A competent car company will develop its own research in the entire stack, and the rest will cooperate with the entire energy and intelligent ecosystem.
Text丨Wang Hailu
Edit丨Song Wei
In 2016, NIO founder Li Bin initiated the establishment of "NIO Capital". Although the name is " NIO " capital, external fundraising is an independent market-oriented industrial fund.
The new energy industry has investment value, which was not a consensus among everyone at that time. In 2016, only 500,000 new energy vehicles were sold in the Chinese market, and the market penetration rate was less than 2%. Zhu Yan, a managing partner of NIO Capital, remembered that at that time, we had to explain to the LP (investor) that we should first explain to the LP (investor): Why is the new energy vehicle industry worth investing in?
The new world is coming faster than everyone imagines. Last year, China sold more than 3.5 million new energy vehicles, and this year's forecast sales of the China Passenger Association is 6.5 million. In September, the penetration rate of of new energy vehicles reached 27%. NIO Capital raised the second dollar fund last year, originally planned to raise $300 million, and finally raised $400 million. "Everyone has already realized that this industry can create wealth, and it has just begun," said Zhu Yan.
htmlIn 55, NIO Capital has invested in more than 60 projects, with an asset management scale of nearly 15 billion yuan (3 US dollar funds, 2 RMB and multiple special funds). There are many celebrity companies among the invested companies, such as CATL , Rongbai Technology, Xinwangda , Momenta (first speed), Pony Ma, etc.
Automotive, energy, semiconductors, and intelligent manufacturing related industries are currently the main investment direction of NIO Capital. Among them, NIO Capital has exited and the highest return rate comes from the battery industry. In 2017, NIO Capital invested in lithium battery positive electrode material company Rongbai Technology, a company with an overall return rate of nearly 10 times. During the same period, NIO Capital also invested in CATL, which was launched shortly after its IPO, making about two or three times the profit.
In the first nine months of this year, the new energy vehicle market grew by 1.1 times, but the overall penetration rate is still less than 30%. Zhu Yan believes that under the driving force of the growth of the overall market size, the entire industrial chain will generate a large number of investment opportunities. "One electrode, negative electrode, current collector, electrolyte , separator, and even adhesives... In any market, as long as it sticks to a battery, it can reach a scale of tens of billions or even hundreds of billions of dollars." Zhu Yan said.
NIO Capital is also continuing to invest in battery factories. They have successively invested in Xinwangda and solid-state battery company Weilan New Energy. Zhu Yan believes that the battery industry is different from the Internet and has marginal costs. Car companies must ensure supply chain safety and will not let batteries, which account for one third of the vehicle cost, be monopolized by one company. He believes that there will eventually be more than 10 companies in the battery industry, and those with production capacity and and those with cost advantages will have the opportunity to come out.
In addition to batteries, another track that NIO Capital focuses on is autonomous driving, investing in Momenta, Pony Ma Zhixing, Yingche, Main Line Technology, and also investing in lidar company Tudatong, autonomous driving chip company Heisema, etc.
In the past few years, the autonomous driving industry has been like a roller coaster. Investors have gone from rising emotions to waiting and watching the currency, and the standards for judging projects have also changed from leading technology to paying more attention to business models. The autonomous driving companies invested by NIO Capital are also actively exploring commercialization paths. Among them, the fastest-progress is Momenta, which cooperates with SAIC to mass produce the assisted driving system of Zhiji L7.
Traditional car companies and traditional suppliers have a weak foundation in software research and development, which gives startups with the opportunity to do a good job in software. But in this process, the boundaries between car companies and suppliers are also being readjusted. Zhu Yan believes that traditional suppliers provide standardized products to car companies, and the "black box" model that refuses to share data will not work. Software suppliers need to build mutual trust in order to cooperate in depth with car companies, and both parties are responsible for the final results.
Tesla and new car-making forces including NIO did not choose to cooperate with suppliers, but advocated "full-stack self-development". NIO began to develop its own autonomous driving algorithm in 2020, and former Momenta R&D director, Ren Shaoqing joined as assistant vice president.
Zhu Yan believes that the autonomous driving industry will coexist in the future. Car companies that focus on autonomous driving will develop their own research, while some car companies that do not have the ability or do not plan to invest in autonomous driving will choose to cooperate with suppliers, and multiple car companies share data with a technology company to form an alliance.
The following is an interview with Zhu Yan by "Late Auto":
NIO Capital and NIO Auto
Late Auto: NIO Capital was established in 2016 and has invested in more than 60 projects. How do you evaluate this transcript?
Zhu Yan: We now manage two RMB and three US dollar funds, with AUM (asset management scale) nearly 15 billion yuan. I think it is still a good report card to achieve such fund management, team size, and the performance of our invested companies in sub-industry.
We invested very well in the first phase of the US dollar, and the overall multiple was very ideal, so we only exceeded the subscription in the second phase of the US dollar. The second phase of the US dollar was initially planned to raise $300 million, and finally closed at about $400 million. This reflects LP’s recognition of us on a certain level.
Everyone believes that the industry has great opportunities and there are many large-scale companies. Companies like Wei Xiaoli and Ningde have created wealth for everyone. Everyone has already realized that this industry can create wealth, and it has just begun. At the end of last year, the penetration rate of new energy vehicles was 20%, and there are still many investment opportunities.
late Auto: Most funds have faced difficulties in raising funds this year. Will the close cooperation with NIO make it easier for you to raise funds?
Zhu Yan: The fundraising strength of more reflects the investment ability of our team. Of course, everyone is also paying attention to the in-depth cooperation between NIO and the industry.
Late Auto: Can you share a case regarding the cooperation between NIO and the industry? For example, Weilan, the solid-state battery startup you invested in, has now become a supplier of NIO.
Zhu Yan: We tracked weilan for a long time, but we decided to invest until their batteries were about to be loaded on electric cars. Wei Lan was not the number one in semi-solid state, but now she has become the first company to mass produce. Through this process, they raise the yield rate and reduce the cost, and they may run very far.
We are a "selected" investment strategy. Generally, we will not invest in the top few in this track, but hope to invest in the best entrepreneurial team in the industry. If we choose such a company, we will actively promote its cooperation with some car companies.
Late Auto: Is it related to the investment of NIO Capital and its cooperation with NIO Auto?
Zhu Yan: does not. Whether cooperation can be done is more of a market-oriented decision between both parties. NIO is at the forefront of innovation and is willing to use new technologies and products. We have invested in the best companies among them, so they will naturally cooperate. Of course our investment may make this communication smoother.
late Auto: You have invested in the vehicle manufacturer LuTes , why do you think there is still a chance in the vehicle market?
Zhu Yan: Li Bin also mentioned before that the automobile industry is not a winner-takes-all industry, because cars and consumers have an emotional connection, which has a lot to do with product strength, service, price range and positioning. We believe that every category will have leaders in this market appear. Consumers’ demand for using cars is not simply moving from a to b, they have many personalized needs.
Our investment strategy is to understand the needs of consumers in specific groups, and the other is to be able to build cars at a cheap price. The era of spending 20 billion yuan to build cars has passed.
Battery is not a winner-takes-all industry
late Auto: How to look at the next 5-10 years, the competition between CATL and second-tier battery factories?
Zhu Yan: There are still many opportunities for innovation in the battery industry, and we will plan more than one company. Batteries are manufacturing, and their advantages depend on scale and yield. Its scale up (scale growth) depends on the production line. A company may have 100 GWh (a unit that measures battery production capacity) and a production line is only a few GWh. Other companies can also come to compete for cost advantages if they buy 10 G. From this perspective, it is possible for others to challenge its advantages. In addition, car companies will also choose more than one supplier for supply chain security reasons.
CATL will definitely have its position. I think its current layout, production capacity, cost, yield, etc. are already very leading. But it is not ruled out that other companies will rise.
late Auto: How many companies can be left in the battery industry? What are the barriers to this industry?
Zhu Yan: I think there will be more than 10 companies with opportunities. The barriers at the current stage are definitely scale, cost and technology iteration. I think the winner now is not necessarily the winner in the future. It is a huge danger to not invest in innovation and be content with current success.
For example, we invested in Weilan, which is to use new electrolytes and new battery structures to gain market share . If its battery can run 1,000 kilometers, the cost will be reduced and it will have a large market share.
late Auto: But Ningde also released a 1,000-kilometer liquid battery not long ago, and the range of 1,000 kilometers has been achieved through structural improvement. Who do you think has a better advantage?
Zhu Yan: CATL is a leading company and I believe it will continue to develop good products. At the same time, the industry also needs innovative companies like Weilan to use different technical routes to increase the range, provide consumers with a better experience, and promote the industry.
late Auto: A person from a battery startup company said that their current innovation may have caught up with CATL in more than a year. He feels that some of the lead is only a phased approach and does not mean that he can lead for a long time.
Zhu Yan: It is already very good that has been leading for two years.
The more successful the company is, the heavier the burden, which may be the biggest challenge in the automotive industry. If the winners do not invest in large scale, they may become losers in five years.
Late Auto: Where are the investment opportunities for VCs here?
Zhu Yan: We are still investing in batteries. Recently, we invested in Rongtong Hi-Tech, a company that makes lithium iron phosphate overall material. We also cast other components in the batteries. Any market, as long as it is related to batteries, can reach a scale of tens of billions or even hundreds of billions of dollars. Positive electrodes, negative electrodes, current collectors, electrolytes, diaphragms, and even adhesives are all large markets, and we will invest in these.
Our investment in battery positive electrode material manufacturer Rongbai Technology has brought us nearly ten times the return. At that time, the entire investment decision was very fast, and in just two weeks, I invested 200 million yuan. We had already made a clear judgment at that time - the high nickel direction is the mainstream and consumers need long range. We want to invest in leading companies, so after Rongbai Technology's fundraising window opened, we made a decision soon.
After we invested in that round, the company raised another round and went public. The price of its listing is actually not much higher than that of pre-IPO. Later, it rose about four or five times in the secondary market. We still have a lot of holdings in , and I have high confidence in this company.
late Auto: The last wave of lithium price increase dividend was taken away by the positive electrode material factory that masters lithium ore . How do you think about the future interest distribution pattern of the industrial chain? Which link is the most worth investing in?
Zhu Yan: The industry is worth investing in because its scale is growing rapidly. It is only a penetration rate of more than 20%. There is still a long way to go to a penetration rate of 90%. Scale will be a huge driving force. Second, I think no matter whether it improves performance or reduces costs, it is worth investing from different angles.
For example, if the scale of the new silicon carbon negative electrode increases, copper will become very expensive. Composite liquid collecting - Use copper and aluminum to make current collecting products. You have to consider reducing costs and improving performance. These have many investment opportunities.
late Auto: But with scale, you may not necessarily make money. For example, Xinwangda only has a profit margin of 3 points.
Zhu Yan: We are more concerned about the innovation and long-term gross profit level of the enterprise. Generally speaking, if there is technical content, there will be more advantages, so that the product can maintain high gross profit.
Late Auto: You have taken frequent moves in the energy industry. What is your investment strategy?
Zhu Yan: We invested in the company of the solar lightweight module Shangmai New Energy - Shi Zhengrong Dr. 8. It uses a new packaging method to replace glass packaging, install solar energy on more roofs, and can even do BIPV (Photovoltaic building integration).
I started investing in solar energy and cleaning technology in 2007. At that time, solar energy had just developed in China, but the business model at that time was both outside: production in China, equipment comes from overseas, and market comes from overseas. At that time, Germany and other European countries were subsidizing solar energy.
is now completely different. China is the largest market for solar and wind energy. Solar power generation no longer requires subsidies, and has reached parity in the Internet access, and the cost is the same as thermal power. The entire solar energy industry chain has basically been transferred to China and has become a local production and local market.
late Auto: But from 2007 to the present, why is solar energy still a single digit of annual electricity generation in China?
Zhu Yan: first, thermal power is very easy to dispatch. China is a large power grid, developed and stable, and has built a complete generator set from the power generation end to the power consumption end. But solar energy is difficult to dispatch because it relies on the weather and can only generate electricity when the sun shines, so it must match energy storage. The same is true for wind energy. Some people will call it "garbage electricity" because it is even more uncontrollable. However, the entire energy structure still needs to be supplemented in different forms, and we cannot only use one energy source. Solar and wind energy must develop on a large scale, but the premise is that there must be energy storage to match electricity consumption and power generation. The cost of energy storage has changed significantly over the past twenty years. When I first started investing, the cost of lithium battery energy storage was about $2,000 for kilowatt-hours, and now it is $100. In terms of cost, it can already be calculated in some scenarios. For example, in a distributed scenario, in an industrial park, solar energy is laid on the roof and energy storage is added.
The International Energy Agency has an expectation that solar energy accounts for less than 3% of the country's electricity generation, which has no impact on the power grid. But at 5%-15%, the power grid needs to make some adjustments to renewable energy. At 15% to 30%, the grid must seriously consider making adjustments to renewable energy. Now some provinces are in the second zone, some provinces are in the third zone, and some are in the fourth zone, and you have to make major adjustments.
Automatic driving investment is very concerned about Commercialization
Late Auto: You advocate investing in high-quality products and oppose shotgun investment. But the autonomous driving industry has invested in four companies: Momenta, Pony Ma, Yingche, and Mainline Technology.How do you summarize your investment strategies for this industry?
Zhu Yan: Its scene is very different. Momenta is the number one in L3, and of course it also goes towards L4. Pony.AI is the number one in Robotaxi. Yingche is the number one in long-distance logistics. The main line is the number one in the port.
In every scene, we all voted first. Why do we talk about high-quality strategies? Because in these industries, it has network effects. The first place may lead far, and the fifth place may have no business.
late Auto: But Pony has done several scenarios now, and they have also tried to build cars, but later gave up. It can be seen that startups with autonomous driving are still confused about exploring business paths. Have you given them any advice?
Zhu Yan: I think all these strategies, from the perspective of industry participants, are looking for scenarios to increase the amount. The commercialization paths of several companies we invest in are very clear. Momenta is a typical example of cooperating with car companies and empowering car companies to commercialize.
I think the L4 Robotaxi company must solve the problem of quantity. For example, Waymo was the leader in the past, but now Tesla is the leader in autonomous driving because it sells many cars and millions of cars are running. Its ability to collect data is very strong. This is a very strong flywheel effect . In fact, Xiaoma is also making various attempts, whether it is logistics scenarios, car manufacturing, or cooperating with other car companies, etc.
Late Auto: How can companies like Momenta deal with the boundaries with car companies? Because car companies want to deeply customize, suppliers can only make money by selling standard products. Second, you cannot deeply customize it. Should you open the white box for car companies to make it?
Zhu Yan: I think both technology companies and car companies must open it, and it is important to trust each other. It is difficult to use the original method without this mutual trust in the adoption of new technologies.
data are also very important to car companies. For example, traditional parts companies sell data to car companies in their own hands. For example, some companies are all black boxes, and they output several interfaces to you. I don’t think this model works.
All these technology companies must think about how to connect with car companies. Car companies should also think about how to cooperate with good technology companies. It will produce several modes: the first is that everyone joins together to be responsible for the effect. The second is to consider a certain degree of white box to solve the trust problem. Technology companies with truly core capabilities must believe that they can continue to iterate, and new functions will always appear.
The third is the data issue. I think it should not stay in the scope of a car company and a technology company. It should be that several car companies share data with technology companies. Because the world's largest automobile companies account for 10% of the market share, but if 1/3 of the cars (and technology companies) are shared data, the experience of autonomous driving will be far more than everyone else.
late Auto: What you said is a bit like the Apollo plan proposed by Lu Qi in Baidu , but later it failed. Many car companies are now moving towards closed routes. Do you still tend to believe that the industry will become open?
Zhu Yan: , we must be in this regard.
late Auto: But NIO is the opposite of you. It is becoming more and more like Tesla, doing vertically integrating , self-developed algorithms, autonomous driving chips, and even batteries.
Zhu Yan: This is a problem in the industry's development cycle. Now you need to trade control in exchange for efficiency. But it may be different in a few years. From the perspective of data collection and cost, an open model may be more efficient.
late Auto: If it is Momenta, it is positioned as a supplier of a car company, can it match today's valuation?
Zhu Yan: I think the current valuation is far lower than its potential value. Self-driving may have a higher concentration in the long run. It is hard to imagine that there are 10 autonomous driving solutions in this world running at the same time, and it may be concentrated on several companies. I think Momenta might be one of them.
late Auto: The autonomous driving track has experienced roller coasters in recent years, and the capital market has gone from being active to waiting and watching. Some top projects are not raising funds very smoothly now, and IPOs are relatively difficult, and they do not have the profitability themselves. How to solve the survival problem?
Zhu Yan: This is the reason why we must invest in the leading companies in the industry. No matter what the cycle of this industry is, there will be a relatively stable position. You see, in the cold winter of autonomous driving, many fundraising is not going well, but the leading companies have enough money to spend the winter. For it, the advantage is that there are not so many autonomous driving companies coming out to grab people, and in the cold winter, it will filter out some market noise.
late Auto: Everyone is worried about the inverted valuation of the primary and secondary markets of autonomous driving. If you have the opportunity to sell old stocks of the project at current valuations before the IPO, would you consider it?
Zhu Yan: is not ruled out, but this decision involves judgment on the long-term value of the company and fund cycle factors, so the reasons will be more complicated.
chip companies that don’t look at cars are not ambitious enough
late Auto: In the chip field, why invest in Biren Technology and Hei Sesame Intelligence?
Zhu Yan: In addition to Biren and Hei Sesame, we have also laid out chip companies such as Zhixin Technology and Yunbao Intelligent. The former is an CPU chip company with ARM structure, and the latter is an enterprise in the DPU track.
I don’t think chip companies that don’t look at cars are ambitious enough. Zhang Wen, the founder of Biren Technology, was able to integrate many heavyweight resources and pay more attention to commercialization. Nowadays, many chip masters have come out to start businesses, but drying chips is not enough, and they must be combined with the scenario. Now that he is just starting out, he still has a long way to go.
Black Sesame Intelligence We thought the team was very strong at that time. It turned out that we were doing vision, algorithms, and software and hardware. Johnson, former technical director of Howie, Mr. Dan (Singer) and Wilson (Liu Weihong), who is deeply involved in the automotive industry, have both accumulated a lot. The two of them created Black Sesame together. I think this combination is very good, and what they do in the future is in line with the laws of the industry.
late Auto: Auto: Autonomous driving chips are very hot. On the one hand, startups are constantly getting investments, and on the other hand, OEMs all want to integrate vertically. For example, all three companies in Wei Xiaoli are developing their own chips. What do you think of the future of this industry?
Zhu Yan: The opportunity for chips in the car is huge. It is normal to buy semiconductor products worth tens of thousands of yuan now. It may not be much worse than batteries. In the future, it may be purchased equally with batteries. The car will become the most important downstream of the chip. There is no doubt that this is not a question.
Independent chip companies will definitely have a chance. Traditional business formats should be dominated by independent chip companies, but now car companies are also actively making chips, such as autonomous driving chips, which have a high degree of integration with algorithms. But many other chip car companies may not be able to do it.
We believe that the market will definitely not be a model. For example, Wei Ziyan Autonomous Driving, but other car companies, everyone applies an autonomous driving ecosystem together, including chips, software algorithms, sensors, etc. This system will also exist.
Late Auto: What is the necessity for car companies to build their own chips?
Zhu Yan: is because the autonomous driving chip is quite expensive, and it also needs higher computing power. The next generation of things needs to continue to improve. It has a very high degree of integration with autonomous driving algorithms and scenarios, so you can customize a chip and make a more professional chip.
late Auto: Does Heizhima have this problem in cooperation with car companies?
Zhu Yan: Not all car companies will build chips, and not all car companies have the ability to build chips. Or, these are not its business focus.
late Auto: Will you specialize in chips that car companies don’t make?
Zhu Yan: What car companies do not do will invest, and what car companies do may not invest. For example, for autonomous driving chips, we invested in Black Sesame and Huixi Intelligent. Because many car companies don’t know how to make their own chips.
Question picture: Zhu Yan, partner of NIO Capital Management,
