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Analysis EO
Jul 10, 2020
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Analysis EO
Jul 10, 2020

Time for BAT and TMD to Hit the Driverless Car Road

► The large addressable market and potential revenue synergy is luring BAT (Baidu, Alibaba and Tencent) and TMD (Toutiao, Meituan Dianping and DiDi) to join the driverless car game. DiDi's in-house Autonomous Vehicle (AV)  in Shanghai is accelerating the adoption curve and also heating up the game, making the rest of the names and startups at times breathless.  ► Pure-tech companies in the area have technology solutions but are struggling to step into the growth/mature stage – and with the unviable business model are exposed.  ► The funding market has been cooling down for a while, with some unicorns suffering without new support. Investors are asking for more – and autonomous driving startups suffered most.  ► As massive – in terms of scope, size or capacity – Level-4 AV deployments are at least four to six years ahead, a ticket to the Internet giants' boat is not a bad exit.  2020 was an eventful year that saw increased AV adoption across some tier-1 cities  China saw several Level-4 major deals closed in the first half of this year – DiDi AV spinoff (USD 500 million), Pony.ai (USD 462 million, Series B), Inceptio.ai (USD 100 million).  The descending enthusiasm of investors could have resulted from the repeatedly postponed commercialization timeline of AV technology. Both giant companies like Google's Waymo and ambitious startups as Momenta once claimed that they would materialize mass production of Level-4 autonomous driving vehicles by 2020. Yet, no single company has realized the goal, due to immature technology, stubbornly high costs and inadequate regulations.  While the investors are getting more discreet on their bets, their expectations remain high. Though the number of deals lessened in the past two years, the volume of money raised in each deal is getting higher. At the beginning of this year, Chinese AV startup Pony.ai secured USD 500 million from Toyota, yet another industrial investor following Kunlun (300418:SZ) – a gaming company. The injection will sustain the firm's research on L4 in the coming years but might harm the company's independence, in our view.  L4 tech solutions providers need to reconsider their role – RoboTaxi operator, self-driving car maker or tech providers. Choosing the latter means they only earn licensing fees.  It might be hard for driverless technology alone to take a majority portion of ride-hailing trips while the rest relies on customer service, as Waymo executive John Krafcik implied. Leading companies have been operating their driverless fleet in China on a small scale. For instance, WeRide reported a total of 8,396 orders of its RoboTaxi service to Guangzhou citizens, in December 2019. However, point-to-point operations in some urban areas are still the initial stage of commercialization.  Like Waymo, Chinese VC Blue Run Capital expressed a similar opinion. OEMs, software integrators and channels surrounding the core OEMs are their priority for opportunities of artificial intelligence (AI). OEMs integrate upstream, downstream and third-party resources efficiently. In the direction of AV, those who focus on parts of the value chain can fonds the course hard, as one closes the loop of demand and supply, creating less value. The company has invested in Lixiang four times, the next being – maybe – China EV stocks after NIO (NIO:NYSE).  Who's the next in Internet giants' shopping bags? Internet/industrial conglomerates have an endless appetite for cutting-edge technologies due to the fear of missing out (FOMO). Their deep pockets support the money needed for acquiring the share of a business when they feel there can be a possible revenue synergy going on.  In the auto industry, whose history is almost a history of M&As, we saw many mega-deals happen in the past five years. Chipmakers and tier-1 suppliers – sensitive to the shifts of world science and technology – are engaging in the game. Intel's USD 15.3 billion acquisition of Mobileye and Delphi's several deals is a clear sign. Pure-tech companies that have technologies but are struggling to step into the growth/mature stage and find the unviable business model are being exposed. A leaf in the storm  We view DiDi's driverless service launch in Shanghai as a significant milestone for the auto industry and, at the same time, a considerable challenge to startups in the same vein. DiDi's peers – not smaller ones in the ride-hailing niche but tech giants – will react accordingly, as the cost of missing new chances may be infinite, just as Baidu missed the opportunity of mobile apps and content recommendation in the 4G era.  The large addressable market and potential revenue synergy is luring BAT (Baidu, Alibaba and Tencent) and TMD (Toutiao, Meituan Dianping and DiDi) to join the driverless car game. Meituan, for instance, has been developing and investing in last-mile delivery AVs to better support its food delivery segment. Its new bet on Lixiang shows its ambitions in networked mobility as well.  The greatest strength for Internet giants to rule the AV business is the solid user foundation created by their primary business. ByteDance (BD), for instance – the Daily Average User (DAU) of its hottest app, Douyin (China’s counterpart to TikTok), reached 400 million as of January, the number having hit 900 million during China's lockdown. The advantage that BD has on traffic entry and its intelligent recommendation systems is paving the way to the Internet of Vehicles (IoV). It will take full advantage of in-car times of drivers and passengers by providing short-video content and expects to commercialize from advertising.  Alibaba has made a presence on the upper stream, investing/building ventures of HD map (AutoNavi) and IoV/V2X (Banma Network). E-commerce giants like Alibaba and JD.com all research on autonomous long-haul freight where L4 Autonomous Truck companies like TuSimple Inceptio and Plus.ai leads the game.  The bottom line As DiDi shows a clear mission to envisage itself as operating fleets of autonomous robotaxis in the next ten years, BAT and TM need to consider engaging more in the game. The need to understand who develops owns and operates the driverless robotaxis or trucks and the surrounding systems, and further, how their advance computing capabilities will help or hinder their entry into the market with their more-than-ten-billion customers, is crucial. They can provide the whole autonomous network with the required infrastructure and best customer experience and move the needle for the autonomous driving industry. 

Briefing
Jul 7, 2020 · Techweb
Briefing
Jul 7, 2020 · Techweb
Briefing
Jul 1, 2020 · TechWeb
News EO
Jun 30, 2020
report
News EO
Jun 30, 2020

India Bans Chinese Apps: BAT and ByteDance Are Most Affected

As the Indian government’s further reaction to the border conflict between India and China on June 17 – which caused 20 fatalities among Indian soldiers – 59 Chinese apps have been banned by the Indian government. India claims the action is out of the concerns over cybersecurity and public order. Chinese companies along with capital have been rushing into India’s vast but unoccupied market since 2014. Within five years, Chinese vendors have taken over 60% of the smartphone market in India. TikTok, the pivotal product of Beijing-based software juggernaut ByteDance, activated approximately 200 million Indian users. Now, Chinese investments are deep-rooted in the Indian economy, with USD 6.2 billion in myriad sectors, including hardware, software and other tech-driven domains. This ban on Chinese apps on June 29 is mainly targeting three major Chinese tech giants – Baidu (BIDU:NASDAQ), Alibaba (BABA:NYSE) and Tencent (00700:HKEX), which are dubbed the 'BAT' companies – as well as the emerging giant ByteDance. Half of the banned apps are under the reign of BAT and ByteDance. Companies like Xiaomi, Meitu and Kingsoft have also been affected, too. Xiaomi, for instance, had planned to drive profits through Internet services rather than purely by selling hardware. The ban of the Mi Community and Mi Video Call will surely impede Xiaomi’s service delivery. For the Kingsoft group, Cheetah Browser comprised over 65% of the total revenue in 2019. These companies are apparently doomed to face significant user declines in the near future. Video platforms, including 'short' and 'long' videos, are the most banned apps, followed by online tools, cameras, browsers and social media. The categories indicate that India's concern may not be constrained in data security only. China's cultural and political influence in India almost definitely lies on the red lines. Businesses from China in the content-related area may not be a strong choice to back in the Indian market anymore, considering such policies. 

Analysis EO
Jun 23, 2020
report
Analysis EO
Jun 23, 2020

China’s ‘618’ Shopping Festival 2020: Huawei and Xiaomi Dominate on Tmall

► Against the backdrop of lavish subsidies and the rapid development of livestreaming technologies, Tmall held the biggest-ever 618 shopping festival. ► Huawei and Xiaomi were comfortably ahead of other Chinese vendors in the 618 festival in terms of smartphone and wearables sales.  ► Huawei showed an abundant strength in products and consumer coverage, outplaying Xiaomi and other vendors. ► Appliance maverick GREE triumphed through its CEO’s livestreaming stunts, bringing a potential threat to Huawei and Xiaomi’s IoT strategies. Tmall, an e-commerce platform operated by Alibaba Group (BABA:NYSE), once again led the 618 Shopping Festival, with a CNY 698.2 billion gross merchandise value (GMV). The first hour of June 18 witnessed a 100% Y-o-Y growth in transaction volume. Two engines drove the consumption craze. First, to boost the economy, Tmall, along with other leading e-commerce platforms such as JD.com (JD:NASDAQ) and Suning (002024:SZ), handed out shopping vouchers generously at a CNY 10 billion level. Second, more widely applied livestreaming promos for makeup, clothing and 3C (computer, communication, and consumer) electronics products, lifted the sales to an even greater volume. Some had anticipated a downturn caused by quarantine or people’s reluctance of going to crowded malls – rather the opposite came to pass. A currently shrinking electronics market was actively seeking its redemption during this shopping festival, however a more intense level of competition was waiting for all players. Apple (AAPL:NASDAQ), the world-leading electronics giant, joined the shopping festival on Tmall for the first time. Chinese electronics vendors such as Huawei and Xiaomi (01810:HKEX) didn’t want to be outdone as well, thus the marketing events stimulated people’s purchase desires with bare stops. For the full category sales, Huawei and Xiaomi achieved thrilling results, taking the first and second position among main Chinese electronics players in Tmall sales respectively and leaving the third far behind, with approximately CNY 1 billion extra sales. The sales of OPPO and vivo (OV) somehow stumbled this year, based on data from Tmall provided by iyiou.com, a sister publication of EqualOcean, as the two vendors did not release their official numbers for the shopping festival. It is likely that, no matter how polished one’s promotional statement is, it cannot make up for the downward slope in sales. Pushed by the pandemic, OVs had to shift their sales from offline to online, which required a bit more time for them to adjust. In terms of smartphones and smart wearables, the data reveals a cozy duopoly for Huawei and Xiaomi. For the smart wearables, other players such as Samsung, Huami and OPPO still have a chance of bouncing back to the top, since the wearable market in China still has a large group of new users compared with the smartphone market.  Though the 5G data and related applications have not yet shaped 5G smartphone as a necessity, the phones featured for this tech have already occupied the peak of new sales. Apparently, the demand is shaped by vendors’ tricky promotion on the new generation of communication technology. Huawei and Xiaomi somehow presented a subtle switch in terms of product layout. Xiaomi in 2020 changed the strategy of smartphones to a concentrated product route while Huawei seems to have a broader price coverage and target customer groups. Xiaomi’s Mi 10 and Redmi K30 are the only two specs that have taken most of the promotion resources. For Huawei, Y series, P series, Nova series and series under the Honor brand are all indulged by the company’s marketing department and the customers, covering unit prices from under CNY 1,000 to 7,500. Xiaomi’s overall production and sales capacity is dragging its performance behind Huawei, as it won the solid second position only by two specs.    Chinese brands did a fairly great job in terms of home appliances. The top 3 positions are all taken by Chinese vendors – GREE, Haier (600690:SZ) and Midea (000333:SZ) – and left a CNY 1 billion sales gap for the fourth brand, Siemens. GREE should credit the sales boost in this year’s 618 to the livestreaming hype. GREE’s CEO, Ms. Dong Mingzhu, has been actively practicing livestreaming sales since April this year. After a two-month phase of testing and improvement, CNY 17.8 billion of sales were achieved through her five 618 livestreaming events. The 618 sales of 17.8 billion in 2020 represent approximately 10% of GREE’s total revenue in 2019, marking a true breakthrough in the livestreaming era. Midea’s top managers followed GREE’s footsteps with a populist attendance in livestreaming activities. However early birds are the ones to enjoy the worm – and Midea does not seem to overachieve in online promotions. The strong branding still supported Midea and Haier with decent sales. The top 3 appliance vendors still showed a strong competitiveness, which brought potential threats to Huawei and Xiaomi’s IoT and smart home strategies. 

News EO
Jun 22, 2020
report
News EO
Jun 22, 2020

Alibaba and JD.com Hit Record-high Sales During the ‘618 Shopping Festival’

► Alibaba achieved CNY 698.2 billion sales on June 18; 3C and home appliances are the most popular categories. ► JD.com reached CNY 269.1 million sales, and more than 91% of orders are same-day deliveries or next-day deliveries conducted by JD Logistics. The annual ‘618 Shopping Festival’ from June 1 to June 18 came to an end, signaling China’s economic recovery. Alibaba and JD.com hit new record-high sales volumes of CNY 698.2 billion and CNY 269.1 billion, respectively.   Alibaba announced that the platform, local governments and merchants issued a total of CNY 14 billion coupons and subsidies during ‘618.’ Taobao’s small and medium-sized merchants received a total of 1 billion more orders compared to the same period last year, benefiting from Alibaba’s ‘Spring Thunder Plan’ which aims to support small and medium businesses.   On Tmall platform, one hour after the pre-sale, the transaction amount has reached five times over a year ago. Home appliances are one of the hottest product categories. Gree topped the list with 1.36 billion units sold, followed by Haier and Midea. Two overseas brands, Siemens and A.O. Smith squeezed in on the top 10 list, indicating Chinese brands have managed to gain mindshare in the domestic market. Smart TVs, air conditioners, gas stoves, water purifiers, and cooker hoods are customers’ favorites. For Gree, air conditioners are winning sales victories thanks to a high reputation. Washing machines, water heaters and refrigerators are the three best-selling home appliances in Haier. Midea is outstanding in small household appliances such as electric fans, kettles, vacuum cleaners and humidifiers.   As for JD.com, although sales were not as high as Alibaba, it increased by 33.6% compared to the previous year. JD.com said that the sales of 187 brands exceeded CNY 100 million. The sales of fresh agricultural products, health care medical products and kitchenware increased the fastest. Food and beverage, baby products, beauty and skincare were consumed most. Consumers preferred to spend more on mobile phones, household appliances, and computers, digital products in the shopping festival. The cities with the highest enthusiasm for consumption were Beijing, Shanghai, and Guangzhou.   Moreover, JD Logistics, with the advantage of self-operating, further has upgraded the ‘front warehouse’ and realized the ‘minute delivery.’ Urumqi’s first order took only 8 minutes and 21 seconds to complete the delivery. More than 91% of orders are same-day delivery or next-day deliveries, conducted by JD Logistics.

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