Full speed ahead: disruption from electric cars looming

In September 2017, Xin Guobin, Vice Minister of Industry and Information Technology of the People's Republic of China, mentioned at the Automotive Industry Development Forum that he would work with relevant departments to work out a timetable for stopping the production and sale of fuel-fired vehicles. This is the first time for China's Ministry of Industry and Information Technology to take a stand on this topic, and has aroused discussions in many aspects. Several overseas countries have already unveiled similar plans, some with clear timetables: Britain and France plan to phase out petrol/diesel vehicles from 2040. Similar plans have been announced in at least 10 other countries; Although the United States does not have a nationwide timetable, several states have already expressed their views on setting a timetable. The challenges affecting the further development of electric vehicles mainly come from four aspects: price, range, charging facilities and regulatory mechanisms. Now these challenges are gradually being effectively addressed. The basic model of the latest Tesla Model 3 sells for about $35K in the U.S., which is on a par with the median price of a gasoline-powered car in the U.S. Market (about $34K) and has a theoretical range of about 350 kilometers. The traditional OEM is not far behind: the price and mileage of LEAF (Nissan), Bolt (GM), i3 (BMW) and other models are close to the traditional fuel vehicles. In China, start-ups such as Weilai Automotive (Nio) and FMC (Future Mobility) have set targets to build affordable, well-endurance electric vehicles that are well positioned for more than a million users. At the same time, take China as an example. With intensive policies to speed up the construction of charging piles and the actions of manufacturers, China is becoming one of the main battlefields in the layout of charging piles, and mileage anxiety of car owners is constantly decreasing. Governments around the world are looking for a balance in the regulation of EV policies: on the one hand, the government's strong support for the development of EV is obvious to all; On the other hand, they are worried that the electric vehicle industry is growing too fast, causing a series of problems. For example, the United States Congress recognizes that driverless vehicles (mainly electric vehicles) are no longer integrated into the current legal framework (for example, in the event of an accident, where liability is defined), and is speeding up discussions on laws and regulations for driverless cars to ensure they are effectively regulated when they do arrive on the market. According to the sales forecast, once the electric vehicle companies complete the expansion of production lines to meet market demand, the sales volume of electric vehicles will increase significantly. Although it is still too early to discuss the replacement of electric vehicles completely, the inevitable trend and development prospects of electric vehicle popularization is the consensus of the industry, and the era of electric vehicle occupying the market will certainly come, it is unquestionable. The next decade will be a decade of drastic changes in the automotive industry. Relevant enterprises should have a profound understanding of this trend in order to do a good strategic layout. Aiyi Kai consulting predicted the popularity of electric vehicles on the automotive industry may have three disruptive trends, and put forward preliminary recommendations for the response measures of enterprises. 1. The competition pattern of EV industry will turn to the competition of hardware performance-price ratio and value-added service, and the competition pattern of EV industry will be predicted. The plan will follow the evolution of IT industry competition: the focus of competition will gradually change from the pursuit of technological breakthroughs to the pursuit of hardware cost-effective and value-added services. Let's first look at what has happened to the IT industry over the past two decades. Since the 1990s, the core of IT enterprise competition has shifted from pursuing the performance of hardware products to pursuing additional services and meeting the personalized needs of customers. Take PCs for example: the current high degree of compatibility between PC components (such as hard drives and memory) brands, and the "marginal" nature of PC hardware, many PC giants (such as Dell, Lenovo, etc.) have shipped their products to foundry manufacturers. At the same time, value-added services have become the real growth point of interest in the consumer electronics industry; IBM, the IT giant, has been stripping away hardware businesses that it considers uncompetitive since the late 1990s, and is moving farther and farther away from services and software. Apple has long recognised that software has the "pricing power" and is building its own kingdom of innovation in the digital world. We think that the competition evolution of IT industry (especially PC and mobile phone) is very important for the competition pattern prediction of EV industry, The reason is that the main systems of electric vehicles (electric motors, electronically controlled batteries) are more standardized, modular and cost-effective than those of conventional fuel vehicles (engines, gearboxes, etc.); Aikkai compares the declining trend in the cost of hard drives for personal computers with that of batteries for electric vehicles (figure 3). The former was one of the core costs of early personal computers The latter is an important component of the current cost of electric vehicles. Even if the technology iteration and cost reduction of PC hardware, which follows Moore's Law, are much faster than those of car batteries, the trends in manufacturing cost forecasts for 2010-2020 are very similar. If we break down the manufacturing cost of a car (Figure 4), we can see that the current cost of car batteries accounts for 1/3 to 1/2 of the manufacturing cost of a car; As battery costs fall, the price of electric vehicles will fall more sharply in the future. In addition, because electric vehicles require fewer components, the cost of vehicle assembly (including automotive engines, control systems, etc.), electric vehicles are much lower than conventional fuel vehicles. In a cost-effective, cost-effective future, competition at the technological level is likely to be less and less, and new value is more likely to be captured through value-added services. We look at these services from a development perspective, It is grouped into three phases (Figure 5): · Basic value-added services, such as today's maps, Navigation, In-Vehicle Network, after-market service extension and intelligent mobile service, such as personalized services for on-board intelligent systems, and AI-related services such as driverless, ultimately integrated travel solutions: This includes simple combinations (e.g. Driverless plus shared fleet), as well as requirements around different customer backgrounds and travel scenarios (e.g. Corporate sales, daily family trips, short trips Providing customized solutions and systematic services (including intelligent integration of different vehicles such as cars, high-speed trains, airplanes, customized solutions on demand, etc.) Traditional automotive enterprises (including corresponding automotive parts enterprises) are likely to falter in this disruptive characteristic due to lack of preparedness. Changes in the model of competition, new competitors from an unexpected perspective, as well as the emergence of new business models, are likely to put enterprises in a quagmire. 2. Demand growth in major automotive markets will face challenges as shared travel matures and driverless technology fuels continued growth in demand in major automotive markets. Shared travel has become popular in China at an impressive rate; The commercialisation and popularity of driverless technology will act as a catalyst for further deepening the shared travel model and completely disrupting all existing car models. Drivers may no longer need to own cars but rely on on on-demand driverless vehicle fleets. The driverless shared fleet will provide door-to-door travel, and the daily cost to car owners will be much lower than the private car ownership model. As people become more comfortable with the sharing economy, driverless electric vehicle fleets will have a qualitative impact on traditional private car ownership patterns. While shared travel will not completely replace the current model of private car ownership, new car sales in developed regions and major cities will be greatly affected by the popularity of shared travel. Traditional automobile enterprises will be affected by this trend. However, as long as that layout and arrangement are reasonable The impact of this trend on them will be disruptive rather than devastating. The fact is that pioneers in the car industry have begun to share fleets in order to confront the threat and even embrace the trend. Throughout the world, Volvo, Volkswagen, General Motors, Ford and other companies have established or invested in a shared fleet; In China, Mercedes-Benz and BMW also announced trial runs of the shared fleet in 2016 and 2017, respectively. Of course, setting up a shared fleet is not the only way out for car companies. We believe that the core of the success of automotive enterprises lies in how to find the positioning and business model that can meet the travel needs of the target population from this trend. 3. Future Electric Vehicle Industry Polarization The development of electric vehicle industry in the future will be divided into two levels, and the relevant participants should be clear about their core competitiveness and positioning in order to remain invincible in the subversive tide. Participants in the EV market are divided into three categories: EV companies (both traditional and new entrants), auto parts manufacturers, and service providers. Electric car companies are likely to polarise. Some enterprises will pay attention to the scale and low-cost mode with the increasing competition of EV commercialization. They are likely to work with travel-sharing companies (and of course need to avoid becoming their accessories) or to be directly involved in the travel-sharing market themselves. Some of them may even move towards "Foxconn in the electric car industry" and become "super electric car foundry". For these companies, the core competitiveness lies in the cost and service model. Another Branch companies will win through differentiated competition and take the high-end route; Some of them will follow Tesla's lead, giving themselves points for design, experience, and "tailoring", while others will likely move toward high performance and market positioning, attracting target customers with high-end value and brand positioning. For enterprises choosing this route, in addition to thinking about how to better create differentiated competition and show their value orientation, they also need to realize that the market they serve is destined to be a relatively small, highly specialized market. For auto parts manufacturers, they also face choices. Drawing again on the experience of the IT/consumer electronics market, we see many suppliers of parts whose manufacturing costs are being squeezed, but also industry leaders such as Qualcomm and patent monopolists. Choices in the next few years are also crucial for auto parts makers: many will be squeezed more quickly because of lower technical barriers and capacity expansion, such as parts like car batteries, or even the risk of overcapacity. So choosing the right niche is crucial: to win at cost and output, or to become the owner of a core technology patent? The third category of participants is service providers. Customer-centric differentiated service providers will have the opportunity to grow rapidly in this wave. Google, whose driverless-car program has been under way since 2009, and Apple, whose success in the consumer-electronics market has been measured Has always positioned itself as a software company. In this field, the core competence is driven by technology and platform; Big data, artificial intelligence and map integration will be the key to winning. As far as China is concerned, BAT (Big Three of Chinese Internet Companies) is the most likely to get the first chance on the road of technology and platform integration. Baidu launched its driverless car project in 2013 and hopes to build the "world's largest" driverless technology platform to connect with other IT companies and car companies. But that doesn't mean that other companies don't have a chance. Other service providers can take advantage of core strengths in certain technology segments, such as artificial intelligence, which has become a core service provider for automotive companies, such as baidu-based jingchi technology, which has recently gained traction in the driverless space. There are many examples such as Didi rental car, concave and convex rental car, EVCARD and so on. As long as service providers find their own positioning and gain an advantage in market segmentation, they will be able to achieve success in the future electric vehicle market.