Geely is willing to be the "Foxconn", but can Baidu, which was acquired by "Jidu", succeed in making cars?

"Baidu is going to build cars." This news was officially announced by Baidu in January this year. Although some news that Baidu will be involved in the car manufacturing business has been released before, the official announcement still caused quite a shock to global car companies, because Baidu not only builds cars by itself, but also brings in the top domestic independent brand "Geely".

On March 2, the joint venture between Baidu and Geely, Jidu Auto Co., Ltd., was officially established. The legal representative is Xia Yiping, the former CTO of Mobike who was just poached by Baidu, and the registered capital is RMB 2 billion.

Through the equity structure behind it, we can clearly see that Baidu, as the major shareholder, holds 55% of the shares through Dazi County Bairuixiang Venture Capital Management Co., Ltd.; Shanghai Mapu Automobile Co., Ltd., as the representative of Geely, subscribed RMB 900 million and holds 45% of the shares.

Tianyancha data shows that the former is a venture capital management company under Baidu, and the latter is a subsidiary of Geely Holding Group. And judging from the senior management team of the joint venture, Baidu has absolute say.

Among the five directors of Jidu, in addition to Xia Yiping, Liang Zhixiang, vice president of Baidu Group, also serves as chairman, and He Junjie, vice president, and Li Zhenyu, general manager of the intelligent driving business group, serve as directors. The board seat representing the interests of Geely is held by President An Conghui.

In addition, regarding the name of the joint venture "Jidu", Baidu explained that "Jidu" has nothing to do with the cooperation between Baidu and Geely in making cars. Its name was taken by Baidu Intelligent AI, which means "the culmination of Baidu's AI capabilities."

However, the mass-produced models of the Baidu-Geely joint venture may not be called "Jidu" in the final product brand. "Jidu" represents the operating entity of the joint venture, not the car brand. Just like Guangzhou Orange Mobility Intelligent Automobile Technology Co., Ltd., its product name is Xiaopeng Motors.

Baidu also stated that the automobile company is independent of the parent company system and maintains independent operation. In the newly established company, Baidu will focus on the entire industry chain of smart car design and development, production and manufacturing, sales and service, and reshape the form of smart car products through Baidu's artificial intelligence and Internet technology and Apollo's autonomous driving capabilities. Geely provides the latest global leading pure electric architecture developed by Geely - the vast SEA intelligent evolution experience architecture.

Although Baidu has taken a substantial step in car manufacturing, car manufacturing is not the same as the pure online experience of Internet products. It is definitely not something that can be done by a sudden "996" schedule. It will also involve a lot of time-consuming and labor-intensive supply chain and testing work. Baidu officials also stated that under optimistic circumstances, it will take about three years to launch the first mass-produced model.

Car manufacturing, a shot in the arm for Baidu

Subsidies for new energy vehicles are declining, Tesla is fully localizing, new car manufacturers are frantically launching new cars to seize the market, and BYD is far ahead. No matter from which dimension you look at it, Baidu's entry into the new energy vehicle manufacturing industry at this time feels like "coming late to the party."

However, as an Internet company with cash reserves of over 100 billion yuan, Baidu must have conducted sufficient industry research and risk assessment before expanding its group business. So why did Baidu still rise to the challenge and rush into this "red ocean" without hesitation?

The answer is obvious: in order not to miss the next opportunity.

Baidu has been silent for many years. As the PC Internet gradually weakens, its digital hegemony is also constantly eroding. In addition, it is overly dependent on the single profit model of search engine products and is gradually falling behind among Internet giants.

Obviously, Baidu needs to enter the wind again to take off. In the foreseeable future, autonomous driving, electric vehicles, and intelligent vehicles are the only tracks that can support Baidu's huge market value.

Moreover, the high R&D threshold and technical barriers have blocked most of the global competitors. Baidu has been deeply engaged in autonomous driving and AI intelligence for many years, and the accumulated deep technical experience will continue to provide Baidu with core competitiveness in the future.

As for the driving factors behind Baidu's car manufacturing, Robin Li's explanation is more practical: automobile companies may have hesitated in the past, but now we have provided a preliminary smart car template, which will also have a positive impact on Baidu's Apollo autonomous driving technology revenue.

Entering the automotive industry as a complete vehicle manufacturer will enable Baidu to bring intelligent driving technology to the market as soon as possible. Technological innovation requires end-to-end integration and a fast and powerful feedback mechanism, which is one of the reasons why Baidu is building cars.

In fact, what Robin Li said is true. Before Baidu Car arrives, Baidu's Apollo autonomous driving technology may bring rich returns to Baidu first.

At Baidu's fourth quarter earnings call in February this year, Robin Li stated that the Apollo-based ANP pilot assisted driving solution will soon be accepting orders, which means that ANP will be the first to be commercialized.

At the same time, the well-known investment bank China Renaissance Capital once did some calculations: it is expected that by 2025, ANP is expected to contribute RMB 28 billion in revenue to Baidu Group, becoming an important performance support for the group.

However, can the ANP of Apollo's autonomous driving technology alone drive Baidu Group's overall growth? The answer is obviously no. This is just like in the stock market, when the fundamentals of the market are not good, no matter how strong the short-term technical indicators are and how obvious the rebound trend is, it still cannot change the downward trend of the market.

In the 2020 financial report data released by Baidu in February, Baidu's operating income was 107.074 billion yuan, a year-on-year decrease of about 0.32% from 107.413 billion yuan last year, marking the first decline in operating income since Baidu went public.

Moreover, in early December last year, Baidu's stock price fluctuated only around US$130, and its market value was around US$50 billion. As a member of the "BAT", Alibaba and Tencent's market value is already more than ten times that of Baidu. Baidu's "Once" has also been joked on the Internet as a unit of measurement for the market value of listed technology companies.

Fortunately, this situation did not last long. Baidu's "East Wind" arrived ahead of schedule because of "car manufacturing".

Since the end of 2020, Baidu has frequently interacted with the topic of "car manufacturing". Its stock price has also started a round of rapid rise, soaring by nearly 150% in the past three months, and its market value has soared by 450 billion yuan. As of the close of the U.S. stock market on March 3, Baidu's latest stock price was US$277.8, with a total market value of 94.751 billion. In the middle of last month, Baidu's market value broke through the US$100 billion mark, reaching a historical high.

It can be said that by binding itself with the new energy vehicle industry, Baidu's early profits from "car manufacturing" have already been pocketed. The rise in stock prices not only guarantees the scale of Baidu's market value, but "car manufacturing" itself has also injected a "booster shot" into Baidu.

The top domestic player who is willing to be a "OEM"

Why did Baidu finally choose Geely for its joint venture in car manufacturing?

This also reflects the vastness and diversity of the Chinese market. As long as there are real needs among enterprises, they can almost always find corresponding "matching" solutions.

Baidu and Geely, the two "leading" brands of domestic technology and independent brand car companies, naturally came together because of real needs and reciprocal relationships.

Automobile is different from light industry, it is a traditional pillar industry with heavy assets. For Baidu, without the accumulation of experience in car manufacturing, it will probably be "taught a lesson" by the market if it rushes into the market alone.

Baidu wants to participate in the development and application of intelligent software for vehicles and the field of unmanned driving, which is also Baidu's actual advantage.

The entire vehicle manufacturing and quality control of electric vehicles will be completed by Geely Auto, which is more proficient in this field. At the same time, it will use Geely's latest global leading pure electric architecture - the vast SEA intelligent evolution experience architecture.

For Baidu, working with Geely will not only greatly shorten the vehicle development cycle, but also enable the vehicle's overall intelligence level and overall product strength to maintain its leading position in the industry.

Geely has its own practical reasons for choosing to go the "OEM" route. From the perspective of Geely Auto's fundamentals, although it has been promoting new energy vehicles for a long time, it seems that Geely has been promoting it in vain over the years.

As early as 2015, Geely had begun planning its transformation to new energy. However, until last year, Geely Group's sales in the new energy vehicle market were only 68,000 vehicles, and this figure was the result of the combined efforts of five brands: Emgrand, Geometry, Lynk & Co, Polestar and Volvo.

In order to intuitively feel Geely's "loneliness" in the new energy market. 91che (x91play) Take Weilai Automobile as an example. The latter's cumulative sales in China last year were 43,700 vehicles. At the same time, the average selling price of its models was the highest among domestic cars, exceeding 420,000 yuan.

The average selling price of Geely Group's new energy vehicles is much lower than that of NIO, but the sales volume is not much different.

Compared with BYD, the gap between the two is more obvious. BYD's sales of new energy vehicles last year were close to 200,000 units, and it has popular models in almost every level. BYD's Qin, Han and Tang new energy models are in short supply in the market.

On the other hand, Geely Auto's business strategy in the new energy vehicle market is clearly based on the idea of ​​"having more children is easier to fight". Although there are many new models, the products are highly homogeneous, resulting in no hot-selling models of new energy vehicles of various brands, which in turn dragged down the overall sales.

Obviously, Geely, as the leader of traditional fuel vehicles of domestic independent brands, has not found its position in the new energy market. However, the "door of opportunity" to the future new energy vehicle market has been opened, and Geely does not want to, and must not, miss this great opportunity - since it cannot sell more than its competitors, it will first build cars for others, get the "ticket" to the smart car market, and then make plans.

In fact, Geely did just that. During the Beijing Auto Show, Lynk & Co released the SEA vast pure electric platform, which took four years to develop and invested more than 13 billion yuan.

In terms of the three-electric system, the charging and discharging control core of this platform adopts silicon carbide semiconductor chips, supports 800V high-voltage fast charging, and is also equipped with a self-developed electric drive system, with a maximum output of 475 kilowatts of drive motor. In terms of endurance, NEDC can exceed 700 kilometers, and the new battery can achieve 200,000 kilometers without attenuation. The first model of this platform, Lynk & Co ZERO Concept, has also taken the lead in realizing L3 autonomous driving.

More importantly, the SEA platform also adopts a modular design, and the mass-produced models cover wheelbases of 1800mm~3300m, which can almost cover all passenger cars on the market. An Conghui, CEO of Geely Group, said that this platform can build all models such as sedans, SUVs, MPVs, station wagons, sports cars, pickups, etc.

It is precisely based on such strong compatibility and leadership that Geely officials dared to make a bold statement at the beginning of this year to manufacture products for global automotive customers.

This is not just talk. Geely Group is also good at acquiring some declining car companies in China and carrying out mergers and reorganizations to reduce costs and increase efficiency. Lifan, Cheetah and other "marginalized" old car companies have all been acquired by Geely.

Geely has made it clear that the production capacity of these automakers will be used to manufacture new energy vehicles for Geely. Geely, which is prepared for a rainy day, is planning the future development of new energy vehicles for the group while also ensuring the production capacity needs for OEM production for global customers.

Moreover, since the beginning of this year, Geely has made many big moves, first establishing a joint venture with Foxconn and signing a cooperation agreement on automobile OEM. Jia Yueting, who will "return to China next week", has also entered the circle of friends of Geely's Li Shufu.

Not long ago, FF (Faraday), founded by Jia Yueting, also signed a framework cooperation agreement with Geely, and Geely Holding also participated in a small investment in FF SPAC listing. According to FF's announcement, one of the top three automobile OEMs in China (Geely) and partners in key Chinese cities will also help FF land in the Chinese market.

In addition, there is Jidu, whose goal is also to promote the car manufacturing business. All of Geely's actions are inseparable from one core, which is to be the "OEM" for customers around the world who want to build cars and become the "Foxconn" of the automotive industry.

But has Geely made the right choice this time? 91che believes that no one can give a clear answer before the market tests it. But what is certain is that Geely has already won the first place in this new energy vehicle "arms race".

In addition, from the perspective of the cooperation between Baidu and Geely, although the two parties’ “car-making” cooperation has “different paths”, the direction is the same. Considering the current situation of Baidu’s decision to build cars, choosing Geely is undoubtedly a win-win choice.

The "passionate love" state

Baidu has taken a substantial step in building cars and announced the general planning process for the launch of its first model, but the actual resources invested by both parties are not yet known to the outside world. No one can predict how far Baidu and Geely's "Jidu" will go in the future.

It is an indisputable fact that Baidu "got up early but arrived late". Although Baidu has been deeply involved in the fields of automotive intelligence, AI, and autonomous driving for many years, it has been much slower in promoting the implementation of complete vehicles. Moreover, in the fiercely competitive domestic new energy vehicle market, the later you enter the market, the more passive your market position will be in the later stage.

Take the example of Zhiji Auto, a joint venture between Alibaba and SAIC Motors. The brand was officially launched in January this year, but surprisingly, the first model was launched in less than two months. It was also announced that the whole vehicle would be delivered next year if pre-orders were accepted during this year’s Shanghai Auto Show. The speed is astonishing.

At present, the basic parameters of the car have also been clarified. The whole series is equipped with a 93kWh battery as standard, and the high-end version is equipped with a 115kWh battery. It is the world's first silicon-doped lithium-supplementing technology, which can achieve a single cell energy density of 300Wh. Within the new architecture, it can support a maximum range of nearly 1,000km.

In terms of intelligent configuration and core product strength of electric vehicles, Zhiji Auto's competitiveness is not weak compared with the current Tesla, new car-making forces, and BYD. The first car has been unveiled, and pre-orders are imminent and delivery is in sight.

Baidu's car-making project is still in the PPT stage. With the rapid technological progress in the new energy vehicle market, can Baidu successfully open up the market as a latecomer and ensure that the various indicators of its models will not lag behind the times in three years? I'm afraid that even Geely itself cannot guarantee this.

It is also worth noting that Baidu has absolute voice in the "Jidu" company, which is in stark contrast to SAIC, which is an expert in manufacturing and holds a major shareholder position in Zhiji Auto.

Zhiji Auto's registered capital is RMB 10 billion, of which SAIC invested RMB 5.4 billion and holds 54% of the shares; Zhangjiang Hi-Tech and Alibaba invested RMB 1.8 billion each and hold 18% of the shares respectively. The remaining 10% of Zhiji Auto's shares will be divided into 5.1% ESOP (core employee stock ownership platform) and 4.9% CSOP (user equity platform).

This means that although Zhiji Auto is dressed in the guise of a new force and is named after the technology company of Alibaba, it is essentially a new energy vehicle company dominated by SAIC. In other words, SAIC has absolute dominance in the application and decision-making of the latest technologies in electrification, intelligence and autonomous driving, which in fact plays an extremely critical role in whether the car can enter the market in time in the future.

On the contrary, Geely occupies a "weak" position in "Jidu" and is more inclined to play the role of "manufacturing". Moreover, will Geely Automobile, which is based on the SEA vast platform technology, form homogeneous competition as the two companies "confront" in the market in the future, and then lead to subtle changes in the relationship between the two parties?

All this has become the biggest uncertainty for Jidu's future. It is not an easy task for Baidu and Geely to remain in a state of "passionate love".

Previously, BYD and Mercedes-Benz had also cooperated to launch the Denza brand. Although the two companies invested almost the same amount of money in brand, technology and capital, they still failed to open up the market and eventually had to go their separate ways. Now, Baidu has no experience in vehicle manufacturing and has chosen to cooperate with traditional car companies for OEM and operate it by itself. The result is likely to be even more difficult and a pitfall will occur at every step.

Of course, how far Baidu can really go in car manufacturing will ultimately need to be tested by the market. With Jidu coming, what is the prospect? Let the bullet fly for another three years!

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.