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Automobile industry chain: chain length VS chain king

2025-02-25 Update From: SLTechnology News&Howtos shulou NAV: SLTechnology News&Howtos > IT Information >

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Original title: "chain length VS chain King"

Xiaopeng Motor has repeatedly refuted rumors about the plan to develop its own battery. On November 28, Xiaopeng reiterated "nothing" and firmly focused on the main automobile industry.

Contrary to Xiaopeng, independent brands such as GAC Ean and Xilai, as well as international car companies such as Volkswagen and BMW, are investing heavily in the field of power batteries, and Xiaomi, which has not even built a car, has invested in a number of companies related to the power battery industry chain.

In fact, not only batteries, but also car companies have begun the journey of self-research chips. The reason why "self-research" has become a high-frequency action of car companies is that the global automobile supply chain is undergoing profound changes, a prominent manifestation is that "vertical integration" has a great tendency to return.

On the one hand, in the era of new energy vehicles, the electronic and electrical architecture of the whole vehicle is developing from distributed to centralized and centralized, accelerating the reshaping of the supply chain industry. On the other hand, under the impact of geographical, epidemic and other external factors, problems such as supply chain interruption and price rise have become prominent. it has become a new consensus in the industry to speed up the building of a safe, economic, efficient, strong and resilient intelligent supply chain ecology.

By reviewing the changes of the industrial chain of the automobile industry in the past 100 years, this paper tries to answer the following three questions:

1. What changes have taken place in the current automobile industry chain?

2. Is the "vertical integration" of Tesla and BYD the same thing?

3. What should Chinese enterprises do when the global automobile industry chain is reshaping?

It is said at the beginning of the Romance of the three Kingdoms, "the general trend of the world, division must be United for a long time, and it must be divided for a long time."

The same applies to the automobile supply chain. Since the birth of the modern automobile industry for more than 100 years, the supply chain has changed from "integration" to "division". At present, there is a trend of "integration".

As the "ancestor" of the modern automobile industry, Ford took a road of "vertical integration" from the very beginning. The so-called "vertical integration" means that an enterprise is not only responsible for producing the final products, but also involved in most or even all of the upper reaches of the industrial chain.

The "Rouge River Factory", which produces Ford, is comparable in scale to a county seat. In addition to making its own engines, chassis, tires and other parts, it has also built power plants, coal mills, steel furnaces, and rolling mills.

General Motors of the same period at Ford was also a representative of vertical integration. In the 1920s, GM's parts industry included electronics, radiators, antifriction bearings, rims, steering, transmission, engines, axles, convertible bodies, and so on.

As opposed to "vertical integration" is the "horizontal division of labor".

The theory of horizontal division of labor was first systematically expounded by American economist Thomas Friedman in his book the World is flat. This theoretical system has affected the development of the world manufacturing industry in the past 20 years and promoted the horizontal division of labor in the global industrial chain.

For example, the 4.5 million parts needed for Boeing airliners are produced by 1500 large companies and 150000 small and medium-sized enterprises around the world. The industrial chain of the automobile industry is also extremely long.

As the fuel vehicle technology has entered a mature and stable period, the profit space created by technological innovation is becoming more and more narrow, and car companies have to maximize profits by reducing costs. From an economic point of view, it is very reasonable for all kinds of enterprises in the industrial chain to carry out horizontal division of labor according to their own advantages, regardless of countries and regions, which is conducive to the reduction of product costs.

After the 1990s, global automobile manufacturers such as Ford and General Motors gradually broke the "vertical integration" and began to de-assemble and purchase a large number of external parts. It is understood that Ford parts production is scattered in 15 countries and regions.

However, the earth is round and the world is not always flat. If there are too many links in the industrial chain and the transportation distance is too long, it is bound to result in high logistics costs and long transportation time, thus increasing the risk of breaking the whole industrial chain.

In the past two years, under the superposition of multiple factors such as COVID-19 epidemic situation and the international situation, the automobile supply chain has been constantly impacted, which makes more and more automobile companies realize the importance of vertical integration.

The "lack of core" crisis that broke out at the end of 2020 is a profound lesson. In addition, the power battery, which accounts for 40% of the vehicle cost and 60% of the vehicle cost, is a link that all car companies dare not neglect.

So car companies have bypassed the original reliance on Tire 1 (first-tier supplier) and began to cooperate directly with chip manufacturers, or develop their own chips; so car companies such as GAC Ean and Ulay Automobile joined the army of self-developed batteries, and even invested in lithium mines, the market was not surprised by this, but Xiaopeng had no intention of self-developing batteries.

Vertical integration: foreign Tesla VS domestic BYD new energy vehicle era, as sales Top2 of BYD and Tesla, can be described as the "flag bearers" of vertical integration, but also the beneficiaries.

Galaxy Securities analysis believes that BYD's vertical supply chain system, on the one hand, ensures that BYD's production will not be affected; on the other hand, BYD is more sensitive to changes in spare parts costs. A Morgan Stanley research report on Tesla last year also said that Tesla's vertical integration ability had a similar effect.

Tesla's vertical integration ability is hidden in the "super factory" created by Musk, which is inspired by Ford's "Rouge River factory". However, the "super factory" is no larger than the "Rouge River factory". After all, in the era of new energy vehicles, the number of parts needed for electric vehicles has been greatly reduced.

At the same time, Tesla's vertical integration is not all-inclusive. "self-made" is not always right, says Gray Rachel, a former vice president of production of Tesla. "if you are producing a product that makes full use of other commercial components and there will be no major innovation for a certain period of time, then there is no point in making it yourself. But if you are making a product that contains unique intellectual property rights or has a high speed of change, then this will be the right choice."

And Tesla was not vertically integrated at the beginning. Musk felt that his partners were weak in the core batteries and chips, so he personally developed 4680 cylindrical batteries and FSD autopilot chips.

(BYD Shenzhen headquarters) BYD's vertical integration is also "forced out".

In 2003, BYD, which started with batteries, entered the car-building industry through acquisitions. Wang Chuanfu once said that because of the small scale, "No one wants to give you supporting industries."

In addition to tires, glass and a few standard parts, BYD produces a large number of spare parts, including seats and wipers, some or all of them. This runs counter to the popular global professional division of labor at that time.

After the power of the electric car, BYD took the initiative to develop its own production. Wang Chuanfu believes that only vertical integration can achieve real innovation. In 2011, a research report from Debang Securities said that BYD covered the whole industry chain of electric vehicles and was the only known automobile manufacturer to vertically integrate the whole industry chain at that time.

What is different from Tesla is that today's BYD has added an open posture, vertical integration at the same time began to "output". This is because with the development of new energy vehicles, the related industry chain is increasingly developed, and by 2017, Wang Chuanfu's vertically integrated dividend has bottomed out.

Take batteries, for example, BYD's power batteries have been produced and sold by themselves for a long time, which Wang Chuanfu said is to maintain BYD's leading position in the battery field.

The turning point came in 2017, the year the Ningde era ranked first in the world, when BYD announced a separate spin-off of its power battery division and the following year to set up a power battery joint venture with Changan Automobile, taking the first step in battery external supply.

In March 2020, BYD battery accelerated the pace of "external supply" to form a "Fudi battery". In June this year, BYD admitted for the first time that it would supply power batteries to Tesla.

Car companies do "chain length", chain enterprises strive for "chain king" at present, BYD intends to "down" open, while other car companies are trying to "upward" integration.

Car companies "upward" have cost considerations, but also have safety concerns. Since 2021, the sharp increase in sales of new energy vehicles has led to a sharp rise in the price of lithium ore resources, leading to a rise in battery prices, with car companies complaining about "working for battery manufacturers." In addition, some car companies think that self-driving, as a "soul", must be in their own hands.

However, batteries and chips are capital-intensive and technology-intensive investments, and not all car companies have the spare capacity to do their own research.

At the fourth Global New Energy and Smart vehicle supply chain Innovation Conference held by the China Electric vehicle Association, Miao Wei, deputy director of the Economic Committee of the CPPCC National Committee, pointed out that in the direction of coordinated development of automobile enterprises and automotive chips, car companies should bear the responsibility of "chain length".

"car companies do not necessarily make cores, but they must understand the core. Car companies must have an overall consideration on how to establish a cross-industry alliance and cooperation in their own development and chip development." Miao Wei said.

In the past, car companies basically did not care about the problem of chips, chip selection, matching are basically completed in the first-class suppliers, second-level suppliers, car companies are basically just a user.

Cui Dongshu, secretary-general of the all-China Federation of passengers, believes that "the whole vehicle is the king" is an inevitable trend, and vehicle enterprises should be long in the industrial chain. If the enterprises that do new energy vehicles in the future want to make a profit, the ability of the industrial chain is very important. "especially the battery industry, it must be in their own hands."

Car enterprises do the "chain length" to co-ordinate the industrial chain, while the enterprises on the industrial chain should strive to be the "chain king".

In the era of traditional fuel cars, the competitiveness of overseas car companies is significantly stronger than that of domestic brands by virtue of their technology accumulation for many years, which is inseparable from the international large-scale Tier 1 (such as Bosch, mainland, etc.) accompanied by its global expansion.

In the era of new energy vehicles, in the first half of electrification, the pattern that the power link has been nearly monopolized by foreign suppliers has been broken, and the Ningde era, a Chinese battery company, has become the leader of globalization, which can be described as the "chain king" of the power battery industry chain.

In the intelligent second half, with the overall rise of independent brands, more localized global companies are expected to emerge. The overall rise of China's own brands requires a group of Chinese enterprises that focus on the core "track" to strengthen the domestic supply chain and build their own "mainland" and "Bosch".

In October, Volkswagen announced a joint venture with Horizon, a Chinese smart chip company, to accelerate its technology development in the field of self-driving. When Ningde was in its infancy, BMW helped it a lot. Can Horizon take advantage of this opportunity to cooperate with international first-tier car companies to become the leader of self-driving chips?

Another company with the potential of "chain king" is Huawei. Huawei, which has repeatedly stressed that it does not build cars, locates the incremental parts supplier of Smart Networked cars.

Wang Jun, president of Huawei's smart car solutions division, once told the media, "Tier1 and Tier2 (primary and secondary suppliers) in China (auto parts industry) are so scattered that there are no giants. The industry needs such a company to try to do this, and Huawei happens to have this ability."

Chen Qingtai, chairman of the China Electric vehicle Association of 100 people, has repeatedly stressed that the bottom of an automobile power is a parts power.

In the era of traditional fuel cars, Chinese enterprises have always been absent in the field of key components, resulting in the difficulty of the "dream of a strong automobile country". At a time of great changes in the automobile industry, China's new energy vehicle industry chain finally stands in the forefront of the race track, live up to the opportunity of the times, and strive to win the dominance of the automobile industry.

[full text reference]

[1] "BYD: technology first Vertical Integration", Debon Securities

[2] "Automobile supply chain turns to" Buy Safety ", Economic Information Daily

[3] "brewing new high-end brands and opening up 10 trillion new markets. Wang Chuanfu talks about BYD's New Strategy, Economic Observer

[4] "Reconstruction of the global industrial chain under the epidemic: industrial chain clusters with the combination of horizontal division of labor and vertical integration", Huang Qifan

[5] "Speed up the construction of a future-oriented smart car supply chain".

[6] "New Energy vehicles win the second half: supply chain Security needs self-control", China Business News

[7] "New four modernizations" accelerates the integration of automobile supply chain, Economic Information Daily

[8] "lack of core forces the supply chain reshaping of new energy vehicles", China Energy News

[9] "Europe lags behind China in the supply chain competition of electric vehicles", Financial Times

[10] "stop production and see stop production, a new stage of automobile supply chain", electric vehicles 100 people will

[11] "one of the series of reports on the revolution of cars: a decade has passed since the advent of electric smart gold, supply chain upgrading and restructuring has opened", Minsheng Securities

[12] "former vice president of production Tesla: Tesla's highly vertically integrated secret weapon", 36 krypton

This article comes from the official account of Wechat: che Bai think Tank (ID:EV100_Plus), author: Qin Haiqing

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