The capital world has summed it up best: Tesla is an iPhone on wheels.

With the iPhone and smartphones in general, the world has seen countless revolutions in business and investment success stories, with fortunes amassed overnight. And as a metaphor, the “iPhone on wheels” can be read at three distinct levels. For starters, cars will transform from luxury items to fast consumables. And, following Tesla, the auto industry will enter the new energy era. Finally, the maturing of smart vehicles will usherin an era of smart mobility involving the entire auto industry.

In November 2020, the General Office of the State Council issued the New Energy Vehicle Industry Development Plan 2021-2035. Under the plan, pure EVs will have become mainstream in terms of new car sales by 2035. From annual sales of less than 10,000 vehicles to more than one million, China’s smart vehicle industry is heading towards the medium and advanced phases in development and setting off another boom in the capital market. 

As a matter of fact, since 2014, China’s smart vehicle brands have been frequently raising funds, and many celebrity entrepreneurs from the internet era have all been harboring a “carmaking dream.” Over the years, emerging carmakers have raised funds in billions, constantly setting new records. In 2020, the US-listed Nio, Lixiang and Xpeng saw, for the first time, a significant rise in their stock prices and exponential growth of their market values.  

On the other hand, with Tesla having set an astounding goal of delivering 500,000 vehicles every year, (Tesla delivered close to 320,000 vehicles over the first three quarters of 2020 globally,) the emerging carmakers have scored impressively. Take November 2020 for example, Nio delivered 5291 vehicles, Lixiang 4646 and Xpeng 4224. It was an amazing show of force in a year severely impacted by the pandemic. As 2020 turned into 2021, the price of Tesla Model Y was reduced by more than 150,000 yuan, leading to a phenomenal 100,000 orders being placed on a single day.    

More important, smart vehicles are triggering changes in the industry. Brand, manufacturing, channel, technology, finance, logistics, consumption and lifestyle choices are all undergoing multidimensional changes, which will, in turn, produce a strong momentum for investment. 

1. Mobility platform services

Based on CPCA data, Chinese indigenous brands are the main force in domestic smart vehicle sales. Even though at present, the 4S model is still the primary auto sales model. Many Chinese brands in China have been engaging in extensive sales model innovation and investment and have, as a matter of fact, invested in a large number of new models such as auto supermarket, brand experience store, service center and community store. Moreover, while setting up new offline outlets, a lot of smart vehicle manufacturers are expanding online collaboration with e-merchants such as Meituan, JD and Tmall and exploration of multiple sales formats including online appointment, offline experience, partnership system and online direct sales. 

In addition, the mobility market is one of the most important sales channels for smart vehicles. As the mobility market continues to expand, more and more smart vehicle manufacturers are investing in incubating their own auto mobility platforms. According to incomplete statistics, over recent years, automakers have set up a large number of mobility companies including 01zhuanche, CAO CAO, SAIC Mobility, T3 Go, OLE, Youpeng CX and Ruqi Mobility.       

Behind the carmakers’ investment in building mobility platforms, their logic for auto sales is similar to that of traditional taxi leasing companies, namely, larger scale and better standardization. In particular, platforms providing clearly defined services and covering multiple cities across the nation will become an important choice in the future for new energy carmakers in digesting production capacity.

Of course, sales volume aside, with the entire auto industry undergoing changes, the identity of a pure-play carmaker will no longer meet the company’s development needs. Transforming into mobility service providers is the main direction for auto companies, and how to deploy in the mobility field is an important step in the transformation. 

It’s worth mentioning that after the previous years’ rapid expansion, China’s shared mobility industry has been running into many hurdles due to the lack of coordinated development with urban planning and regulatory policies. Fewer funding activities were reported in 2020, even though the overall funding scale had exceeded 10 billion yuan. Having been continuously tested by the market, almost all of the main mobility platforms currently in the market feature unique business logic and breakthrough ideas as well as strong capital, heavy traffic and secured OEMs, as they await the next big bang in the market.  

On the other hand, the continuously deepening collaboration between carmakers and mobility platforms has extended to the manufacturing end. November 16, 2020 saw the official release of D1 which was jointly designed and developed by DiDi and BYD. The first electric car in China that was created specifically for shared mobility, D1 has fully factored in the needs of drivers, passengers, asset companies and operating companies in its exterior and interior, software and hardware configuration, performance and safety, and cost of purchase and use. In other words, the pain points have been soothed one by one.   

According to DiDi founder and CEO Cheng Wei, D1 is the first vehicle that charges by kilometer instead of by the entire vehicle. The design of D1 was based on enhancing the utilization rate of the vehicle and fully considered the “mileage cost” of the vehicle, that is, the cost of the vehicle from the moment it leaves the factory to the end of its life, which includes cost per kilometer and depreciation of parts.

With a new distribution channel, a new consumption model and new financial products, this collaboration by DiDi might have just pointed the way for a sustainable “OEM + mobility platform” model. The next explosive growth of mobility platforms is worth looking forward to.  

2. Human-vehicle interaction

Besides the mobility market, investors have their eyes on another market, one that is even more technology-drive ─onboard system and human-vehicle interaction. Different from the PC era and the mobile era, human-vehicle interaction in the auto context introduces disruptive changes. The reason why smart vehicle operation is different from the immersion-style operation of a mobile system is that when the onboard system is in use, that is, during driving, 95% of the user’s focus is on driving behavior and only about 5% of his/her energy and time can be spared to control the onboard system. Different scenarios will lead to dramatic changes in the information carrier ─ changing from text to voice, motion and other forms. 

Statistics have shown that the user’s sight and attention cannot be focused on the onboard system for more than three seconds. Within those three seconds, if the user fails at the operation or repeats the operation until the task is completed, the behavior is considered very dangerous and the cost of trial and error high. This, therefore, determines that the functional logic and information layout of the onboard system be presented in the best way in the shortest time. The specific result achieved is that the design of human-vehicle interaction is closely aligned with user needs and interactive behavior rules in real scenarios so as to ensure that information transmission is extremely efficient.  

In the future, a large number of physical buttons will be replaced by other input methods, especially tough and voice methods. Touch control will improve accuracy, effective feedback mechanisms will be developed, and the application of gesture control will be expanded in middle-to-high-end models. In the meanwhile, because of its convenience and humanization, voice control will become the main interactive method with the advancement of AI technology. And biometric technology will be applied and developed in areas such as fatigue monitoring and eyeball tracking.

Take the voice system for example. At present, human-vehicle interaction is achieved through two types of technology: speech recognition system and natural language processing system. 

Speech recognition system is mainly used to recognize, distinguish and verify the voice of each speaker, and the representative company is Baidu. With an accuracy rate of 98%, its system has reached a near-mature stage, enabling a voice interaction that can support different languages and dialects.

Natural language processing system, on the other hand, automatically understands human languages and approaches human thinking modes. The representative company is iFLYTEK with an accuracy rate of 70% and room for breakthroughs. 

As for facial and gesture recognition system for vehicle owners, it mainly uses computer visual technology to extract facial and graphic information from images. The representative company is SenseTime with an accuracy rate of 99% and capability of delivering near-mature products.

Internet technology giants such as BAT and Huawei are the major providers of the aforementioned applications, while iFLYTEK, SenseTime, AISpeech and Yitu are active players in the AI application field, each with its own strengths. iFLYTEK went IPO more than one decade ago, while SenseTime, Yitu and AISpeech are inching infinitely closer to IPO.

3. Onboard infotainment

Moreover, the smart devices and software services “hidden” inside smart vehicles have been attracting serious investment over recent years. At present, the most obvious consumer-related functions smart vehicles are capable of cover five main areas: navigation and positioning, multimedia, vehicle services, consumption and payment, and communication and social networking.

The first area is navigation and positioning. At present, it mainly encompasses synchronous precise positioning, real-time road conditions, best route, 3D route guidance, 3D navigation and precise map navigation. 

Based on categorization by professionals, there are currently three types of companies providing locations. The first type is the base map provider which provides basic data, as represented by NavInfo, Baidu Map and Amap. The second type is the map service provider which provides solutions for mobility, food takeout, logistics and other scenarios, as represented by Baidu Map, Amap and QQ Map. And the third type is the application provider which implements solutions, as represented by DiDi and Meituan. 

At present, AutoAI and Baidu Map are the relatively dominant providers of onboard navigation systems. At the beginning of 2020, Tesla officially announced that its map data service provider would change to Baidu Map. In other words, Baidu Map will provide Tesla with map data services inside China, and navigation systems on board Tesla vehicles in China and all updating will be based on Baidu Map’s data services. Baidu Map announced the release, for the first time in China, of the SVG (Scalable Vector Graphics) API which would be used in providing Tesla with map data services including base map display, real-time road conditions, POI search and road network, so as to enhance Tesla’s navigation experience. Previously, Tesla’s main provider had been AutoAI.   

The second area is multimedia. At present, it mainly encompasses radio, audio playback, video playback, mobile TV, electronic photo album, life information inquiry and games.

Currently, applications used by the emerging carmakers are mainly from Ximalaya, QingtingFM, LRTS, Kugou and QQ Music. It is almost beyond doubt that the frequency and intensity of the use of content-based media applications inside smart vehicles are second only to navigation. And Nio founder Li Bin once invested, as an individual investor, 200 million yuan in AutoRadio which is the parent company of KaolaFM. 

The third area is vehicle services. At present, it mainly encompasses surveillance and anti-theft, call service, road assistance, remote diagnosis, assisted driving, vehicle insurance, and seat and air conditioning control.

Take road assistance for example. Currently, most of the providers came into being when O2O was on the rise. The majority of them haven’t received any funding or only received one to two rounds of funding. In August 2016, Wuhan Giaa landed in the national share transfer system for small- and medium-sized enterprises. For this type of services, 110 is the largest inflow entry point. The iPaoSOS App, on the other hand, received angel investment from Huagai Capital in 2018. It focuses on vehicle use and mobility assistance software for vehicle owners. With its software, the vehicle owners can contact, through GPS positioning, nearby auto assistance stores and choose to place orders before waiting for the merchants to arrive for repairs.  

The fourth area is consumption and payment. At present, it mainly encompasses smart fueling, in-car payment, multiple payment platform, shopping and consumption, movie ticket purchase, food takeout and flight tickets.

Currently, platform-level companies are still emerging in this area. Taking into consideration license payment and other factors, this type of services should mainly be provided by the emerging carmakers and mobile payment giants.

And the fifth area is multimedia. At present, it mainly encompasses Bluetooth communication, mobile wireless network, onboard SMS, email, onboard WeChat and mobile office.

The emerging carmakers have taken the lead in this area, developing APPs capable of vehicle owner authentication and providing socializing platforms for both insiders and strangers. It remains to be seen whether internet giants Tencent and Kind can take over socializing in an auto scenario by catering to different scenarios.  

4. Onboard camera and radar

In addition to onboard software, smart vehicles are undergoing tremendous changes in hardware due to the widespread use of driverless technology, and these changes have bred a large number of investment opportunities.

For example, for a smart vehicle in the driving mode, its judgment logic is similar to that of a person walking. The eyes first detect obstacles and routes, then the brain makes analyses and decisions on whether to avoid the obstacles or to go straight. The eyes of a smart vehicle mainly consist of cameras, LiDARs, high-precision maps and GPS positioning. And sensing devices including cameras and radars are mainly responsible for collecting information around the body of the vehicle and determining the location of the vehicle.

At present, Tesla has a relatively comprehensive understanding of sensor systems smart vehicles should be equipped with, while the emerging carmakers in China have been lingering in the learning mode for a long while. Based on what Musk has been saying in public, no big changes will be made to Tesla’s onboard sensors in the future. Public information shows that as a standard, Tesla vehicles are equipped with eight cameras, one millimeter-wave radar and twelve ultrasonic radars. 

Up till now, the emerging carmakers in China have mostly adopted Tesla’s plan. However, information from the official channels of various platforms has pointed at LiDAR being used by multiple auto brands in the future. Xpeng, in fact, has claimed that it will achieve self driving through the fusion method of camera + millimeter-wave radar + ultrasonic radar + LiDAR. 

During the 2020 Guangzhou Auto Show, Wang Jun, President of Huawei’s Smart Vehicle Solutions BU, said in a media interview that Huawei’s LiDAR has become a hot product snapped up by auto companies and that Huawei was considering a release in the near future of its entire array of LiDAR products. At the same time, Huawei revealed through public channels that it is conducting LiDAR studies, hoping to not only enhance LiDAR accuracy but reduce the price to below 200 US dollars.

In other words, accuracy improvement and cost reduction of various radars are highly likely to add crucial competition barriers for the branding of the emerging carmakers.  

Currently, the main LiDAR brands are from the following manufacturers:

The first one is Hesai Technology. It was established in 2013 in San Jose in the middle of Silicon Valley in the US, and its headquarters were moved to Shanghai in 2014. Focusing on developing laser sensors, the company has completed angel, A and B rounds of funding and raised a cumulative amount of more than 380 million yuan. Clients it partners with include BMW, Delphi, Continental AG, Aiways, Idriverplus, Roadster.ai and Jingchi.ai.   

The second one is RoboSense. Registered in 2014, it was initially founded by a Ph.D. team at Harbin Institute of Technology. In October 2018, the company completed a round of strategic funding and raised more than 300 million yuan. Investors in this round included Alibaba’s Cainiao, SAIC’s investment platform SAIC Capital and BAIC’s industry investment fund. 

The third one is SureStar. Established in 2005, it is a national-level high-tech enterprise that has been dedicated to the development and manufacturing of laser imaging radar technology and products for a long time. The company started funding in 2013 and has completed seed, A and A+ rounds, although the specific cumulative amount raised has not been disclosed. Clients it partners with include Cainiao and JD.    

The fourth one is Leishen-LiDar. Established in 2015, it is currently in partnership with Geely, DFMC, SXQC and Horizon Robotics.    

And the fifth company is Benewake. Established in June 2015, it is a national-level high-tech joint venture with headquarters in Haidian District in Beijing. The company is dedicated to developing, manufacturing and selling solid-state LiDARs and providing users with customized product solutions and services, and it is committed to its business philosophy of being “the best robot eye in the world”. At present, it has completed A, A+, B and B+ rounds of funding and the investors included IDG Capital, Shunwei Capital, Cathay Capital (Valeo LP), Delta Capital, Keywise and Ecovacs. It has also achieved mass production of its LiDAR products and Audi is one of the clients it partners with. 

On the other hand, there are a larger number of manufacturers of millimeter-wave radars:

One example is Linpowave. Established in 2015, it is a millimeter-wave radar developer, and its products include forward-looking medium-range millimeter-wave radars and side- and backward-looking close-range millimeter-wave radars which can be used in automobiles, ships, aircraft, missiles, security and defense, and other fields. Its investors include LightSilver Capital, 1898VC and Jiuyo Capital.   

Another example is MindCruise. Established in April 2019, it has obtained angel and pre-A rounds of funding.

Because of its unique industry characteristics, the sensor field hasn’t triggered wide-ranging discussions in the venture capital field. The main reasons are as follows: One, sensor manufacturers have limited capacities for growth and the return on investment rate is not as high as that of the internet industry. Two, currently there are not many fields requiring sensor applications. And three, R&D teams under OEMs have multiple advantages in terms of team, time and capital.  

Nonetheless, it can be expected that with the advent of the smart manufacturing era, sensors will be used more and more in smart vehicles and other fields and their market potentials are huge indeed.

5. New infrastructure building: infrastructure for smart vehicles

For smart vehicles, the density of charging stations and battery swap stations in cities is undoubtedly one of the important elements for development. The existence of a sufficient number of charging stations will directly alleviate users’ after-purchase worries.

Public information shows that thanks to strong policy guidance, 2015 saw a huge capital influx, and companies started frantic expansion in order to secure funding. However, poor operation and receding capital had left many companies teetering on the line between profit and loss. At the same time, because of the small user base, it was difficult to achieve scale as measured by traffic volume. Investment institutions, therefore, became more cautious. According to initial statistics, for charging stations, the amount of funding in 2019 was reduced by about 50% from that of 2016.  

Since 2020, the siphon effect caused by new infrastructure building and continuous improvement of operating models have been attracting new players onto the new energy vehicle charging station race track. It’s foreseeable that a small number of leaders will soon receive a new round of massive funding, and enhancing profitability through optimizing operation will be the key to stimulating a new round of funding. 

At present, there are only a handful of platforms that are still vital and continuing to expand through funding. Many companies have announced withdrawal from the charging station market and perished in the darkest moment before dawn. 

One successful company is TELD. A wholly-owned subsidiary of TGOOD, it is mainly engaged in the construction and operation of new energy vehicle charging networks and value-added internet services. Established in 2016 with joint investment from TGOOD and China Development Bank International Investment Ltd., it announced in January 2020 that it had received 1.35 billion yuan in strategic investment from multiple funds and enterprises. 

Another success story is AIpark. Established in 2015, it provides three-in-one solutions and product services for parking, driving and charging, and has since launched AIpark City smart urban parking management system, AIpark One smart parking garage management system, AIpark Sky Eye, AIpark APP and other series of products.

Its development is also more aligned with the capital logic of the internet platform. Since receiving the A round of funding in 2017, it has also obtained investment from well-known investment institutions including Gaorong Capital and CICC Capital, and has completed in 2020 a total of four rounds of funding (C, C+, D and D+).

On the other hand, while the charging station model is brewing for exponential growth, other models have been developing rapidly as well. In August 2020, Nio set up Wuhan Weineng Battery. Users no longer need to buy any battery pack during car purchase. They can instead choose to rent battery packs of different capacities based on their actual usage needs and pay monthly service fees. And they can enjoy the same battery swap and flexible battery upgrading services as users who have purchased battery packs. 

Wuhan Weineng Battery lost no time in announcing that it had obtained investment of 200 million yuan. CATL had initiated this investment, and Guotai Junan Securities and Hubei Science and Technology Investment Group had followed. Another round of investment exceeding 100 million yuan was led by Guotai Junan Securities with followers including CATL, FutureX Capital, Three Gorges Capital Holdings Co., Ltd. and other investment institutions. 

In addition, Volkswagen has come up with the idea of a mobile charging robot. At the end of 2019, it went public with this idea for the first time and produced a prototype one year later. It also expressed the wish to soon replace charging infrastructure with innovative solutions since electric vehicles are rapidly becoming popular. “With this robot,” said Mark M?ller, Head of Development at Volkswagen Group Components, “we can turn almost every parking garage into an electric one without having to burden ourselves with any complicated renovation of the electric power infrastructure.”

It is safe to say that with the continuous development of smart vehicles, continuous increase of their market share and their rapid adoption by consumers, outstanding enterprises will burst upon the scene for different scenarios, different habits and different fields. Changes of varying degrees will happen in consumption, application, aftermarket, channels, new materials and other areas, bringing with them more and more opportunities for innovation.