On February 17, a news report by German media manager Magazin spread across the Chinese Internet.
The headline reads: "Volkswagen and Huawei Negotiate Billions of Dollar Deals in China."
In the news report, the original text of Manager Magazin is like this:
The companies have been discussing the takeover of a Huawei unit specializing in autonomous driving for several months, according to stakeholders. The subsidiary of the tech group has 700 employees, around 50 of whom are absolute specialists.
Translated into Chinese:
According to participants in the discussion, Volkswagen and Huawei have been discussing taking over Huawei's autonomous driving division for months. The division has 700 employees, about 50 of whom are absolute experts in the field of autonomous driving.
After reading this passage carefully, I found two interesting points:
First, the source of the report is an insider involved in the discussion between Volkswagen and Huawei on the acquisition, which proves that Volkswagen and Huawei did discuss related matters, and it is not out of thin air.
Second: The subject of the acquisition was "Einer autonomes Fahren spezialisierten Huawei-Einheit", which translates to Chinese is "Huawei's department specializing in autonomous driving development", which has a number of "700 people", including "50 experts in the field".
At present, Huawei's automotive business R&D team has more than 5,000 people, and the number of R&D teams related to intelligent driving has exceeded 2,000 people. Therefore, the acquisition object discussed by Volkswagen and Huawei cannot be the entire Huawei car BU, but more likely to be a subdivision product division under the car BU.
In order to better understand the logic behind this news, it is necessary to first take a look at the current situation of Huawei's automotive business.
01
Huawei handed over the intelligent driving department? Not likely
In 2014, Huawei began to launch autonomous driving projects internally.
On April 17, 2019, Xu Zhijun, Huawei's rotating CEO, announced Huawei's intelligent vehicle strategy and officially entered the intelligent and connected vehicle market.
In a previous media interview with Su Zhen, the former leader of Huawei's intelligent driving department, he clearly stated that the current R& D team size of Huawei's autonomous driving is more than 2,000 people, the annual R & D expenditure is close to 1 billion US dollars, and the scale of R & D investment will maintain an annual growth rate of about 30%. In other words, Huawei rolled up its sleeves and prepared to kill everyone in the car business.
From this perspective, if the German media reports are true, the multi-billion dollar negotiated purchase price does make it difficult for Huawei to accept. In addition, Huawei attaches great importance to research and development, and chooses to cut off its arm at this time node, handing over the "intelligent driving" department as one of the cores of research and development, which is almost impossible for Huawei.
Since 2019, Huawei's automotive business organizational structure has undergone many adjustments. Under the current structure, Yu Chengdong is a first-class leader, and Wang Jun and Bian Honglin are in charge of operation and research and development. There are three sections in consumer BG that are directly related to cars, namely: Hongmeng OS Car Machine Edition, HiCar, and Huawei Smart Selection. The car BU is mainly divided into product research and development department and research and development management department.
In this organizational chart compiled by Caijing, we can clearly see that Yu Chengdong has strictly divided the commercial organization and R&D organization of the automobile business after serving as CEO, and the structure has become more mature.
Under this framework, the car BU is similar to the traditional Tier 1 and Tier 2, and similar to the positioning of the Bosch Group, mainly providing related components.
Consumer BG is an innovative model: it is responsible for providing solutions such as "Huawei Inside" or "HI", Huawei will cooperate with car companies, HI business department will discuss relevant introduction work with relevant car companies in the early stage, Huawei's global ecological business department is responsible for the actual sales of vehicles, and Huawei consumer business department provides marketing and sales solutions.
At present, car companies cooperating with Huawei in this form include Changan Avita, BAIC Jihu and AITO Q&I. From the beginning of the birth of AITO, Yu Chengdong has always treated him as a "pro-son" and generally laboriously shouted. According to Tencent Auto's report, in order to sell aito M5 well, Huawei poached a number of sales and marketing talents from car companies.
Yu Chengdong also said that Huawei will build its partners into the most profitable brands:
"We plan to sell cars in 1,000 stores by the end of this year, assuming that each store can sell 30 units per month, so I set a challenge goal of reaching 30,000 units per month, so that our partner car companies will have annual sales of 100 billion yuan."
Judging from Yu Chengdong's attitude, Huawei currently prefers the "cooperative car sales" business of consumer BG. But what needs to be made clear is that whether it is the car BU or the consumer BG, it is empty talk to get rid of strong research and development capabilities.
02
Urgently increase the size of the intelligent public
In recent years, Volkswagen has been making continuous moves in electrification and intelligent transformation.
Since 2020, Volkswagen CEO Diess has frequently shown favor to Musk, and on October 16, 2020, Diess invited Ma Yilong to speak to 200 executives online to motivate their work.
Des even went so far as to turn against the unions, risking forced abdication and announcing through various media outlets that Volkswagen would cut 30,000 jobs in the electrification reform.
In Volkswagen's 70th round of investment plans for 2022-2026, 89 billion euros were invested in electric vehicles and digitalization, accounting for 56% of the total planned investment.
Among them, the investment plan for autonomous driving and digital transformation reached 30 billion euros (about 215 billion yuan), an increase of 10% over the previous plan.
Just last Wednesday, In an interview, Diess said he expected the auto industry to achieve the spread of smart driving by 2025, and Volkswagen is seeking further partnerships to improve its self-sufficiency in software.
On March 30, 2021, Volkswagen announced the establishment of the CARIAD software division, and Volkswagen also said that it will launch a software platform adapted to all models of the Volkswagen Group in 2025.
In terms of autonomous driving, on July 13, 2019, Volkswagen and Ford jointly invested in argo AI, an autonomous driving company, and Volkswagen spent $2.6 billion to acquire a 40% stake equivalent to Ford to develop autonomous driving technology in the United States and Europe. On January 25, 2022, Volkswagen CARIAD Software corporation announced a partnership with the Bosch Group to jointly develop consumer-grade driver assistance systems and autonomous driving systems.
Realistically speaking, Volkswagen's assisted driving performance on the MEB platform is remarkable, and Volkswagen is also eager to consolidate its advantage in this regard and even catch up with the head players. Therefore, the rumors of the acquisition of Huawei's intelligent driving department are indeed unexpected and reasonable.
The performance of Volkswagen's existing driver assistance system has performed well in traditional car companies, and the frequent investment behavior in this field also implies that Volkswagen hopes to accelerate its research and development by cooperating with other companies, which is also a common practice that everyone hopes to lead in the era of electric vehicles with inner volume.
03
Write at the end
Returning to the source of this news, the participants said:
The price expectations of the two parties are very different. The two sides disagree over prices, which range from a few hundred million dollars to $1 billion.
And the insider also said that the negotiations have reached a stalemate and there is no progress so far.
In fact, domestic reports on the cooperation between Volkswagen and Huawei are far earlier than the German media.
As early as last October, it was reported that Huawei and Volkswagen Group were forming a joint venture. The Volkswagen Group has invested in the joint venture as the controlling party, and Huawei mainly provides technology, including software technologies such as autonomous driving and chip patents.
The establishment of a joint venture is much more reasonable than the direct acquisition reported in this report. On the one hand, Huawei placed its hopes on the automotive business during the difficult period when the mobile phone business encountered a bottleneck, and Huawei also revealed the idea of independently establishing an independent company for the intelligent driving business. Packaging and selling the core departments is a very low-yield solution.
What is reminiscent is that according to Dr. Feng Sihan, CEO of Volkswagen Group (China), in a previous interview, Volkswagen CARIAD Software will set up a team in Shanghai focusing on autonomous driving research and development, coincidentally, Huawei's intelligent driving research and development center is also located in Shanghai.
On the other hand, China's strong autonomous driving research and development capabilities and the strength of the electric vehicle market also make it inevitable for car companies to find local partners.
In February 2021, Toyota invested $400 million in self-driving company Pony Chi Heng to deepen and expand the cooperation between the two companies in the field of mobility. On this basis, the two companies will further accelerate the development and commercial application of autonomous driving.
In September 2021, GM invested $300 million in momenta, an autonomous driving company, and GM said its agreement with Momenta will enable GM to accelerate the next-generation solution tailored to Chinese consumers and put it into use. In November, Toyota also participated in Momenta's Series C+ funding round.
For Huawei, the sales of the first car, the Cyrus SF5, incubated by the "Huawei Smart Choice" model, are not ideal. According to the data of the Association of Passenger Vehicles, from July to December last year, the sales volume of the Cyris SF5 was 94 vehicles, 715 vehicles, 1,040 vehicles, 2,205 vehicles, 1,446 vehicles, and 1,089 vehicles, respectively, and the total annual sales volume was only 8,086 vehicles.
Regardless of whether such sales performance is related to the low brand appeal of Xilis itself, whether car companies can accept that third parties firmly grasp the core technology of intelligent driving and whether they are willing to cooperate is another issue that cannot be ignored.
At last year's saicur shareholders' meeting, Chen Hong, chairman of SAIC, said that it was unacceptable for SAIC to cooperate with third-party companies such as Huawei for autonomous driving. Chen Hong said: "It's like a company providing us with a holistic solution, so that it becomes the soul and SAIC becomes the shell." SAIC wants to take its soul into its own hands."
In this way, the method of establishing a joint venture between Volkswagen and Huawei may be the best solution to this problem. On the one hand, the public can keep the "soul" from being betrayed, on the other hand, independent companies can also be more convenient for financing and not bound by the framework of the parent company. In addition, on July 10, 2021, under the leadership of the Chinese Prime Minister and the German Chancellor, Huawei and Audi signed a strategic cooperation memorandum on jointly developing the Internet of Vehicles, and the Audi A6L equipped with Huawei ADS was also seen by the media before, and Huawei and Volkswagen have a basis for cooperation.
Volkswagen issued an official response on February 18 to reports on the acquisition of Huawei's intelligent driving part, but only four words: "No comment."
The dust has not yet settled, and the future cooperation methods between Volkswagen and Huawei are still confused.
Author: Mingming
Edit: Reinhardt
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