Slush Shanghai 2019: How to Seize Opportunities in Car Mobility Ecology
After ten years of development, the emergence of new forces such as NIO and Xpeng has not only caused major changes in the mobility industry, but also forced traditional enterprises to change themselves.
On September 25, at the 2019 Slush Shanghai Science and Technology Innovation Summit, Zhang Fan, vice president of EO Company and co-founder of EqualOcean, Zhang Junyi, managing partner of NIO Capital, Liu Yilin, deputy general manager of Xpeng Motor Shanghai Branch, and G7 CFO Zhang Jielong discussed the topic of 'Mobility 2020'. EqualOcean summarized the content below.
The ten-year change of car mobility ecology
Zhang Fan (张帆): G7 was established in 2010, Xpeng Motor was established in 2014, and NIO Capital was established in 2016. There are only less than 100 days left to enter 2020. Let’s do a summary and an expectation here. First of all, I would like to ask you, what kind of preparations do you have for the mobility and logistics sector in 2020 and beyond? In the past decade, what kind of core value has your company created for the industry? What kind of main problems have been solved? What changes are taking place in our industry, and where will the next decade go?
Zhang Junyi (张君毅): I was engaged in management consulting before doing investment. The job at that time was to describe the scenarios and plans for the next ten or twenty years for the car companies. When planning for SAIC, the concept of ‘four modernizations’ was proposed, namely, electrification, intelligence, networking, and light weight. However, with the development of the market, companies such as Didi appeared, and ‘lightweight’ became ‘sharing’. After several years of development, China and the world have recognized this concept. The strategies of companies such as Daimler and BMW are all around the development trend of mobility options and intelligent electric vehicles. At the same time, after ten years of development, the emergence of new forces such as NIO and Xpeng has not only caused major changes in the travel ecology, but also forced traditional enterprises to change themselves. At present, NIO Capital has made many layouts in the automotive field. For example, it has invested in companies such as Inceptio Technology (赢彻科技) in terms of vehicle intelligence, and invested in Auto.ai (四维智联) in connectivity sector. We hope to use the power of capital to empower the industry.
Liu Yilin (刘毅林): This year is just the fifth anniversary of Xpeng. From the perspective of the market, we can see some new changes. Since the large-scale delivery of Xpeng electric vehicles in April, Xpeng has been the number one sales force among EV startups for several months. Up to now, it has achieved more than 10,000 units of sales. What's more interesting is that compared with the previous consumers, most of the high-end vehicles purchased by consumers currently have automatic driving ability and intelligent ability. The automatic driving speed section usage rate, including the automatic rate of automatic parking, is much higher than the original data. Throughout the functional iteration, from April to July, it offers about 50 new features and more than 900 optimization capabilities. Any developmental changes are related to the level of user acceptance. From the perspective of equipment or products, I believe that today there is a good foundation for users to accept new changes, and the changes in the mobility equipment itself are irreversible.
Zhang Jielong (张杰龙): In the past ten years, the logistics industry dividend mainly comes from the more refined management of the logistics operation process. Everyone has established a lot of processes to turn the logistics company of the past hand-workshop into a streamlined logistics company, which is very great achievements. China's largest logistics companies, each with hundreds of thousands of people, still represent the highest level of management in the world. We have found that the new opportunity in the industry is to solidify all the refined management processes and SOPs in logistics equipment. The equipment is replacing the work of people in logistics operations, and it can know its own efficiency, cost and safety. Replacing people will also be the biggest opportunity for the next decade.
Is it too late to cut into autopilot?
Zhang Fan: G7 recently set up a self-driving truck technology company Inceptio Technology. At such a point in time, some people in the industry think that G7 is ‘relatively lagging behind’. How do you think about this problem? What kind of opportunities and space does G7 and Inceptio have?
Zhang Jielong: First, it is not too late. We have recently visited almost all domestic and foreign OEMs, Tier 1 suppliers, laser radars, millimeter waves and other manufacturers that are particularly important for autonomous driving. The goal of Inceptio is to deliver the L3 class car with mass production at the end of 2021, but we found that the OEMs, Tier 1 suppliers and radar manufacturers are not ready. The main reason is that there is no demand. Second, we have done a lot of preparation before. We believe that the commercialization process of autonomous driving commercial vehicles does not heavily rely on development of autonomous driving technology, but whether you have the ability to build a landing application scene instead, whether there is any ability to provide the infrastructure to support the self-driving trucks running on the road and whether there is any ability to attract low cost funds. G7 began to connect trucks nine years ago, and began to connect to the gas station three years ago, which provided blood for the company. In the future, whether it is refueling, maintenance, or changing drivers, we need logistics infrastructure throughout the country to support it. From this perspective, we have gone very fast, and we started preparing for the establishment eight years ago. In the first half of this year, we have signed a joint development agreement with Dongfeng, Foton and China National Auto, to achieve the common goal of delivering L3 class cars by the end of 2021.
The challenge is also an opportunity
Zhang Fan: 2019, for the automotive industry, it is not an easy year. Let's look at some data: the growth rate of social consumption continues to fall, and the sharp decline in automobile consumption is mainly dragged down; in August 2019, automobile consumption fell by 8.1% year-on-year; from January to July, the total social logistics cost was CNY 7.8 trillion, a year-on-year increase of 7.9%. The growth rate dropped by 0.1 percentage points from the first half of the year, and the growth rate of total social logistics costs decreased steadily; the amount and frequency of VC/PE investment also fell from last year. What kind of difficulties did such a big environment cause for you? How did you deal with it?
Zhang Junyi: I posted a moment on my WeChat saying that the auto industry cannot be degraded to level where the profit of auto companies can only be earned by selling houses. This is a problem of big environment in the automotive industry, reflecting the lack of comprehensive consumption power. As an investor, you need to be keen to do three things:
First, spread the seeds. Because the hot money in the market is getting less and less, the phenomenon of unevenness is improved, funds and resources will be concentrated in the head companies. Investors have better opportunities and longer time to assess the potential risks and potential opportunities of a project. Second, the timing of fundraising and investment of many funds does not match. Some funds have prepared some ‘ammunition’ in the past few years and are in a state of readiness. I believe that there will be more and more investment in large amounts next year. Third, the improvement and development of this industry requires all-round power. The government’s policies are not frequently discussed but important. Whether it is the automotive industry, the logistics industry or the investment industry, it needs a steady-state and predictable policy environment to support it.
Liu Yilin: From the perspective of products, the biggest impact at present is the sales of passenger cars. From the macro environment, China's road conditions and parking conditions are not capable of carrying enough equipment. In addition, from the objective facts, consumption is more rational, and a growth of more than 10% will not always be correct. In the case where both the macro environment and the objective facts exist at the same time, higher requirements are imposed on the enterprise. As a car company, in addition to looking at this issue more macroscopically, we need to do micro things. Whether it's a passenger car or a commercial car, users expect a new device that offers a better design and experience. These changes are not only the equipment itself, but also the supporting services. These are the things that can really bring about change.
Zhang Jielong: The logistics industry has experienced very big challenges, and the consumption impact is small, but the bulk and chemical industries have suffered a lot. Through our app, we can see that many vehicles have stopped serving, and many vehicles on the platform are running without being full (low operational efficiency). But for the industry, when it is challenging, it is also an opportunity. On the one hand, the equipment of the industry is getting more intelligent. With the equipment’s automated self-management, operation will be better and more efficient than before; on the other hand, in the macroeconomic environment, the intelligence of logistics equipment vehicles can bring great value in other aspects. For example, we have the opportunity to intelligently reconfigure financial resources in the entire system. The logistics industry has weak anti-risk ability and high cost of borrowing money. The lowest interest rate for a driver who borrows money on the fund platform is 18%, and there is a great distortion in the allocation of financial resources. This industry has the opportunity to reconfigure financial resources, and everyone can get loans at a lower cost.
Science and Technology Board is the country's efforts to improve the environment for entrepreneurial innovation.
Zhang Fan: Some companies invested by NIO Capital have been listed on the Shanghai Stock Exchange’s Science and Technology Board (STAR Market). What is the significance of the STAR Market for you? Will it bring a big change or influence?
Zhang Junyi: Regardless of the New Third Board or the Science and Technology Board, it is the country's efforts to improve the entrepreneurial and innovative environment. Science and Technology Board does not require enterprises to make profits, but also considers the development of enterprises. It should be noted that the development of the enterprise after listing depends on the enterprise itself. The STAR Market is not the only solution. It is a channel that can improve the long-term companies’ performance in both primary and secondary market. However, if the texture of the company itself has not changed, even if it is on the board, there will be a big pressure. Because the science and technology board reduced the company's profit requirements, it not only changed the listing of the secondary market, but also changed the primary market. Some companies can consider the board in the Series C and Series D rounds, and other financing methods can also be considered. Listing financing is a costly thing that covers not only cost of equity, but also cost of governance, the standardized operation and requirements of the company. A good company does not need to go public, but chooses to go to the Science and Technology Board based on its own position and development stage or continue to brew in the primary market.
In addition, how we can achieve a sustainable development of the capital market is not a solution that the government can solve with a single registration system. It requires a lot of systematic efforts.
Zhang Fan: 2020 is coming soon. Let’s finish with your future mobility planning or expectation in one sentence.
Zhang Jielong: We hope to offer our customers a network of cargo robots that integrate equipment, energy and financial services.
Liu Yilin: I hope that all people who own a car will no longer suffer, whether it is a service problem or a problem of use.
Zhang Junyi: Both the investment environment and the industry environment have become longer, smarter and more patient.