Mobileye's application for an IPO may just be the beginning.
Author | Ding Yi
Edit | Wen Liang
One of the biggest IPOs in the autonomous driving industry may be just around the corner.
In December last year, Intel announced plans to spin off Mobileye to go public; and recently, it was reported that Intel had secretly filed registration documents with the U.S. Securities and Exchange Commission to apply for an initial public offering of Mobileye's new shares, with a valuation of up to $50 billion.
It's not just Mobileye. On February 20 this year, it was reported that Continental was considering splitting four businesses, including autonomous driving. There have also been rumors that Baidu will spin off the autonomous driving division.
The word "spin-off" refers to the formation of a new company by divesting part of its internal business into a new company, and the shares of the new company are distributed according to the shareholding ratio of the original shareholders or directly held by the company on behalf of the shareholders, thus forming a parent and subsidiary company or a brother company.
In recent years, the news of the spin-off of the autonomous driving department has been more frequent and intensive, which may be a signal released by the company like an animal instinct before an event, or a response to the prediction of a certain trend by the self-driving players. Either way, this imperceptible information is a projection of current or future developments in the autonomous driving industry.
So, what are the reasons behind a spin-off incident and the possibility of industry development?
Spin-off business, a business that makes no loss?
After announcing the spin-off of Mobileye, Intel CEO Pat Kilsinger said: "Investor interest in self-driving cars is growing, we don't see the full value of this business yet, and a public listing will help unlock Mobileye's potential." ”
In fact, Pat Kirsinger's views have been able to represent the significance of the vast majority of the spin-offs.
After the spin-off of the company's business, the new company will generally usher in two outcomes - spin-off listing and mergers and acquisitions. Either way, it can promote the development of the business and the company to a certain extent.
According to the data, from January to November 2021 alone, domestic A-share listed companies issued 170 spin-off announcements. It is inferred from this that in addition to A-share listed companies, more companies may have spin-off plans.
Compared with listed companies with mature development in the industry, automotive industry companies have more consideration for spinning off the autonomous driving business.
Since Google set off a boom in self-driving technology research and development in 2009, this boom has continued to surge for 14 years, and it has become more and more turbulent. However, due to the limitations of technology to be improved, laws and policies, and public acceptance, it is still difficult to promote and apply autonomous driving technology on a large scale in various countries, let alone achieve commercialization.
Autonomous driving departments that are struggling to make their own living either choose to accept financial support from their parent companies or obtain external financing. If the autonomous driving department relies on the parent company for a long time to transfuse blood, it is not a burden for the parent company.
As a result, some companies have turned their attention to spin-offs.
For the parent company, by splitting the autonomous driving division to achieve self-reduction, you can get more beautiful financial data and more revenue.
Even with a market capitalization of $2 trillion, Google introduced its first external financing by March 2020 after 11 years of continuous blood transfusions for waymo, the self-driving arm.
In addition, the spin-off of the autonomous driving business with weaker connections to the original business but with a larger imagination space will allow the parent company and the new company to obtain a higher market valuation.
Generally speaking, the price-to-earnings ratio of comprehensive listed companies is lower than that of professional listed companies. Listed companies can focus more on the company's main business by spinning off the department, thereby eliminating the problem of diminishing employee compensation caused by excessive expansion and improving the company's efficiency. A more structured business and transparent operating conditions will also make it easier for the market to judge the valuation of the company, which may increase the market valuation of both the parent company and the new company.
It is worth noting that technology companies are more likely to obtain high valuations in the capital markets. Once the spin-off autonomous driving company is listed, the original company can obtain excess investment benefits by holding shares.
For new companies, cutting off the shackles and going into battle lightly may speed up development.
After the spin-off and independence, the decision-making mechanism and management mechanism of the new company will usher in changes, with more independent decision-making power and more rapid information transmission. On the other hand, the new company will also establish incentives for managers to promote new company managers through incentives such as stock options.
In addition, if the new company is not well managed, it is very likely to be acquired by competitors for lower costs, and this threat will also force the new company to develop well.
The most representative negative case is Vininger, who came out of automotive electronics and autonomous driving. After the spin-off of The Vininger, which includes electronics businesses such as radar, vision systems and driver assistance software, sales and net profits have declined for five consecutive years after the spin-off and independence of Vinninger, and finally Veninger sold for $3.8 billion.
He Xiongsong, executive general manager of Chentao Capital, believes that in order to share the risk, large companies often split multiple departments at the same time, and even if the spin-off autonomous driving company is not well managed, it will not affect the performance of the parent company too much. Therefore, in his view, the benefits of spin-offs far outweigh the disadvantages for a company.
Honey of A, Yellow Lotus of B
If you pay attention to the past incidents of spin-offs of autonomous driving business, it is not difficult to find that the number of supplier spin-offs worldwide far exceeds that of OEMs. For example, Delphi spins off Aptiv, Continental spins off Autonomous Driving and Mobility, Intel spins off Mobileye, and South Korean parts supplier Mando spins off the autonomous driving business MMS.
The spin-off of the autonomous driving business means, to some extent, that a company regards the autonomous driving business as one of the key directions for the future development of the company. However, in areas that seem to be a battle between OEMs and autonomous driving companies, suppliers are moving far more than OEMs.
The reason behind this phenomenon may be that the main engine factory has less revenue from spinning off the autonomous driving business.
He Xiongsong believes that when new car companies such as Tesla and "Wei Xiaoli" put the research and development of autonomous driving technology on the agenda, OEMs did not realize that this technology would have such a profound impact on the future development of the automotive industry. When Tesla's market value soared after 2019, and even broke through the trillion-dollar mark, many OEMs refocused on this technology that had been despised, and instead focused on the development of self-driving technology and recruited relevant talents. However, with just a few years of research and development history and a small number of technical talents, it is more difficult to support the spin-off of the autonomous driving business of the main engine factory.
Even if some OEMs have built a certain scale of autonomous driving research and development teams, the spin-off will not necessarily accelerate the development of the autonomous driving sector.
At present, some domestic OEMs have incubated autonomous driving companies and made certain achievements. However, most of its products and technologies only serve the parent company, and almost no cooperation with other OEMs. Or, the background of the main engine factory limits the possibility of cooperation with other OEMs.
The autonomous driving companies with the aura of the main engine factory on their heads, even if they have repeatedly emphasized the independence of the company's operation, it is still difficult to ignore the close connection between them and the main engine factory. For other OEMs, cooperation means handing over the "soul" of the car to the opponent. Therefore, if the autonomous driving company that has been born out of the main engine factory goes to a broader market, other OEMs will inevitably be jealous when cooperating with them.
In addition, the development of autonomous driving technology is not only a way out of the spin-off, some rich OEMs can provide R & D funds, cooperation resources, product applications and other support for the autonomous driving department, and the two sides can promote each other's development.
Because of this, almost all OEMs around the world firmly grasp the autonomous driving department in their hands, hoping to accelerate technology research and development and mass production applications in the market environment of competing autonomous driving technology.
It is worth noting that the CEOs of GM and Cruise had disputed over whether to split Crisse, which ended with the departure of Dan Ammann, the former Cruise CEO who advocated the split.
Due to the difference in role attributes, it can cooperate with OEMs around the world more flexibly and freely, so that suppliers can reap more benefits in the spin-off, so the number of spin-offs of autonomous driving business far exceeds that of OEMs.
This is just one of the advantages. By decentralizing autonomous driving management teams, suppliers can more quickly establish organizational structures that adapt to new technological developments.
A person in the industry revealed to The New Intelligent Driving that no matter what kind of company, it needs a strong impetus when transforming, and this driving force often comes from people who have strong defining capabilities and control over the company.
However, looking at the existing market pattern, the vast majority of suppliers are operated by professional managers or professional management teams, and it is very challenging and difficult to do things that hurt bones and change genes under such conditions.
Because of this, the autonomous driving business must be completely spun off from the original company, otherwise it is easy to resemble an octopus under the simultaneous promotion of various forces, and each foot wants to go forward, and it may still stay in place when it is pulled and pulled.
However, at present, the market is still dominated by traditional fuel vehicles, and it is difficult for suppliers to completely reverse the direction of business under the great market demand. By splitting the autonomous driving business, it is possible to ensure that the business develops rapidly without interference, without affecting the company's original business.
Whether to spin off the autonomous driving sector is a matter of opinion.
When the river is bridged, another way is found
Although most OEMs have not yet made it clear whether they want to spin off the autonomous driving department, they have taken different forms to accelerate the research and development of autonomous driving: domestic OEMs such as Great Wall Motors and FAW Jiefang have established Zhixing and Zhitu Technology Autonomous Driving Companies, and foreign OEMs such as Volkswagen has established an independent entity for autonomous driving, Volkswagen Autonomy.
These independent companies pin their hopes on traditional OEMs to catch up at the level of autonomous driving software and their determination to embrace change.
After all, the traditional OEMs have been deeply engaged in the automotive industry for decades or even more than a hundred years, and their adherence to the corporate system and the understanding of the automotive system architecture have basically been deeply rooted, and it is not easy to break their original shackles, especially the huge difference in thinking concepts.
An industry insider who works in a traditional main engine factory once told New Intelligent Driving:
In the process of softwareization, the traditional automotive industry has considered too many safety factors and always wants to build a zero-defect system, which will slow down the progress to a certain extent.
Moreover, the strategy determines the talent gathered in the environment. These "talents" are more inclined to the system supported by Newtonian mechanics, believing that 1+1 constitutes 2; while those who support information-based car building are more optimistic about the uncertainty of the world, they think that 1+1 > 2, or 1+1
As for smaller self-driving startups, some of them try to differentiate different businesses into independent brands, such as Xiaoma Zhixing, which builds the truck business as a "Xiaoma Zhixing" and registers two companies for them. Xiaoma Zhixing once expressed its determination in the public account article: "Will promote the two core businesses of passenger and commercial at full speed".
After entering 2021, the stronger the stronger the autonomous driving industry, the weaker the Matthew effect is more obvious, and the criteria for judging the maturity of a company's autonomous driving technology are also biased from indicators such as road test mileage and takeover rate to commercial orders that directly affect the existence of the company.
The size of commercial orders and the size of the amount will determine to a large extent whether the company can attract more attention, solicit a new round of investment, and obtain more orders.
Therefore, OEMs and technology companies are trying to find their own optimal solutions to accelerate the development and application of autonomous driving technology.
Write at the end
To spin off the autonomous driving business, different OEMs and suppliers have their own considerations, so even the leading players in the industry also adopt different strategies.
However, Internet technology companies have a fairly consistent choice for the autonomous driving business.
In May last year, Google announced that it intends to spin off Waymo to make it public; in 2020, Yandex from Russia reached an agreement with Uber to spin off the autonomous driving department of MLU BV, a joint venture between the two companies, making it an independent entity; on March 10, 2017, Baidu CEO Robin Li revealed in an interview with Bloomberg that when the time is ripe, Baidu will consider splitting the autonomous driving division and independently attracting investment and partners.
Although the three technology companies come from different countries, they have certain similarities: with search engines as the starting point for development, their businesses are complex and diverse, and autonomous driving technology remains a leader in their own country and even in the world. As well, the spin-off of the autonomous driving division will be an option.
In response to the phenomenon of technology companies spinning off businesses, Brooke Masters, chief business commentator at the Financial Times, believes that technology giants are essentially integrated companies, and once they encounter difficulties in development, small businesses will take the opportunity to grow into new large groups.
To a certain extent, her remarks seem to emphasize that after the technology giant spins off its business, the new company will have stronger resilience and competitiveness.
Self-reform, accelerated sprint, the survival race of self-driving companies is essentially an adventure that does not miss any new opportunities. Whether it is split or not is one of the tests.
END
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