China's automobile production and sales have ranked first in the world for 15 consecutive years, and the production and sales of new energy vehicles have ranked first in the world for 9 consecutive years. China's rapid development in the automotive industry has made the Chinese people proud and the world "eyed".
However, since the beginning of this year, Ford, Mercedes-Benz, Volkswagen and other major Western car companies have suddenly announced that they will reduce or postpone their electric vehicle plans, and Apple has directly abandoned the car-making business that took 10 years and invested tens of billions of dollars.
At the same time, Xiaomi, which has been on the job for three years, launched its first model, SU7, officially entering the field of new energy vehicles.
Internally, it is seriously involuted, and externally, it faces trade barriers with the sharp increase in exports. With these questions in mind, we interviewed Mr. Miao Wei, member of the Standing Committee of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC), deputy director of the Economic Committee, and former minister of the Ministry of Industry and Information Technology.
After working in China, he worked in the automotive industry almost always from the beginning of a Chinese automobile sales and service company to the head of the Ministry of Industry and Information Technology for more than 40 years. During his tenure at the Ministry of Industry and Information Technology, he was one of the main promoters of China's new energy vehicle policy.
In the office of the Ministry of Industry and Information Technology, this senior auto man reviewed the various twists and turns and stories behind the development of China's new energy vehicle industry with passion, analyzed the current problems and solutions of the domestic new energy vehicle industry, and analyzed the future opportunities and overseas strategies in the field of new energy vehicles from the perspective of international industrial competition.
This article is a synthesis of the interview content and Mr. Miao Wei's book "Lane Change Racing".
Narration: Miao Wei Member of the Standing Committee of the 14th National Committee of the Chinese People's Political Consultative Conference and Deputy Director of the Economic Committee Interview: Lin Dingzhong Deputy Editor-in-Chief of Zhenghe Island Editor: Lin Dingzhong He Jinge Source: Zhenghe Island (ID: zhenghedao)
1. Is vehicle electrification a trap set by the West?
Q: Your book is called "Lane Changing Racing", what do you think is the position of China's auto industry on the track from a global perspective?
Miao Wei: Let me start with this book, why is it called "Lane Change Racing" and not "Lane Change Overtaking"?
New energy vehicles are the first half of the game, characterized by the electrification of power, we have achieved a global lead, but the first half is not the decisive field of the game, the first half is good, laying a good foundation for the second half, the real decision is the second half of the game represented by intelligence.
Q: From Ford in the United States to Mercedes-Benz and Volkswagen in Germany, many Western automakers are scaling back or postponing their electric vehicle plans, and Apple has simply stopped its tens of billions of dollars in its electric vehicle business. Recently, there have been voices saying that the electrification of automobiles is a trap set for us by Europe and the United States. Do you think it's a trap?
Miao Wei: Recently, many large automobile companies in Europe and the United States have indeed retreated from the development of new energy vehicles, and some Western governments have also begun to reduce subsidies for new energy vehicles, such as the United Kingdom, Germany, Sweden, Belgium, etc., and the European Union has also lowered the original plan to achieve full electrification by 2035.
Is the electrification of automobiles a trap set for us by the West? During the two sessions, many CPPCC members asked me this question. Some people even said on the Internet that "the electrification of automobiles is like the 'Star Wars' program of the United States in the past, inducing the Soviet Union to engage in an arms race, how many nuclear warheads do you have, how many nuclear warheads do I have, and finally drag the Soviet Union down."
In the era of traditional fuel vehicles, we are all following, although after so many years of development, the gap is narrowing, but we still follow. The advantage of following is that we have a goal ahead of us, we don't lose our way, and whether we go faster or slower depends on our own development. In the development of new energy vehicles, we have developed too fast and run to the first, which is equivalent to walking into a no-man's land. Without a goal and direction ahead, there will be some confusion.
China has become a leader in the development of new energy vehicles, which means that we have run to the first place in the long-distance race, and it is not surprising that there are laggards behind. Those who retreat now are left behind. We must not slow down or even doubt where we are heading because we are left behind.
Q: In recent years, China's new energy vehicles have developed rapidly. In 2023, vehicle exports reached 4.91 million units, up 57.9% y/y, making it the world's first automaker. What do you think are the key decisions that we're getting right at the national level?
Miao Wei: The most important thing is to adhere to the "three vertical and three horizontal" technical line unswervingly. This is the sum of various technical routes that can see the prospect of industrialization in the world at that time, and looking back today, this is still a forward-looking overall layout, laying the foundation for the technological innovation and industrial development of new energy vehicles in the mainland.
The "three verticals" refer to pure electric vehicles, hybrid electric vehicles, and fuel cell vehicles, and the "three horizontals" refer to the battery and its management system, the motor and its control system, and the multi-energy powertrain control system.
Whether car companies want to take the technical route of hybrid, pure electric or fuel cell is the company's own business. As a policy maker, of course, we must first clarify the scope of new energy vehicles, and we can't call everything new energy vehicles.
Q: Japan's Toyota and Honda take the technical route of hybrid gasoline and electricity, why are they not included in the category of new energy vehicles?
Miao Wei: The reason for this is because the diesel-electric hybrid vehicle still uses the internal combustion engine as the main driving force of the car, and the electric motor only gives some power supplement at full speed and full load, which is not consistent with our original intention of developing new energy vehicles for green environmental protection. Obviously, a hybrid vehicle is very different from a plug-in hybrid vehicle, which is powered by an electric motor.
Q: You are one of the main decision-makers and promoters of China's new energy vehicle development. With the rapid and high-quality development of new energy vehicles in China, what are the important experiences that can be learned from the development of other industries?
Miao Wei: Generally speaking, it can be summarized into five experiences: first, under the leadership of the party, give full play to the significant advantages of the mainland's socialist system and concentrate on doing great things; second, seize the development opportunity of pure electric drive of "changing lanes and overtaking"; third, maintain strategic focus and adhere to a blueprint to the end; fourth, build a technological innovation system dominated by enterprises; fifth, the government should guide from top-level design, technological innovation, standard system, fiscal and taxation policies, and other aspects.
Why do we need to build an innovation system that is dominated by enterprises? If universities and research institutes are the main body, what is researched will eventually become a paper and be awarded a prize and put on the shelf. This is a value-oriented issue, because universities and research institutions are oriented by academic advancement rather than the success of industrialization. Mr. Yuan Longping did so well in hybrid rice back then, solving the problem of stable and high yield of rice, but due to the lack of papers, he has not been rated as an academician for many years.
Therefore, from the very beginning, the new energy vehicle research and development project set up by the Ministry of Science and Technology is a technological innovation system with automobile companies as the main body. Of course, production, education and research should be combined, but after all, it should be dominated by enterprises.
Focusing on enterprises, we will go in the direction of industrialization. No company will say, I'll give you a sum of money, you go play, and finally send me a few papers.
In addition, maintain strategic concentration, adhere to a blueprint to the end, work for a long time, and do not "turn over the cake". The United States is "flipping the cake", from the new generation of automotive partnership program (PNGV) during the Clinton era, to the hydrogen-powered era of the George W. Bush period, to the electric car era of the Obama era, to the Trump era still engaged in fuel vehicles, and now it has begun to return to electric vehicles during the Biden era.
In addition, as far as their system is concerned, even if the president remains unchanged, the president will not listen to what the governor says. How we got up with the construction of our own charging piles is supported by local governments. In the United States, even if the president applies for money from Congress to invest in the construction of charging piles, will the governor listen to the president? Will the governor listen to the mayor?
Q: In "Lane Changing Racing", you said that in 2009 you proposed three signs of automobile power, when China was not a car powerhouse. By your standards, do you think China is now an automotive powerhouse?
Miao Wei: To measure whether it is an automobile power, I personally believe that there are three main landmark indicators: internationally competitive enterprises and well-known brands, mastering the world's leading key core technologies, and fully exploring the domestic and foreign markets.
The development of new energy vehicles is the only way for the mainland to move from a large automobile country to an automobile power, and according to the current development trend, we are confident that we will build an automobile power before 2035.
Previously, we had two phased goals: the first phased goal was to achieve a 20% penetration rate of new energy vehicles by 2025, and we have achieved this goal ahead of schedule, reaching 31.6% in 2023.
The second phase goal is to achieve the goal of 50% penetration rate of new energy vehicles by 2035, and I think the goal of 50% penetration rate can be achieved ahead of schedule in 2025, which will lay a very good foundation for the next step of intelligent networked vehicle development.
Q: When enterprises are strong, the country is strong, and if there are more first-class enterprises, the resilience and growth potential of the country's overall economy will be greater. What kind of enterprises do you think are first-class enterprises, and which enterprises in China are close to or already first-class enterprises?
Miao Wei: In general, the number of companies in the world's top 500 has surpassed that of the United States. But that's big, not strong.
Some of our companies are already very strong, such as Huawei, which has been suppressed by a superpower like the United States, but they can still achieve such results. We have a large number of such companies in all walks of life that are beginning to emerge, such as BYD. In 2023, it has entered the top 10 global automobile companies and the world's first new energy vehicle. Another example is DJI, which supplies about half of the world's drone market demand.
Q: There are also some specialized and special new enterprises, such as a company called Halma Group in Shandong, which ranks first in the world in the market share of four subdivisions of tire molds, valve cores, submarine oil production equipment, and wind power transmission parts. We also have a large number of such businesses that may not be familiar to the general public.
Miao Wei: Yes, specialized, special and new small giant enterprises, single champion enterprises, etc., need to be cultivated step by step, and do not do anything for good.
In the subdivision field, no matter how big or small, even if it is a part, if you make the same part in the world, you enter the top three, it is also very good!
There are a large number of small and medium-sized enterprises in China, and they have endogenous vitality and motivation. Anyone who runs a business wants to be able to grow from small to large. In the process of enterprise development, a large number of enterprises will die, but those who survive are very competitive. Many large enterprises, including Huawei, did not become so big all at once, but focused on the communications industry for decades, did not engage in real estate, did not engage in diversified operations, and persevered to become bigger.
Therefore, in addition to attaching importance to some large enterprises, we must also attach importance to cultivating the vast number of small and medium-sized enterprises, and the development of small and medium-sized enterprises is closely related to the development of the private economy.
2. Which new energy vehicle companies are more likely to break out?
Q: China's new energy vehicle sales have ranked first in the world for nine consecutive years. But there is also a problem, now many new energy vehicle companies are losing money and making money, and Weilai, Xiaopeng, and Leap are all losing money. Why is the profit margin of new energy vehicles so low? Is it because we are too involved? If we lose money for a long time, can the prosperity of new energy vehicles continue?
Miao Wei: Now it is true that the involution is more powerful, and those who have the ability can also roll, and those who are not able can also roll. From a positive point of view, this is a competitive pattern, and the result of the volume is the progress of the enterprise and the improvement of competitiveness. But the process of rolling is very cruel, and the biggest problem is whether it can be profitable, which is related to whether the enterprise can be sustainable.
The investment in car manufacturing is relatively large, and the investment will be allocated to the fixed cost of each car. When the break-even point is not reached, the more you do, the more you lose, and once you cross the break-even point, the more you do, the more you will earn.
Nowadays, many people regard the sales margin of car companies as the main focus, which is not suitable for the entire automotive industry. In fact, it should look more at the gross profit margin of the enterprise, as long as the gross profit margin can reach more than 10 percent or 20 percent, it should be sustainable. If the gross profit margin becomes negative, the income cannot make ends meet, and the cash flow is problematic, it will turn around a little less, and finally it will not be sustainable.
This is a painful and torturous stage in the business development process of enterprises, and many automobile companies have fallen on the eve of achieving the break-even point in history. For operators, cash flow is a key issue that needs more attention, losses are not fatal, once cash flow dries up, the enterprise will quickly die.
Question: Wang Chuanfu once said: "A market economy is an economy of surplus, and only by surplus can there be competition, and only then can competition develop." "The competitive process is bound to be brutal, but what capabilities and characteristics are more likely for car companies to survive and break out?
Miao Wei: I am more optimistic about the new forces of car manufacturing, because they have no burden, and the traditional car companies still have to weigh the development of fuel vehicles and new energy vehicles, but the new forces are committed to the development of new energy vehicles without hesitation, because this is their only way to survive.
Now more and more new energy vehicle companies are beginning to make profits, BYD, Ideal is profitable, GAC Aion has also begun to make profits, and Wenjie is expected to be profitable this year, so there will be more and more profitable enterprises.
Those who are not yet profitable should not only look at its gross profit margin, but also look at the investment in R&D and marketing, and the low gross profit margin may be due to too much R&D investment. Li Bin, the founder of NIO, said that regardless of whether the profit is high or low, R&D investment cannot be reduced, and a reduction is equivalent to a broken back road, and R&D investment must be continuously increased.
Broadly speaking, Tesla is also a new force in car making, it does not have fuel vehicles, and it has died and lived many times, you look at "Musk's Biography", he has collapsed several times, and now it is a good day. BYD is still very difficult in 2019, but it gritted its teeth and persevered, and now it has become the world's No. 1 new energy vehicle company in terms of production and sales, and has entered the 9th place in the top 10 of the global automotive industry.
Now the real test is the traditional car companies at home and abroad, in the book I compare the mobile phone industry to illustrate this problem. When feature phones were converted to smartphones, a large number of international brands, domestic brands died, Motorola, Ericsson, Nokia, their past is very remarkable. And Apple is the "new force" of the mobile phone, there was no such thing as a "new force" at that time, in fact, it was the new force of the mobile phone, and Apple finally came out.
Apple ushered in a new era of mobile phones, while Motorola, Ericsson, Sony all collapsed. Then China also came out with a number of new mobile phone forces, including Huawei, Xiaomi, OPPO, and VIVO.
In the process of "lane change racing" in the mobile phone industry, there is only one mobile phone company in the world that has survived this change, and that is South Korea's Samsung. I hope that our traditional car companies can become Samsung in the automotive revolution, not Motorola, Ericsson, Nokia. Now a number of Chinese companies in the new energy automobile industry have come out, BYD has come out of private enterprises, and Geely has also done a good job.
In addition, new forces such as Wei Xiaoli also have strong vitality, although they have also encountered difficulties. If an enterprise wants to develop, there are difficulties at any time, as long as confidence does not slip, there are always more ways than difficulties.
Q: There is an embarrassing problem in the new energy vehicle industry, that is, the production qualification of the new car manufacturers. NIO is to let JAC OEM, ideally through acquisition to obtain production qualifications, Xiaomi, which has just launched a new car, is said to be BAIC's qualifications. Will the state directly grant production qualifications to car manufacturers that have been recognized by the market?
Miao Wei: NIO has already obtained the qualification. Regarding the issue of controlling factories, some people have the view that there are too many factories in the automotive industry, which are too scattered and must be controlled. It is believed that even dozens of companies may not be able to survive, and it will be even more difficult to survive if there are more factories. However, the objective development of the market economy is not subject to people's subjective will. I also wrote in the book that in 2016, the NDRC approved the qualifications of more than a dozen new entrants, and most of them died, and a few survived. It is often that the vitality of enterprises without qualifications is stronger.
Of course, if you don't control it at all, there may be dozens or hundreds of car factories a day, and the volume will be even worse. There are real dry cars and fake dry cars.
Evergrande once said that it will build ten major production bases in the world in the future, with an annual production capacity of 500,000 vehicles and an initial 100,000 vehicles. How can anyone do this? If you have money, you can't do this, which violates the basic laws of the automobile industry.
The usual practice must be to build tens of thousands or more than 100,000 vehicles in one place first, form a certain scale, and then build a second factory after there is market sales. There is also Sailin, the local loss of billions, this kind of lesson is very profound.
I think we should manage the local government well, and the local government should not invest on behalf of the enterprises lightly, and the people who come should see what is going on. is like Wang Xiaolin of Sailin, he is an American lawyer, he cheated and ran away, and in the end, you can't catch him in a lawsuit. Therefore, it is necessary to manage the local government well and not invest indiscriminately.
As for the enterprise coming, you can vote if you want, I will give you a prize if you succeed, I have to look at you if you fail, smash the pot and sell iron, the iron has to stay with me, I have to resettle the workers, I have to pay off the bank arrears, and I can't let the speculators go unpunished.
In this regard, local governments pay a lot of tuition fees, but they often fall into a situation where they will die and be chaotic when they are released. How to manage without dying, letting go without messing up, is a management art.
Q: Xiaomi is a well-known company and has just released a new car, is it possible for it to obtain qualifications in the future?
Miao Wei: If it is going to succeed, it is possible to give it independent qualifications, just like NIO. Now they are basically asked to find a qualified car company to OEM first. Xiaomi's new car will be on sale at the end of March, and if it sells well, I believe it will get the qualification in the future.
Third, there are still a lot of opportunities in the field of new energy vehicles
Q: Now that there are many giant enterprises in the field of new energy vehicles, there are many giant enterprises in the field of batteries, and BYD in the whole vehicle, what opportunities do you think there are in this field in the future, whether it is entrepreneurship or traditional enterprise transformation?
Miao Wei: In terms of the supply chain of new energy vehicles, there are still great opportunities in the fields of automotive chips, operating systems, sensors, and artificial intelligence, especially where our supply chain security is involved.
The United States is "stuck" on us, so we will follow this line of thought to find opportunities, such as when the chips will not be sold to us, and the Android operating system will not be used by us, etc. Now a large number of our on-board systems are still Android, and the amount of Huawei Hongmeng is still very small. The on-board chips are also Qualcomm's 8155 chips, and the artificial intelligence chips are all NVIDIA's. There are also power semiconductors, BYD has done a good job, but it can't rely on BYD alone.
Then there's sensors, and there's lidar. Lidar 96 lines and 128 lines can be done. At present, many companies are doing it, such as Hesai Technology, which has basically been developed in the last three or five years, and the longest is not more than 10 years, because our new energy vehicles have only formed a climate in the past few years. There are plenty of opportunities in these areas.
Regarding the "stuck neck" of the United States, I am reminded of what Chairman Mao said at that time, blockade, blockade for ten years or eight years, and all problems in China have been solved. Chairman Mao was a great strategist, he didn't know what a chip was at that time, but he was strategically right.
I used to always buy the United States, and as a result, path dependence was formed. Now we are "stuck" and forced to solve it, which gives us an opportunity. We have all learned dialectics, and under certain conditions, bad things can become good things.
Q: Akio Toyoda once said, "Foreign automakers like Tesla and BYD...... These electric technologies are low-level. Izumi Kawanishi, president of Sony Motors, a joint venture with Honda, publicly stated, "China's electric cars have no technology at all, they are just fancy on the screen." "What should we think of these remarks by the heads of Japanese car companies?
Miao Wei: He said his, we will do ours. Toyota has neglected the development of electric vehicles because Akio Toyoda believes that electric vehicles will not become a climate. Later, I found out that China had done a good job, so I wanted to skip electric vehicles and engage in fuel cells. Toyota was actually the first to do hydrogen fuel cells, but it only sold a few thousand units last year.
Akio Toyoda's attitude is actually wavering, recently he is mainly inclined to attack pure electric vehicles, in fact, he is contradictory, you attack pure electric vehicles, then Toyota is still studying solid-state batteries for what? To develop fuel cell vehicles, Toyota is engaged in hydrogen-powered vehicles, why should we develop solid-state batteries?
Q: So does China still want to develop hydrogen energy vehicles? If you speculate, for example, in 10 or 20 years, will hydrogen energy catch up and be on a par with pure electricity?
Miao Wei: We have basically reached a consensus that the more feasible technical application scenario for hydrogen energy vehicles is heavy-duty commercial vehicles, and now five urban agglomerations are engaged in demonstrations.
There are two routes for heavy-duty commercial vehicles: one is the hydrogen fuel cell route, and the other is the electric route, which uses the battery swap method. These two routes have their own advantages and disadvantages, and what I understand is that taking a trailer with a total weight of 49 tons as an example, the diesel trailer is about 400,000 yuan, the pure electric trailer is sold for 600,000 yuan, and the fuel cell trailer head is sold for 1.2 million.
Hydrogen vehicles have to face problems such as fuel cells are too expensive, many parts have to be imported, and mass production has not been formed, but it is worth a try.
In passenger cars, we can't be too ambitious, see different ideas, lose pure electric and plug-in hybrids, chase what fuel cells, and lose the advantages.
In addition, hydrogen and electricity are both good secondary energy sources, and the secondary energy is mainly electricity, supplemented by hydrogen, which is its positioning. Hydrogen is not only used in cars, but also in many places, such as steelmaking. Hydrogen can be injected directly into the converter to make steel, and there is no carbon dioxide emissions.
In the same way that in previous years there was a debate about whether electric vehicles reduce emissions, hydrogen as a secondary energy source is now being discussed. The hydrogen here must be green hydrogen, at most blue hydrogen, and gray hydrogen must not be engaged in anymore. However, green hydrogen is more expensive than gray hydrogen, and it is difficult for green hydrogen to become competitive by market mechanisms without a carbon tax or carbon trading compensation mechanism. In addition, hydrogen storage, transportation, and the construction of filling stations need to be coordinated, which is a large system project.
Q: If China's new energy vehicles are to compete in the second half, what are the main core issues that should be paid attention to?
Miao Wei: The second half is the development of intelligent networked vehicles, from a technical point of view, we need to develop from vehicle to vehicle control, including chassis, power, and finally form a vehicle computing platform. In the development of intelligent networked vehicles, if the vehicle is connected to the vehicle control, and then the use of the large market to stand on, we will win completely.
The United States is still suppressing us, and at this time, we should support Chinese companies represented by Huawei. Huawei's current in-vehicle system is the best in China's use environment, including interface design, human-computer interaction, and voice recognition in cooperation with iFLYTEK.
Huawei is familiar with the in-vehicle system, but the challenge in the future is to open up the vehicle control, and now it is penetrating into the vehicle control, and the M9 has started the intelligent driving function.
Question: Now that China's automobiles have been exported first, do they have to speed up their export to the sea? How should Chinese car companies go overseas specifically? Will they face more and more trade barriers in the future?
Miao Wei: According to the statistics of the China Association of Automobile Manufacturers, the export volume of mainland automobiles in 2023 will be 4.91 million units. However, this growth trend cannot be sustained permanently, and with the increase in vehicle exports, there will definitely be trade barriers and trade frictions, and Europe has begun to conduct anti-subsidy investigations against us.
In general, we need to move from "going out" to "going in", and we have to "go up".
As far as "going out" is concerned, we still have a broad space, for example, those countries that do not have an automobile industry, and do not keep staring at our existing overseas markets. We must be extra vigilant against countries with automobile industries, and if you go to these countries and sell your car at a "cabbage price", people will not give you restrictions.
The world is huge, more than 190 countries around the world, and we still have very few places to go. So first of all, we must expand the market, especially those developing countries that do not have an automobile industry, where we will not lose to European and American cars, or Japanese cars, whether it is fuel vehicles or electric vehicles.
In addition, for the automobile market in developed countries, we must "go in", invest and build factories in the local area, and it is best to carry out various forms of cooperation with local automobile companies, turn opposition into unity, and take into account the vital interests of the other party. Seek mutual benefit and win-win, so that you have me, I have you, in order to better go in.
Question: Large aircraft, high-speed rail, new energy vehicles, photovoltaics, construction machinery, shipbuilding, etc. have become the new business card of China's manufacturing, why China has made great achievements in these fields, but the chip has been left behind, and now it is "stuck in the neck"?
Miao Wei: This issue cannot be hindered, and the achievements need to be fully affirmed. In the past, we took the initiative to integrate into the international cycle and achieved the "miracle" of China's economic development, but now that geopolitics has affected the industrial and supply chain system, we should take the initiative to adapt and establish a new development pattern.
At present, we are relatively lagging behind in chips. Chips mainly lag behind in advanced processes, which are subject to integrated circuit equipment and materials such as lithography machines.
The Chinese are afraid of persecution, and our national song is very good, "The Chinese nation has reached the most dangerous time, and everyone is forced to make a final roar." We are united as one, braving the enemy's artillery fire, and advancing ......." We have the strong leadership of the CPC Central Committee, the efforts of the industry, and the common concern and support of the whole society, and it is only a matter of time before we catch up.
Wang Chuanfu has a good saying: chips are not made by God, they are man-made, as long as they are man-made, we will definitely be able to make them.
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