Drive I/O | Key takeaways from Auto Shanghai 2021

Traditionally a time for automakers to flex their muscles, the Auto Shanghai expo this year held a surprise: It was China’s big tech firms that took the spotlight, outshining some of the country’s leading EV makers. 

Huawei made a big splash, unveiling its complete self-driving car technologies as it gears up to compete as a central player in China’s autonomous vehicle (AV) industry. Baidu, China’s biggest internet search firm, was not to be outdone, proclaiming itself the undisputed AV industry leader. The company said it expected to equip 1 million new cars in five years with its software.

Some of the biggest startup unicorns such as chipmaker Horizon Robotics were also busy, forging alliances with a list of automakers during the event as they work to establish themselves in the booming industry.

Highlight 1: Chinese tech giants bet on smart EVs

Overshadowing traditional carmakers displaying flashy concept models and production-ready cars, Chinese tech giants generated big buzz at Auto Shanghai this year. 

Tech giants unveiled advanced connected and autonomous driving solutions along with ambitious growth strategies, generating headlines and lending cachet to lesser-known auto partners. In particular, deep-pocketed Huawei and Baidu showed how they are ramping up aggressive pushes into the industry.

Huawei was one of the biggest draws at the show. Crowds swarmed the Arcfox-branded Alpha S electric sedans on display at its booth, equipped with the telecom giant’s hardware and software and made by automaker BAIC. 

After three years of co-development, the two companies said that they are on track to deliver the Alpha S by year-end. According to Huawei and BAIC, the vehicle features “best-in-class” self-driving capabilities for highways and busy streets to customers in China’s four biggest cities. Its other customers that hail from outside of the four cities will get the function via over-the-air software updates within the next two years as Huawei continues to work on its AV mapping.

To reach this target, Huawei has been plowing resources into its new auto business. Its Automotive Solutions unit will beef up headcount 25% to 5,000 employees this year, Wang Jun, president of Huawei’s intelligent Automotive Solution business unit, told Chinese media during the show.

Hands-free driving on busy city streets is widely considered a key milestone for mass AV adoption, one that Tesla has offered in its full self-driving (FSD) package since March. Eager to offset its flagging smartphone sales Huawei has been chasing this capability as it ranks auto among its top-priority businesses, though it is years behind industry leaders. At the company’s global analyst conference a week before Auto Shanghai, deputy chairman Eric Xu announced that Huawei will nearly double its annual auto R&D budget to $1 billion this year.

Lingering questions among industry analysts TechNode spoke with include understanding what progress Huawei has made on the self-driving front so far—a question it has not yet addressed—and how much safer its self-driving cars will be compared with traditional autos. The tech heavyweight faces a significant uphill climb. Many automakers remain skeptical that the “wounded tiger” will manage to make cars itself, these analysts said.

Huawei’s moves into the auto industry present a significant threat to Baidu. Wang Yunpeng, a vice president at the search firm, recently went on the counter-attack in a talk with Chinese media during the auto show, insinuating that even by throwing money at the challenge, competitors stood little chance of quickly catching up. 

Baidu, Wang said, is in the same camp as Google’s AV unit Waymo—it’s on the verge of commercializing its technologies. To compare, “companies like Huawei and Didi are probably still at the stage of testing their vehicles on fixed routes,” Wang said (our translation).

Baidu’s robocars have logged 10 million kilometers (6.21 million miles) on public roads, around a third of Waymo’s. During the event, Baidu launched what it boasted was China’s most advanced driver-assist system. Called Autonomous Navigation Pilot (ANP), the technology enables autonomous driving capabilities for vehicles made by Baidu’s automaker partners. The system will be first available to owners of these vehicles in 20 cities by year-end and then over 100 cities by 2023, the company said. Baidu said its self-driving tech will power at least one new model per month beginning in July and equip more than 1 million cars with its software over the next five years.

With blurred lines between vehicles and technology, how much tech is in a Baidu- or Huawei-enabled smart car? Using as an example WM Motor’s W6, the latest crossover from the Baidu-backed EV maker, the tech giant is responsible for most of the digital technology in the car, from the voice assistant to the map navigation in the operating system. WM Motor also sources Baidu’s self-driving software and hardware suite including 12 cameras, 12 ultrasonic sensors, a radar system, and a computing platform, while it independently develops the car’s mechanics, such as the powertrain system.

Chinese carmaker Chery is also clamoring to join Baidu’s friend circle, while BAIC is one of Huawei’s oldest allies in the automotive industry. However, some of the bigger names in auto want full control in developing the next-generation of vehicle architecture. For that reason, China’s biggest automakers, SAIC and Dongfeng Motor, displayed their latest offerings with software developed in-house or by Chinese AV unicorns they have backed.

During the expo, SAIC began to take orders for its first sedan, the L7, under its new premium EV brand IM. Short for “Intelligence in Motion,” SAIC co-launched the brand with Alibaba in November to compete against Tesla. The Volkswagen partner recently raised its holdings in Chinese AV upstart Momenta, aiming to offer urban self-driving capabilities early next year. Meanwhile, Dongfeng announced (in Chinese) that it aims to sell a total of 1 million EVs and master fully driverless technologies within the next five years.

Experts TechNode spoke with were optimistic about Chinese automakers’ moves into smart, electrified cars, thanks in part to local tech giants. Domestic players could account for 70% of auto sales from the current 40% within the next 10 years, Liu Guanghao, an investment director at Shanghai-based venture capital firm BeFor Capital told TechNode. “These driver assistance features are industry-leading, and the car interiors, such as the digital dashboards, appeared forward-thinking. This could help traditional automakers reposition their brands to be more premium,” (our translation) Liu said.

Highlight 2: EV Big Three momentum slows

Amid the hubbub from big tech and traditional auto companies, Chinese EV contenders were comparatively quiet, with no mention of new models at Auto Shanghai.

Well-funded Nio, Xpeng, and Li Auto are considered emerging EV leaders and the most promising of China’s Tesla challengers. Now, as competition heats up, they are collaborating with smaller tech unicorns—such as Li Auto’s partnership with Chinese chipmaker Horizon and Xpeng’s partnership with DJI’s Lidar unit, Livox—in an effort to maintain their leadership positions in the sector. 

But their outlook may be clouding over after internet giants overshadowed them during the expo.

On the first day of the show Nio kicked off a massive expansion of its charging infrastructure, announcing that it would open 100 battery swap stations and 500 supercharging stations in an area spanning eight northern provinces during the next three years. Meanwhile, Nio president Qin Lihong acknowledged to Chinese media on April 19 that big tech’s push into EVs was a challenge for the company considering Huawei’s established retail network, and reaffirmed its goal to expand its sales network by 60% to 366 stores nationwide by year-end.

There has been growing concern over EV upstarts lagging larger players in new product and technology development going forward. Nio CEO William Li last month expressed confidence that it would release the ET7, its next-generation electric sedan, on time, slated for delivery early next year. It would happen, he confirmed, despite steep challenges in advanced technology adoption. The company said it is doubling its R&D budget to RMB 5 billion ($774 million) this year. “Auto intelligence is where this game may be decided,” Li told Chinese media during the auto show.

Li Auto is seen as falling behind its peers in the AV race, having not yet delivered highway self-driving functionalities to its customers. Feeling the heat at the auto show, CEO Li Xiang said April 20 on Chinese social media platform Weibo that its self-developed AV system will be able to compete head-to-head against those by Huawei and Tesla next year. The EV startup in September announced plans to adopt Nvidia’s advanced supercomputer Orin for its second model, scheduled to launch in 2022.

The six-year-old automaker also turned to Chinese AI unicorn Horizon Robotics for help, and the two companies during the show deepened their partnership to an “in-depth cooperation in building upgradable smart and electric vehicles” (our translation). Despite its best efforts, Li Auto may be too late to catch up and gain a competitive advantage, as tech heavyweights venture into EVs, an analyst told TechNode at the show. 

Li Auto in February assured investors that it will triple its R&D spending to RMB 3 billion ($464 million) this year. Since December it has raised around $2 billion from a new share offering and bond sales to ramp up in-house R&D capabilities.

Xpeng Motors is ahead of its peers in driverless technologies, but also failed to wow the crowd during the show, despite unveiling its second sedan, the P5, which it displayed at a press event in Guangzhou a week earlier. Touted as China’s first production model equipped with two Lidar sensors, an expensive and essential component for 3D perception, the P5 is expected in the first half of 2022 to self-navigate driving scenarios such as being cut off on busy streets.

However, Xpeng did not release the P5’s pricing information as planned, spurring concern from industry insiders that the company’s best days are behind it. Several insiders and analysts that TechNode spoke with said that the P5 launch fell short of expectations while the cost of the vehicle’s hardware suite has remained high, pressuring Xpeng in pricing the new product, people close to the company told TechNode during the show.

Xpeng fired back on April 22, saying on its Weibo account that it had secured more than 10,000 orders of the P5 in 53 hours after opening orders (with refundable RMB 99 deposits). “The market feedback was beyond our expectation,” (our translation) a company spokeswoman said to TechNode on Wednesday. 

Big tech disruption

Chinese tech giants at the Auto Shanghai 2021 disrupted the already-breathtaking pace of China’s new energy and autonomous driving world by doing what they were there to do: build consumer brand awareness and deliver advanced car technology solutions. The disruption is boosting the perception of Chinese-built vehicles—no longer synonymous with cheap, low quality cars—up the industry value chain.

This disruption is pressuring Chinese EV upstarts’ lead in the industry. These EV firms will have to convince investors that, after notching early wins, they can maintain their momentum in an increasingly crowded playing field. 

“Big tech’s entry into the market would inevitably erode the influence young EV makers have in the industry. This has created an alternative regarding the competitive landscape in the next five to 10 years,” (our translation) Paul Gong, China auto analyst at UBS, told TechNode on April 21.