Luxshare built a car, intended for Apple?

"Fruit Chain" faucet Luxshare Precision (002475. SZ) is going to build a car.

But more precisely, Luxshare Precision did not personally build cars, but through OEM cooperation, it ranked among the first-class suppliers of the depot.

Build a good car for someone else

On the evening of February 11, Luxun Precision issued an announcement that it had signed a Strategic Cooperation Framework Agreement with Chery Holdings, Chery Holdings and Chery New Energy (hereinafter collectively referred to as "Chery Group") in Wuhu, Anhui Province, to form a joint venture with Chery New Energy to specialize in the research and development and manufacturing of new energy vehicles. The joint venture will be established within 3 months after the signing of the agreement, with Lixun Precision holding 30% of the shares and Chery New Energy holding 70% of the shares. In terms of business, Chery is good at the vehicle business, the joint venture company will be led by Chery, and Luxshare Precision will coordinate in terms of business and customers. For details, see yin persimmon finance reported on February 11 that "the controlling shareholder 10 billion shares in Chery, the "fruit chain" on the Lixun precision also wants to build a car"

The announcement emphasizes that this agreement is exclusive, that is, Chery Group shall not cooperate with enterprises other than Lixun Precision in the OEM car manufacturing business. According to Caijing, Chery has previously had long-term contact with foundry giant Foxconn.

In the investor conference call disclosed on February 13, Luxshare Precision said that for this cooperation, both sides agree that the arrival of the OEM model is inevitable, Luxshare Precision does not build cars, but cooperates with Chery to develop another new industry - "build a good car for others", that is, the vehicle ODM model.

Generally speaking, the OEM (Original Equipment Manufacture Original Equipment Manufacturer) model refers to "oem production", the producer does not directly produce the product, and the ODM is the abbreviation of The Origin Design Manufacturer, which literally translates to "original design manufacturer", which refers to the producer's design of a product, in some cases may be favored by some other enterprises, requiring the latter brand name to produce, Or modify the design according to the needs to produce, commonly known as "OEM". Luxun Precision said that this cooperation will create a precedent for the vehicle ODM business.

At present, the ODM business has a relatively clear landing project, which will be put into production in about the next 12 to 18 months. As for the main target business of the joint venture, it is expected to be the business of foreign traditional brand car companies and the new Smart EV brand business in China.

Aim for Tier 1

In answering why it chose to cooperate with Chery at this point in time, Luxshare Precision bluntly said that it was to seize the window period of entering the core component market with the help of the ODM model, "aiming to participate, focusing on Tier1".

Tier 1, the tier 1 supplier of the depot, is the auto parts supplier whose products are directly supplied to the OEMs. Tier 1 suppliers not only supply assemblies and modules directly to OEMs, but also participate in each other's R&D and design with OEMs, making them the suppliers with the highest participation in the vehicle manufacturing process.

Wang Laichun, chairman and general manager of Luxun Precision, said: "The opportunities brought by Smart EV (smart car + electric vehicle) include not only the whole vehicle, but also the more vitality of Tier1. "In order to achieve Tier1 take-off in the next three five years, cooperation with Chery at present can provide cutting-edge R&D design, mass production platform and sea exit for Xun Precision's automotive core parts business, helping it achieve its medium- and long-term goal of becoming a Tier1 auto parts."

According to public information, Luxun Precision started with the production of connectors, and later developed into a leading enterprise in the Apple industry chain, and has completed the strategic layout of interconnected products in the fields of electronics, communications, automotive, and medical treatment. In the past ten years of Lixun Precision's precipitating automobile business, it has mainly focused on the "nervous system" of the whole vehicle, including low/high voltage vehicle wiring harnesses, special wiring harnesses, etc., and its main customers include domestic traditional car companies, new car-making forces and some large Tier1 manufacturers.

According to the company's financial report, in the first half of 2021, The revenue of Luxshare Precision's automobile business was 1.77 billion yuan, accounting for 3.7% of the total revenue.

Preparing for the Apple Car?

As soon as the news of The joint venture between Luxshare Precision and Chery came out, there were comments that "Luxun is preparing for Apple Cars."

On the one hand, the Apple car that "did not see its people first heard its voice", on the other hand, the "fruit chain" leader announced that the car was aimed at the target of Tier1 leading manufacturers, which made people think that Luxun Precision Car was made for Apple, which is not difficult to understand. In fact, Luxshare Precision also revealed, "With the continuous development of the ODM business, the company's core components business will also be brought into play." ”

Considering that Chery and Huawei have already cooperated in the research and development of relevant car-making technologies since the end of 2020, as well as the possible strategies and partner selection of Apple's future car-making, CITIC Securities believes that Luxshare Precision's current investment is benignly complementary to the original business, and may lay a good foundation for future entry into domestic and foreign customers' vehicle OEM/ODM.

Huafu Securities directly said that through the acquisition of Chery shares and the use of this as a research and development and mass production platform, Luxun Precision can quickly establish a vehicle regulation-level system and build Tier1 capabilities, in preparation for the subsequent OEM and supply of parts for Apple.

Judging from the reaction of the capital market, most investors still buy luxshare precision's car-making plan, and on February 14, lixun precision rushed higher in the morning, rising more than 6% at one point, and narrowed to 2.07% as of the close.

However, Luxun Precision pointed out in the investor meeting that there are essential business differences and management differences between doing branding and doing ODM. At present, when the ODM car manufacturing business model is less than one million units in the early stage, the company's function is more to assist Chery to develop ODM business and build a good platform.