Home appliance faucets piled into the new energy vehicle industry chain Who can "left" out of the three models?

Sony, Midea, Gree, Hisense and other leading home appliance companies are crossing borders to seize new opportunities for electric vehicles. Compared with the last round of "car-making" fever of home appliance companies more than a decade ago, the new round of "car-making" heat of home appliance companies did not "collide head-on" with traditional automobile giants, but took a different path, chose a variety of differentiated models, and cut into the industrial chain of new energy vehicles.

Sony announced last week that it will form a joint venture with Honda to provide a mobility service platform for the joint venture's new cars in the future; last month, Midea Group (000333. SZ) invested 10 billion yuan in Anqing, Anhui Province, to build a new auto parts production base, while Gree Electric (000651. Dong Mingzhu, chairman and president of SZ), also said last month that it would make efforts to develop new energy commercial vehicles.

Selling services, selling parts, selling special vehicles, and the three models of "car-making" of home appliance companies, which can go further?

A new round of "car-making" fever in the home appliance industry

On March 4, Sony announced its intention to form a joint venture with Honda to combine its development and application expertise in imaging, sensing, communications, networking, and entertainment technologies with Honda's vehicle development, manufacturing, and aftermarket capabilities to jointly produce and sell high-value-added electric vehicles. The goal is to establish a new company within 2022 and start selling the new company's first electric vehicle in 2025.

That's just two months after Sony announced the founding of Sony Mobility at CES 2022 and two years after Sony launched vision, a smart car concept car at CES 2020. Joining hands with Honda means that Sony's "car building" has officially landed.

Sony's "car-making" is different from the traditional "car-making" concept. Sony mainly provides a "soft" system, because it is the world's largest supplier of image sensors, and has a wealth of entertainment resources such as film and television, music, games, etc., so it wants to use these accumulations to occupy a place in the electric vehicle market, including providing in-car entertainment content systems, driving assistance systems, etc.

Recently, there is news that Volkswagen plans to acquire Huawei's autonomous driving division for billions of euros, a year ago Hon Hai and Geely signed a cooperation agreement, and many cooperation that has occurred or is in the pipeline show that the "marriage" between electronic technology companies and traditional car companies has become a trend. Because the future of smart cars can be regarded as moving smart appliances, is the intersection of new and old forces.

Kenichiro Yoshida, Chairman, President and CEO of Sony Group, said that through the alliance with Honda, he hopes to contribute to mobility with safety, entertainment and adaptability as the core, based on the vision of "making the mobility space full of emotions". Toshihiro Mibe, Honda's director, president and CEO, said the new company will further innovate and promote mobility globally.

On January 5 this year, Sony unveiled VISION-S's all-new SUV concept car at CES 2022. Sony will conduct 5G driving tests starting in April 2021. In terms of safety, with 360-degree sensors installed around the vehicle, Sony is ready to release an L2+ level driver assistance system. In terms of entertainment, Sony offers services such as music, video, games and more.

To put it bluntly, Sony can sell its entertainment content and services on a new generation of smart electric vehicles in the future, accumulating "fans". Sony was once dragged down by the loss of electronic hardware businesses such as color TVs and mobile phones, and now the mobile phone business has been greatly "slimmed down" and the color TV business has been transformed to high-end. In the future of "car building", Sony does not want to take too much risk of hardware profit and loss, but wants to make money for services.

Midea has suffered losses in "car building", and acquired Yunnan bus and other businesses more than a decade ago, which was later terminated. Therefore, this time, Midea does not do the whole car, but makes accessories. On February 16, Midea Industrial Technology's Anqing Welling Auto Parts Co., Ltd. (hereinafter referred to as Anqing Welling) laid the foundation stone for a new base for new energy auto parts, with a total investment of about 11 billion yuan, which is the largest total investment amount in the history of Midea Group. The new base can form an annual production capacity of 60 million sets of auto parts, and achieve an annual output value of 40 billion yuan.

Gree's involvement in new energy vehicles is also based on core components - new energy batteries. In August last year, Gree Electric Appliances acquired a controlling stake in Yinlong New Energy (later renamed "Gree Titanium New Energy"). In February this year, Dong Mingzhu, chairman and president of Gree Electric Appliances, said that Gree Electric Appliances will not do new energy family cars, but can do urban sanitation vehicles and large buses, because Gree Titanium New Energy Company's lithium titanate batteries have advantages in safety.

Open up the second track of new energy vehicles

The lack of growth in the home appliance market in recent years, coupled with the continuous rise in raw material costs, leading home appliance companies are opening up a second track. The transformation from fuel vehicles to new energy vehicles is a new industrial opportunity once in a century, and leading home appliance companies have rushed to this "express train", hoping to rely on their own resources and advantages to get the "admission ticket" to enter the new energy automobile industry chain and form a new growth point.

According to the total data provided by Aowei Cloud Network (AVC) to the first financial reporter, the retail sales of China's home appliance market in 2021 will be 760.3 billion yuan, an increase of 3.6% over 2020, but down 7.4% from 2019. Under the guidance of China's "double carbon" (carbon peak by 2030 and carbon neutrality by 2060), the domestic new energy vehicle market will enter an explosive growth stage in 2021, and domestic new energy vehicle sales are expected to exceed 5 million in 2022 and expand to 30 million in 2030.

Anqing Welling's new base mainly produces power steering motors, new energy vehicle electric compressors, new energy vehicle drive motors and other products, creating a research and development center for thermal management, main drive, auxiliary/intelligent driving three major systems. In the next ten years, Midea Group will invest $1 billion in technical research and strive to become a supplier of system-level solutions for new energy vehicles.

"(New energy vehicles) this track is developing very rapidly, and we sometimes feel that we are not waiting." Fu Yongjun, vice president of Midea Group and president of Midea's industrial technology, said that although Midea has begun layout four years ago, many auto parts will begin mass production in 2021. Midea's rotary carbon dioxide automotive air conditioning compressor has cooperated with Volkswagen and other automotive companies in communication.

Midea is the world's largest supplier of home air conditioning compressors, and its compressor business is expanding from home air conditioning to automotive air conditioning. Chen Jintao, general manager of Welling Auto Parts Company, said that new energy vehicles are different from traditional cars, there is no waste heat of the engine, both refrigeration and heating, so the thermal management system of new energy vehicles has become complicated.

"Our current style of play is 'innovative, difficult, fast'." Chen Jintao said that the core components related to thermal management have been laid out, especially the compressor as the leading product. The pain points of this industry are obvious, including the problem of mileage in winter, the mileage of air conditioning is reduced by half as soon as it is turned on, "these problems we have to help customers to solve."

At the same time, Relying on its own technology and accumulation in motors for home appliances, Midea is also expanding to the motors of new energy vehicles. "In 2021, we completed the delivery of 100 million household air-conditioning compressors and started the production of the first automotive air-conditioning compressor and the first automotive main-drive motor." Fu Yongjun said that the track of new energy vehicles has been paved.

Midea Group said in response to investors' questions on the Shenzhen Stock Exchange Interactive Easy Platform on January 19 this year that Midea continues to break through boundaries. Among them, the mechanical and electrical business group was upgraded to an industrial technology business group, and the new energy vehicle parts business came to the inflection point of take-off.

Dong Mingzhu is also full of confidence in the new energy sector of Gree Electric Appliances. At present, Gree Titanium new energy commercial vehicle products have covered models from 6.8 meters to 18 meters, and at the same time, municipal vehicles, construction machinery, logistics vehicles, hydrogen fuel, hybrid and other models have been laid out.

Hisense Home Appliances (000921. SZ) spent 1.302 billion yuan last March to acquire Japan's Sanden Holdings, gaining about 75% of the voting rights. Sandy Holdings is a Tier 1 manufacturing supplier of automotive air conditioning compressors and automotive air conditioning systems, mainly supplying Japanese and European automotive brands. Hisense and Sanden Holdings will jointly develop technologies such as comprehensive thermal management and vehicle network connectivity for new energy vehicles.

Whether it can be the last "leftover"

The rapidly developing new energy vehicle market looks very good, but due to the long industrial chain, intensified competition, the market has yet to be cultivated, the business model needs to be improved, there are still many challenges and risks, and there is uncertainty about who can become the final winner.

Therefore, Sony has adopted a cooperation model to "land" the dream of building cars. Honda will be responsible for producing its first electric car at its automaker's new joint venture with Sony. In fact, Honda's new pure electric vehicle brand "e: N" the first electric vehicle is about to be launched, and it is also holding hands with Sony to develop high-value-added electric vehicles, also to walk on two legs and increase the chances of success.

For Sony, after a few years of difficult turnaround in electronic businesses such as color TV and mobile phones, it is constantly strengthening its entertainment content business such as games, film and television, and music. Sony is becoming more and more "soft", and from its performance in the third quarter of fiscal 2021 (October-December last year), the Electronics and Solutions business (EP&S) accounted for only 22.66% of Sony's overall revenue.

Sony's revenue increased by 13% year-on-year and operating profit increased by 15% year-on-year, mainly relying on the growth of sales of film and television, music, and sensors. Even Tesla made a profit in fiscal 2020 after losing money for many years, and the profit that year did not rely on selling cars, but on selling carbon emissions. In order to avoid falling back into the quagmire of electronic hardware losses, Sony is quite cautious about getting involved in automotive hardware.

Gree Electric Appliances' acquisition of Yinlong is also a twist and turn. Due to the risks of getting involved in new energy vehicles, a few years ago, Dong Mingzhu's proposal to acquire Yinlong by Gree Electric Appliances was rejected by shareholders, and she had to invest in Yinlong herself. It was not until August 31, 2021 that Gree Electric Appliances participated in the judicial auction and obtained 30.47% of the equity of Yinlong for about 1.828 billion yuan.

At present, Gree Titanium (formerly Yinlong) is still exploring the path of turning around losses. Before being acquired by Gree Electric Appliances, from January to July 2021, Yinlong achieved revenue of 1.058 billion yuan and a net profit loss of 760 million yuan, which was larger than the net profit loss of 688 million yuan in 2020. Gree Electric Appliances said that it will straighten out Yinlong's corporate governance structure, revitalize existing production capacity, and enhance its profitability.

Although mass production of new energy auto parts has begun on a large scale, Midea still feels the pressure to compete. Fu Yongjun said that it is possible that China's new energy vehicle sales will exceed 10 million in 2025, and if it does not become the main supplier on this track before this, it may not have a chance. "The world's martial arts are only fast and unbreakable." In order to shorten the necessary verification cycle to enter the automotive industry, if there is a target enterprise with a certain degree of recognition and experience in the industry, we will also explore the way of entering through mergers and acquisitions. ”

Wen Jianping, chairman of Aowei Cloud Network, analyzed to the first financial reporter that leading home appliance companies are listed companies and need to chase the hot spots in the capital market. Under the guidance of the national strategy, the new energy automobile industry is relatively easy to find funds. At present, the new energy vehicle industry chain is becoming more and more perfect, the entry threshold is declining, and home appliance companies have experience in large-scale manufacturing. However, the core technologies and talents involved in the new energy automobile industry are more demanding than the home appliance industry, and it is still necessary to choose and lay out carefully.