2022 has just started, and the popularity of car building has come up again.

　　On February 11, Luxshare Precision announced that its controlling shareholder, Luxshare Co., Ltd., purchased 19.88% of Chery Holdings, 7.87% of Chery and 6.24% of Chery New Energy for 10.054 billion yuan. At the same time, the company also announced that it plans to form a joint venture with Chery New Energy to develop and manufacture new energy vehicles.

　　A weekend apart, according to Taiwanese media reports on February 14, the Model T, Foxconn’s first electric model, will be officially delivered in early March.

　　Throughout the month of January, news of new entrants' car manufacturing was disclosed every week on average. At the beginning of the month, Tuanche.com announced to build a car, but it did not attract large-scale attention in the industry. 10 days later, Li Xiang, the founder of Ideal Auto, pushed the "new car maker" to the center of the whirlpool of public opinion with a questionable Weibo post.

　　In the same week as the hot search on Tuanche.com, the NIUTRON brand founded by Li Yinan, founder of two-wheeled electric vehicle company Mavericks Electric, released the official image of its first model, Ziyoujia NV. In less than 10 days, Jidu Automobile, a joint venture between Baidu and Geely Automobile, announced the completion of a $400 million (about 2.53 billion yuan) Series A financing.

　　(Ziyoujia NV/Photo source: Niu Innovation Energy)

　　On January 30, Beijing released the "2022 Municipal Government Work Report Key Task List", showing that projects such as Xiaomi's auto manufacturing plant will start construction in Beijing within the year.

　　Since 2021, many giant companies have entered the market to build cars. The automobile manufacturing industry, once known as "the jewel in the crown of modern industry", has dropped the threshold rapidly now?

　　From a technical point of view, yes. But from a business perspective, that's not the case.

　　Building a car is getting easier

　　Since the automobile industry has moved towards the era of electrification, the threshold for building a car has been continuously lowered.

　　At the beginning of 2014, Tesla just entered the Chinese market, and for the first time let the Chinese understand what a real "smart car" looks like, and also let the Chinese discover the opportunity for "laymen" to create more competitive cars.

　　After obtaining Tesla's "enlightenment", hundreds of companies have embarked on the road of building cars in less than three years. "Wei Xiaoli" (Wei Lai, Xiaopeng, Ideal) is the representative enterprise of the new car-making forces born in that period.

　　The car-building boom at that time came from, on the one hand, the emergence of electrification and intelligence in the automotive industry, and on the other hand, the reduction in the technical difficulty of the automotive power system from oil-powered to electric.

　　The difficulty reduction brought about by electrification only involves the power system, and the threshold for other technical fields is still there. But as the time moves towards 2022, there are already “shortcuts” in all aspects of car manufacturing.

　　At the 2019 Shanghai Auto Show, Huawei officially announced its entry into the automotive industry, focusing on becoming an incremental component supplier. The Chinese technology giant can help car companies solve almost all problems involving autonomous driving, intelligent interaction, and electric drive systems. At present, BAIC Polar Fox, Changan Avita and GAC Group have reached HI (Huawei Inside) in-depth cooperation with Huawei.

　　Extreme Fox αS Huawei HI Edition / Source: Extreme Fox Auto Official

　　If you are worried about Huawei's dominance, companies can also hand over the three major systems of autonomous driving, intelligent interaction and electric drive to relevant professional suppliers. And the battery can also be done for you by a supplier like CATL. When new technologies are completed by other partners, only the chassis is left to be developed by ourselves.

　　Nowadays, there are also suppliers who can help solve the problem of chassis.

　　On January 11, Yopao Technology released the UP super chassis and 3 UP SPACE super cabins based on the skateboard chassis concept. Li Peng, the company's founder, said that in the era of automobile 2.0, cars will evolve into a smarter, more personalized, and scene-driven mobile intelligent space, which relies on a skateboard chassis that completely decouples the upper and lower bodies.

　　After the vehicle design and development are completed by the partners, there are also foundries such as Magna, Foxconn, and Luxshare who can provide mass production services, saving you the time and money of building your own factory.

　　To put it simply, if there is no problem at the funding level, the brand side can create its own brand of smart electric vehicles as long as the product definition is done well.

　　so what? It is still very difficult to rely on car building to achieve commercial success.

　　Building a car is just the first step

　　History has proved that the ability to build a car is not the same as being a stable car company.

　　Of the hundreds of auto companies established between 2014 and 2017, less than half are still alive, and only six will be able to achieve annual sales of over 10,000 in 2021.

　　"Even if it's 'Wei Xiaoli', it would be good for two of them to survive in the end." A senior person in the auto industry expressed such a view on Yiou Auto.

　　What is it that limits the success of automakers? The main problem is "money".

　　Li Bin, the founder, chairman and CEO of NIO, and He Xiaopeng, chairman and CEO of Xiaopeng Motors, have said that the capital threshold for building a car is 20 billion yuan. In 2021, Li Bin "updated" the threshold height of car building: "It may not be possible without 40 billion (yuan) now."

　　(NIO ET5/Photo source: NIO official)

　　Although the threshold of 40 billion yuan is not absolute, building a car is definitely a very "money-burning" thing.

　　Just developing a competitive smart electric vehicle would have meant a lot of money. Even without a fuel power system, a smart car requires more than 20,000 components. "Vehicle grade" almost means the most stringent standard for large-scale manufacturing.

　　Although the development of the vehicle is enough money, it is only a small part of the whole process of building a car. The real time comes when the car is brought to market and the real money is spent. Purchasing, production, channels, services... any process requires capital like a tap that cannot be closed.

　　At the same time, companies also need to continue to invest in the research and development of new models and new technologies, resulting in an extremely long payback period.

　　As of 2022, "Wei Xiaoli", a new force in China's leading car manufacturing, has not yet gotten rid of the problem of losses. Even Tesla, whose current market value is nearly $1 trillion, has repeatedly come to the brink of bankruptcy, and its first full-year profit was 17 years after its establishment.

　　Under the circumstance that its own development is not easy, the "involution" of peers is still very serious.

　　The competition among car companies in terms of technology and configuration has never stopped. As the industry becomes more intelligent, the "arms race" of car companies has penetrated into the field of extremely expensive chips, lidars and other intelligent components, resulting in the development and sales costs of vehicles rising again.

　　This means that building a car not only has to endure extremely high costs and a very long payback period, but the final return on investment is also very limited.

　　Many companies end up breaking the capital chain because they didn't go the right way.

　　Many companies eventually died because they failed to identify product positioning or improper use of funds, such as Qiantu Motor and Byton Motors. The former's acceleration capability designed for its super sports cars is not even as good as some SUVs, while the latter's annual retail expenditure of a 300-person team is as high as 50 million yuan.

　　Of course, more new car-making forces die because they entered the game too late, lacked competition thresholds, and their business logic could not stand the test. Most of them have embarked on the "Naihe Bridge" before they have actually embarked on the "road of car building".

　　To build a car, you have to find the threshold

　　At the end of 2021, He Xiaopeng said that 2024 is the last window period for this round of car-building outlets. In this context, what kind of characteristics do new entrants have to have a chance to win the game?

　　First of all, there must be sufficient funds to deal with a series of changes that may occur in the market in the future. Secondly, at least it must have advantageous technologies that meet the needs of relevant market segments or an industrial ecology that can empower automotive products.

　　At present, the new car-making forces in the first echelon have their own unique competitive advantages: Weilai has innovated user services, Xiaopeng has put a technology label, and Ideal has captured the psychology of "baby dad" users.

　　(Ideal ONE/Photo source: Ideal car official)

　　Apple's entry into the automotive industry is because of its strong and closed-loop intelligent ecosystem. This ecosystem includes not only hardware ecosystems such as computers, smartphones, and smart watches, but also software ecosystems built by the IOS system, Apple ID, and application stores.

　　Thinking from a longer-term perspective, companies that do not aim for large-scale sales are more likely to achieve their intended goals. What I am talking about here is not those companies that raise their valuations by increasing their car manufacturing business, but those companies that maximize their individual needs through customization.

　　Different enterprises have their own different needs, but the personalized needs of many enterprises for the mobile space eventually become "make do". Because their demand can only be through the transformation of certain mass-produced models.

　　With the emergence of more and more incremental component suppliers that promote the decoupling of the industrial chain, such as skateboard chassis and autonomous driving, the difficulty and cost of some customized requirements will become lower.

　　"It may take time for skateboard chassis to become the mainstream of the industry, but this represents a trend in the automotive industry." Jiang Hongquan, chairman of Boyuan Capital, a subsidiary of Bosch Group, said when communicating with Yiou Auto that when the automotive industry chain is constantly being decoupled, Car manufacturing is also expected to be democratized in the future, which will lead to changes in the entire auto industry structure.

　　When companies only need to think about their own needs, the so-called goal-achieving route becomes extremely clear. At the same time, related customized vehicles can also reduce product development and procurement costs by discarding other modules that are not related to customization requirements.

　　If the function of the customized product of the enterprise can meet the needs of the enterprise, and the cost is within the affordable range, it has been considered a success. Once a product is produced that finally finds favor with the outside world, it means the business has an opportunity to generate additional revenue.

　　Conclusion

　　Building a car is the hardest way to enter the auto industry.

　　Just like Apple in mobile phone manufacturing, there is only one Tesla in car manufacturing. Before thinking about how to surpass Tesla, you should first think about how to deal with the large investment amount, long return period, low input-output ratio and whether the sales volume can meet expectations.

　　(Tesla Model Y/Photo source: Tesla official)

　　The trend of multi-industry integration is going fast in the automobile travel industry. With the addition of more technological elements, the auto industry will also become more and more open. In addition to car building, taking advantage of hardware, technology, software ecology and other advantages to enter the automotive industry also has the opportunity to obtain considerable returns.

　　Huawei, which has technological and ecological advantages, chose to use the role of incremental component service provider to empower car manufacturing, and strive to promote the integration of Hongmeng Eco into the products of other car companies. There are also technology companies such as 360 and DJI who made the same choice.

　　Open your eyes, the opportunities brought by the development of the automobile travel industry are far more than car manufacturing.