan (25000 US dollars). Rumor has it that this model is expected to appear at the Guangzhou auto show in November 2021 at the earliest. However, the news has just been released, and Tesla officials said it was a rumor.
The timing of the release of the cheap version may be in doubt, but I'm sure I haven't run away. Because musk mentioned this on Tesla battery day in September 2020, and plans to manufacture a pure electric vehicle with new batteries for 25000 US dollars in the next three years.
No matter win or lose, Tesla makes low-cost models, which itself is the problem of Xiaomi. It's not only about delivery and revenue, but also about cost and cash flow.
Intelligent factory is the core advantage of Tesla, and its efficiency will be higher than that of traditional OEM. If there is a big difference between the delivery volume of Xiaomi car and Tesla's cheap version, based on Wright's law, Tesla's gross profit rate will be higher, and its business strategy can continue to reduce prices.
They all play offline to experience online sales, but they don't do marketing based on the cost performance of their products. Mascot's traffic is stronger than Lei Jun's, and the popularity of clubhouse and dogcoin can be seen.
Hardware (smart car) can not make money, but it can make money through Internet business (driverless value-added service). Tesla's FSD autopilot sells 64000 yuan, and half price EAP autopilot (its autopilot is ahead). In addition, Tesla OTA (air upgrade of car system) also needs money. At present, the new domestic car manufacturing forces can't afford the cost.
4) It's still the cost, from Legion to foxtrooper
Bill of material (BOM) joint procurement to reduce costs has always been a good way for Xiaomi and its eco chain companies to defeat their competitors.
From mobile phones to cars, the span is too large: vision chips, front-looking cameras, millimeter wave radars and lidars in the perception layer (environmental perception and positioning); chassis and body parts BOM provided by Tier1 suppliers such as Bosch and continental Germany, etc., which are not likely to be purchased jointly with eco chain companies.
Xiaomi's return from Legion operations to individual operations has lost another core ability to reduce costs.
04. There is no way out
Of course, there is a basic set, but there is no outstanding comparative advantage, but for Xiaomi, there is no way out to build a car. The logic is the same as Apple's car making. We have explained it in detail in "Apple's car making: a mind war without surprise" before
There are three main forces to pull apple and millet off the field
Above all, Xiaomi's car making is definitely the ultimate test of Lei Jun's wisdom. But this is the choice of the times, Lei Jun and his millet have no way back.