It is difficult to achieve a climate alone, and only through openness and cooperation can we achieve a win-win situation. What alliances are being formed in the chaos of the car circle? What are the intentions of cooperation?
In-volution, the sociological sense of inward evolution, that is, the often talked about "involution", is causing many rounds of heated discussions in the automobile market. Especially in the recent Chinese market, car company executives are debating fiercely about "involution" and its associated competition, and have expressed their own experience, questioning and even in-depth transcendent understanding. Among the many statements, although the views of orderly competition, long-termism, and "good money drives out bad money" are different, they all recognize that "involution" is an inevitable process of market competition and a catalyst to promote the industry to adapt to the wave of transformation. Opponents believe that a reflection is urgently needed: the leading edge of "involution" is fragile, and the industry has not yet reached the time of healthy development, and external competitors are relying on economic strength and room to wait and see. Of course, looking out of the debate field of "involution" competition and adaptability, behind the hustle and bustle, some common explorations of cooperation mechanisms and technical standardization are also taking place in parallel. After all, there are only a few cases of "rolling" out of the industrial pattern by oneself, and under the pressure of today's market, cooperation with the meaning of "vertical and horizontal" is also in full swing.
The "Internal Combustion Engine Alliance" makes progress together
In April 2023, Toyota changed its leadership. At that time, Toyota's new leadership team, led by Tsuneji Sato, was focusing on "inheritance and evolution", with the goal of making every effort to make up for the group's previous "wavering attitude" towards pure electric vehicles, and to make every effort to find more development options to achieve the vision of carbon neutrality. Through its business adjustments in the past year, it can be seen that a series of decisions of the new leadership have indeed accelerated the pace of Toyota's promotion to electrification and intelligence, so that it will continue to make efforts in the manufacturing and research and development of new electric and hybrid products: on the one hand, the progress of integrated casting technology and solid-state battery technology has been disclosed; On the other hand, it reorganizes its autonomous driving and artificial intelligence subsidiaries, focusing on the future mass production and large-scale deployment of robotaxis pre-installed joint ventures in the Robotaxi field. However, this does not mean that Toyota-led Japan automakers have given up on the transition between electrification and maintaining the status quo. In fact, according to the consolidated financial reports of more than Japan car companies in fiscal year 2023 (as of March 2024) according to the Japan Economic News, Toyota, Honda, Suzuki and Mazda have set a record for the highest profits in history. Among them, Toyota's final profit was as high as 4.94 trillion yen, which was twice that of FY2022, setting a new record for a Japan company in the manufacturing industry. In addition to the statement in the financial report that "we will use the high competitiveness of our products to lock in models that can increase prices for product promotion and reduce costs", the sales performance of hybrid models, which accounts for nearly 60% of the global share, is the main factor contributing to its performance. Therefore, driven by high commercial returns, it seems that continuing to deepen the research and development of internal combustion engine technology and adapting to the corresponding electric drive integration technology route has become a common choice for Japan car companies. On May 28, Toyota, Mazda, and Subaru held a joint press conference and pledged to continue to invest in internal combustion engine technology and help decarbonize internal combustion engines by combining them with electrification technologies and making them compatible with green alternative fuels such as biofuels and synthetic fuels. This joint action of the three companies is being seen as a technology alliance for carbon-neutral internal combustion engines.
All three companies said that in the future, internal combustion engines for vehicles will exist as zero-carbon hybrid engines, so they will continue to develop their "representative" powertrains, including Subaru's boxer engine, Toyota's inline-four engine, and Mazda's rotary engine. For the next generation of engines, the three companies will not only seek to improve the performance of the stand-alone engines, but will also use their respective strengths to optimize their integration with the electric drive unit. At the same time, the three parties also said that they will cooperate in the following aspects: sharing of technical information and R&D resources to reduce R&D costs and improve R&D efficiency; Jointly develop carbon emission standards for internal combustion engines and promote the industrialization of related technologies; Collaborate on the development of carbon-neutral fuels to provide sustainable solutions for the future development of internal combustion engines. After the press conference, Tsuneji Sato, President of Toyota Motor Corporation, said, "In order to provide our customers with diversified options to achieve carbon neutrality, it is necessary to meet the challenge and continuously develop engines that are compatible with the future energy environment. The three companies share a common vision to perfect engine technology through friendly competition. Subaru President Atsushi Osaki and Mazda President Katsuhiro Murago shared similar views on continuing to improve existing engine technologies and products through co-creation and competition, with a view to finding a smooth transition path from internal combustion engines to hybrid to electric drives. It is true that in major regional markets, both Japanese companies and their competitors are increasing their research and development efforts for hybrid engines. All parties involved have come up with strong measures such as improving peak thermal efficiency, balancing the costs of energy conservation and emission reduction, and cost reduction. However, as the pressure on the industry increases, it is obviously more important for these Japanese companies to find a suitable route for themselves rather than implementing a development strategy that follows the trend. Interestingly, while Toyota is reluctant to comment on its investment in the new engine, according to the group's CTO Hiroki Nakajima's earlier view that "investing in next-generation engine technology will ultimately be 'much less' than investing in electric vehicles and battery development", it is clear that Toyota is still sticking to its "multi-path" goal and will not abandon its all-encompassing strategy of gasoline, hydrogen, hybrid and pure electric vehicles. In response, Macquarie auto analyst James · Hong said that Toyota's move "is basically paving the way for the development of small engines for hybrid vehicles, and its short-term strategy is to achieve adaptation without modifying the design of the next generation of vehicles, which is in line with Toyota's strategy of diversifying bets." And engine variants will be able to run on diesel and petrol as well as low-emission or carbon-neutral fuels such as hydrogen or so-called e-fuels, part of a broader bet that the use of renewable hydrogen and alternative fuels will allow automakers to continue selling internal combustion engine models that comply with environmental regulations. "It's also worth noting that the last time a Japan automaker's technology alliance was in 2014 when the Association for the Study of Automotive Internal Combustion Engines (AICE) was established. At that time, AICE included almost all Japan car companies and the Japan Automotive Research Institute, and received strong support from the Japan government's Ministry of Economy, Trade and Industry behind the scenes, with the goal of forming a technology alliance in line with the interests of local enterprises before new energy vehicles became the mainstream of market consumption, so as to counter the technological advantages of European and American car companies in small engines. Although the situation faced by the new "Internal Combustion Engine Alliance" and AICE is different, the internal driving force that makes it gather is to seek strategic room for maneuver in the market without endangering the technical security of each enterprise, and then hope to achieve a relative balance between profitability and transformation in the pace of technological development that it can accept. However, after the "Daihatsu incident", the Japan government's inward review of the automotive industry revealed a series of quality and safety scandals, which attracted far more attention than the three Japanese companies working together. Even the United Kingdom's Financial Times commented that the scandal will continue to weaken the Japanese hybrid revival that Toyota is leading. Although in the current macro market context, the weak yen also helps to boost the value of overseas sales of these "conservative" Japanese companies, and the hybrid demand in markets such as United States has offset the relative weakness of these car companies in pure electric vehicle products, in order to continue to maintain a certain premium level in the industry trend of weak profits, the "Internal Combustion Engine Alliance" must also clean up the stain caused by "pursuing development speed and ignoring safety systems" as soon as possible, and then continue to win the favor of global consumers.
Renault is standing at the intersection of various circles of friends
Then turn our attention to Europe, where the multilateral balance of power and the market boundary of car companies are being broken. As we previously reported, in March this year, Renault Group CEO Luc·a de Meo advised Europe, calling on European auto companies to cooperate to promote an "Airbus" alliance in the automotive industry, with the intention of reducing their respective investment costs through pan-European forces in order to better participate in the competition. As a result, by tracking the trend of Renault's cooperation, we can also see some clues of "vertical and horizontal". Let's start with the inside of the "old league" Renault-Nissan. Since the "rebalancing" last year, the alliance's partner entities have focused on Renault's electric vehicle and software company Ampere. Nissan will invest approximately EUR 600 million to secure a seat on Ampere's board of directors, thereby complementing Nissan's technological reserves in the development of electrification. In the short term, of course, Nissan's goal is to achieve alliance synergies, including cost efficiencies, regulatory compliance, and easy access to a wider range of EV products and powertrain technologies. As one of Renault's five future-oriented businesses, Ampere's primary goal is to reduce the cost of Renault's next-generation electric models by 40%, including the upcoming Scenic, Twingo and other new models, in addition to established research in software and artificial intelligence. Although Renault Group has decided to cancel Ampere's IPO this year, it believes that the current timing in the stock market is not right, and the good cash flow of the group is enough to continue to support Ampere to fully implement the group's strategy until the latter reaches breakeven in 2025. The good news is that Ampere has lived up to its expectations and is said to have made progress relatively independently on a new generation of centrally integrated electronic architectures and Android-based software ecosystems. This immediately attracted the attention of European friends who are eager to launch low-cost pure electric models in Europe at the lowest cost and as quickly as possible. At the end of 2023, Volkswagen Group and Renault Group had negotiated on cooperating in Europe to develop entry-level electric vehicles and share the cost of car production. Unfortunately, plans to collaborate on the development of low-cost electric vehicles have fallen through, and in May Volkswagen decided to withdraw from the talks, driven by serious differences over where and where to produce it: Volkswagen wants to make the most of its European production network, while Renault insists on producing the car at its factory. Despite the poor start to the development of low-cost electric vehicles, in order to ensure that the Twingo electric version, which will cost less than 20,000 euros, can be sold smoothly in 2026, Renault will "work with a Chinese partner to further shorten the development cycle and reduce engineering costs", while "styling and advanced engineering" will be completed in France. People familiar with the matter said that although China's engineering costs are not necessarily lower, it is necessary to face up to the fact that most of the current electric vehicle technological breakthroughs come from China, and even European car companies are now increasingly relying on the cost advantages of China's industrial chain to cut expenses. Even De Meo expressed a similar view in an interview with France's Le Figaro, "Chinese manufacturers are very strong, and they have achieved a generation of products and technology leadership by relying on an all-round development strategy." The entire Chinese ecosystem is fueling the development of the automotive industry, which gives a large number of companies the opportunity to participate. I don't think we can pass up the opportunity to work with ecosystems that include battery gigafactories, top engineers, feedstock refining capabilities, and so on. On the other hand, while Ampere has attracted wide attention from both inside and outside the world, Renault's five major businesses have also welcomed new partners for its "internal combustion engine and hybrid engine assets", and its new joint venture entity with Geely Group has finally been negotiated. On May 31, HORSE Powertrain Limited, a powertrain joint venture between Renault Group and Geely, was established.
According to the announcement, Renault Group and Geely each hold a 50% stake in Haosi, and the new company is committed to providing global partners with a complete set of advanced powertrain technology products, with an expected annual revenue of about 15 billion euros and an annual production capacity of about 5 million powertrains. Renault said the collaboration will focus on five pillars: R&D and new product launches. These include improving high-efficiency internal combustion engine engines, electrifying vehicles through hybrid and modular solutions, using low-CO2 fuels such as biofuels and synthetic fuels, developing hydrogen engines, and improving air quality through new catalyst systems and lifecycle approaches; Geely Group said that the company will bring immediate scale effects, improve market coverage, and effectively help the development of Geely and Renault Group. At the same time, the two joint venture parties will also transfer relevant intellectual property rights to Haosi, for example, Geely can provide hybrid transmission assemblies including 3DHT Evo and 3DHT Pro, as well as new-generation engine assemblies including 1.5L, 1.5TD and 2.0TD; Renault, on the other hand, offers diesel engines, 1.3-liter small-displacement engines, and E-Tech hybrid powertrains, which are popular in Europe. This will enable the new company to develop future powertrain technologies entirely in-house to meet a wide range of market needs, especially in the area of alternative fuels such as green methanol, ethanol and hydrogen.
Ecological construction attaches more importance to unity
Even back in the Chinese market, where the debate is becoming more and more intense, all parties involved are looking for a win-win situation that is mutually beneficial, rather than a winner-takes-all. It is like the extensive presentation of cooperation in energy replenishment construction. Nowadays, with the domestic market demand and technology improvement, a variety of energy supplement methods for new energy vehicles have ushered in a period of rapid development, among which, the two forms of "battery swap" and "supercharge" are complementing each other. Whether it is the "Battery Swap Circle of Friends" represented by NIO or the "Supercharging Alliance" promoted by Huawei Digital Power, both focus on expanding the scope of complementary energy replenishment ecosystems. As of May 21, with the strategic cooperation between China FAW and NIO, seven car companies have participated in the process of promoting the standardization of battery swap technology, the generalization of battery swap mode and the scale of battery swap network. On the one hand, the consideration of car companies entering the battery swap business one after another is that the battery swap business has a significant scale effect, that is, the unit cost of the battery swap service will decrease with the increase in the utilization rate of the battery swap station. However, if it is constructed and operated alone, the pre-investment in the battery swap mode is large, and its specific applicability and rationality may be very different for brands in different price segments. NIO has taken the lead in the industry, and has now deployed more than 2,400 battery swap stations across the country, becoming the world's largest operator of smart electric vehicle battery swap networks. On the other hand, car companies need to conduct specific analysis and extensive cooperation on specific issues such as cost allocation, operation efficiency, and pricing models, and jointly promote core indicators such as the utilization rate of battery swap stations and user experience, solve user range anxiety, and help the rapid development of China's smart electric vehicle industry. In fact, there are many more car companies deploying charging networks than battery swaps, and if each car company builds a separate charging station, it will cause a lot of waste of land and power resources. Under this premise, the significance of the union is more important than ever, if the energy resources can be shared and shared, it is not only conducive to accelerating the construction process of the entire supercharging network, but also to share the cost and risk, so that car companies have more energy and financial resources to invest in the research and development of high-voltage charging models. Note: This article was first published in the July 2024 issue of Auto Magazine in the "Industry Perspectives" column, so stay tuned.
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Article: Car Vertical
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