1、 2024/AUTOCRYPT CO.,LTDCASE STUDYIntroductionWhat is a Software-Defined VehicleGovernment Support and Infrastructure DevelopmentProximity to Raw Materials and Supply ChainAdvanced Software CapabilitiesCustomer-Centric Approach to InnovationChanging Perspectives and Lessons LearntDISCLAIMER:This docu

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4、ent is provided as is;no representations are made thatthe content is error-free.TableofContentsChinese automakers took advantage of this newly established niche and entered the race at fullspeed.In a matter of years,Chinese OEMs rolled out a lineup of new-generation software-defined vehicles filled

5、with a multitude of innovative vehicle functionalities that were ahead oftheir time.These vehicles served as a testament to the expertise of Chinese manufacturers andtheir ability to contest the position of legacy automakers.Now,the likes of BYD,Xpeng,and Niohave established themselves as serious co

6、mpetitors to some of the largest OEMs in the world.IntroductionIn the last decade,innovation has shaken up the automotive industry,forcing OEMs to changetheir traditional ways and adapt to evolving market needs.Rapid digitization has affected theway consumers experience technology and has significan

7、tly raised expectations for user-technology interaction.Highly intelligent software-defined vehicles(SDV)that were oftenfeatured in sci-fi films did not seem so fictional anymore.With a rise in number of automakersthat could actually deliver on the promise of advanced cars,the industry has swiftly s

8、wervedinto the software-defined vehicle lane.Notorious for its high entry barriers,the automotive industry has historically been a fielddominated by a handful of manufacturers.However,the urgent demand for environmentallyfriendly and smart vehicles has opened the gates for new market entrants.Change

9、s in the industry helped Chinese OEMsenter the market;changing customer perspectiveshelped them solidify their spot under the sun.Customers worldwide are becoming moreaccepting of Chinese vehicles.A customer surveyconducted by MHP and Motorpresse Stuttgartfound that 47%of consumers in Europe and 44%

10、of consumers in the USA would considerpurchasing a vehicle from a Chinese manufacturer.The same survey conducted in China revealed thatnearly all customers consider purchasing a locallymanufactured vehicle.The success of Chinese automakers is not a merecoincidence but a result of meticulous planning

11、,strategic investments,and a deep understandingof market dynamics.While showcasing statisticsproving their remarkable growth is effective,itsessential to highlight the underlying forces thatpropelled their ascent.Factors that contributed to the rise of ChineseOEMs to the top of the industry were man

12、ifold.This case study will provide an analysis of thefactors that led to the Chinese SDV market boomand how local OEMs are leading innovation in theindustry.247%44%98%in Europein the USAin ChinaPercentage of consumerswho would consider purchasing a vehicle from a Chinesemanufacturer.Source:MHP and M

13、otorpresse StuttgartThe rise of Chinese SDVs11.MHP.The Software Race.https:/ 3What is a Software-Defined Vehicle?Before diving into the analysis of the Chinese SDV market,we should clearly define what asoftware-defined vehicle is.Software-defined vehicles are unique in the way they operate withpower

14、ful software stacks.Enabling implementation and continuous improvement of next-levelvehicle functionalities,SDVs support technological innovation in the automotive industry.Theconcept of software-defined vehicles stands on the assumption that vehicles of the future will beexponentially more reliant

15、on software rather than hardware.An SDVs value lies primarily in the software that enables advanced capabilities like cloudconnectivity and autonomous driving.And while the hardware is still important,software willbe the differentiating factor in the new generation SDVs.The ultimate SDV is a vehicle

16、 that hasundergone a profound transformation in its design and functionality.It is not just about addingsoftware-enabled features but making software the central nervous system of a car,whichrequires some substantial changes to the vehicle structure.The rise of Chinese SDVsThis is an essential condi

17、tion for enabling software-driven components and flexibility withfuture updates.Complete software-hardware decoupling is only possible with theimplementation of a centralized or zonal vehicle architecture.A centralized architecture createsa vehicle environment that enables convenient software altera

18、tions without the need to changethe underlying hardware layer.Firstly,the vehicles e/e architecture must go through a complete reconstruction withhardware and software component decoupling.In a decoupled architecture,the vehiclessoftware development process happens independently from its hardware.De

19、centralized Vehicle ArchitectureCentralized Vehicle Architecture4A centralized vehicle architectureconsists of a high-performance vehiclecomputer,zonal ECUs,and integrationnodes.With this structure in place,anOEM can send software updates to thehigh-performance vehicle computer,and the software upda

20、te will beuploaded to the relevant ECUs throughzonal integration nodes.Uploading and upgrading in-vehiclesoftware requires a huge amount ofcomputing power.In addition,a vehicleneeds to have enough computingpower to handle complex software andrun advanced applications.Thenecessary computing power is

21、suppliedwith high-performancemicroprocessors and microcontrollerchips.These chips are already includedin some of the most advanced vehicleson the market.As the technologyadvances,embedded chips will becapable of running even moreadvanced computing processes,fuelingfurther SDV innovation.The ultimate

22、 SDV is a vehicle that has undergone aprofound transformation in its design and functionality.It is not just about adding software-enabled featuresbut making software the central nervous system of acar.5Government Support and Infrastructure DevelopmentThe role of government support in the case of th

23、e Chinese SDV market extends beyond merefinancial aid,it encompasses a strategic vision for the nations automotive industry.The Chinese government identified that Western OEMs have the upper hand when it comesto ICE vehicle manufacturing.Legacy automakers had the technology,the talent,and themarket

24、share.Chinese OEMs would have had to catch up to decades of industry expertise toeven be able to compete with legacy automakers,let alone gain an advantage in the market.This has steered the Chinese government to look for alternative paths to automotive industrydomination.Filling the gap in the new

25、energy vehicle segment was a unique way to enter themarket.That is how the government started investing heavily in electric and hybrid vehicletechnologies.This strategy simultaneously aligned with upcoming global carbon-neutral trends,consequently positioning Chinese OEMs as one of the leaders in th

26、e electrification of theautomotive industry.From 2009 to 2022,the Chinese government invested over 200 billion Chinese Yuan(approx.28 billion USD)in EV subsidies and tax exemptions in the automotive sector.The governmenthas been subsidizing electric vehicle production for public transportation,taxis

27、,and personalvehicles.Authorities have focused on fostering a conducive environment for innovationthrough government grants.In fact,in the first half of 2023,5 out of the top 10 subsidyrecipients were local EV or battery manufacturers.The list includes Contemporary AmperexTechnology,SAIC Motor,BYD,E

28、VE Energy,and Chongqing Changan Automobile,cumulativelyreceiving over 8.5 billion Yuan(approx.1.2 billion USD)in government grants.YouTube.Why the big car companies are losing China|Business Beyond.https:/ 1.購稅優惠政策延 預計減免總額達5200億元-精準施策助新能源汽擴量提質.購稅優惠政策延 預計減免總額達5200億元-精準施策助新能源汽擴量提質_政策解讀_中國政府.(n.d.).htt

29、ps:/ 2.Nikkei Asia.China gives EV sector billions of Yuan in subsidies.https:/ 3.123The rise of Chinese SDVs6Some may argue that maintaining such a largecharging infrastructure is a waste ofresources.However,the maintenance costspale in comparison to the potentialopportunities created by a far-reach

30、ing EVcharging infrastructure.These incentivesproved beneficial,as EV ownership in Chinareached 13.1 million units at the end of 2022,accounting for more than half of the globaltotal.EV purchase incentives for consumers didnot end with subsidies and tax exemptions.The government also heavily investe

31、d inproviding the necessary infrastructuresupport to optimize the environment for EVusage.In 2022 China had already installednearly 1.8 million public EV charging stations,creating the largest public charginginfrastructure in the world.On top of national grants,regionaladministrations offered locali

32、zed incentivesto businesses and consumers.For instance,the municipal government of Chengduawarded up to 50 million Yuan toautomakers that developed and launchednew EV models.The municipal governmentalso offered an 8,000 Yuan credit toconsumers purchasing a new energy vehicle.11百度安全驗證.“上有政策，下有對策”，新能源

33、國補退坡，地補貼出爐.(n.d.).https:/ 1.Statista.Publicly available EVSE chargers worldwide:Country&type.https:/ 呈速增態勢.我國新能源汽保有量達1310萬輛 呈速增態勢_滾動新聞_中國政府.(n.d.).https:/ 3.第001版.(n.d.).國際能源署 今年全球電動汽銷量或增三成多.今年全球電動汽銷量或增三成多.http:/ 4.Life after subsidies for Chinas EVs.China Dialogue.https:/ investment helped create a

34、favorable environment for EV adoption,which in turn helped encouragemanufacturers to take on innovativeprojects and spearhead the development ofelectric,and consequently,software-defined vehicles.As a result,the Chinese EVindustry has rapidly expanded,and for thepast eight years,the country has rank

35、ednumber one in the world for both EVproduction and sales.57Proximity to Raw Materials and Supply ChainThe geographic proximity of Chinese OEMs to critical supply chain components has been amajor competitive advantage against Western manufacturers.China has the majority share of the worlds lithium-i

36、on battery capacity backed by a supplychain that is putting the mining and processing of component materials such as lithium,cobalt,manganese,and rare earth metals in the countrys hands.Combined with lower labor costs andgovernment subsidies on land and energy,Chinese companies have been able to min

37、e crucialbattery materials at a more competitive rate.Since the effects of the pandemic started waning in 2021,lithium prices have increased by afactor of 10.The cost of other materials was also affected,with nickel price increasing by 75%,and cobalt doubling in price since 2020.Raw material costs o

38、ften fluctuate due to changes inproduction and supply chain disruptions.This greatly affects battery manufacturing costs,which negatively impacts the cost of producing an electric vehicle.However,thanks to thephysical proximity of the supply chain,Chinese OEMs remain in a very favorable position top

39、rocure essential materials for EV manufacturing at a lower cost.On top of that,local OEMs have access to skilled labor,advanced manufacturing facilities,andtechnological expertise,all within a concentrated geographical area.Some of the biggestautomaking hubs in China are located in the Guangdong Pro

40、vince,Shanghai,and Jilin.Theselocations house some of the biggest global OEMs like BYD,SAIC,Toyota,Volkswagen,andmore.These automaking hubs are also where some of the largest tier and component suppliersare based.Such proximity has not only reduced lead times in sourcing essential vehiclecomponents

41、but also facilitated agile responses to market demands.The concentration of automotive market-adjacent companies in one location allowed for theflourishing of vertical supply chains.Meaning that some automakers were able to take overmultiple stages of the supply chain,assuming more control of the ma

42、nufacturing process.Forinstance,Chinas best-selling EV manufacturer BYD owns its entire vertical supply chain,fromsemiconductor and battery manufacturing to vehicle assembly.This gives BYD greater controlover cost,quality,and production timelines.Vertical supply chain integration is one of the mainr

43、easons why the companys vehicles can remain cost-competitive while maintaining superiorquality.Abundant domestic resources,lower labor and production costs,and vertical supply chainintegration put Chinese automakers in a favorable position for not only vehicle manufacturingbut also vehicle software

44、development.How raw material cost increases are challenging electric vehicle production.AZoC.https:/ 1.11The rise of Chinese SDVsSource:Mining Technology,Trading Economics8Advanced Software CapabilitiesOne of the core elements that makes Chinese vehicles stand out from the competition isadvanced sof

45、tware.Developing software is a challenging task for the traditional automotive industry.Since vehiclesoftware is a fairly novel concept it requires an extensive amount of research and development.Additionally,automotive software development requires a unique set of skills,previouslyunderutilized in

46、the hardware-heavy vehicle manufacturing process.Cars are now evaluated onmore than just design and horsepower;thus,technology plays a fundamental role.Chinese OEMs welcomed innovation and have proven successful in adopting the latesttechnology in their vehicles.During the Auto Shanghai 2023 show,an

47、 increasing number ofChinese automakers demonstrated their in-house software development capabilities.Here,local suppliers were offering their own domain controls,chips,and central computingplatforms.These advancements not only serve as proof of the Chinese automakers expertisebut also signify that

48、local OEMs have successfully integrated in-house tech practices into thevehicle development process.Chinese automakers are not the only ones welcomingchange.Some local tech companies are also switchinggears and entering the automotive industry.Establishedtech giants,like Huawei and Baidu,are utilizi

49、ng theirdecades of experience in software development to buildSDVs.Entrance of tech companies into the automotiveindustry raises the technological standards expected fromautomakers.Baidu and Geelys partnership is a testament to how cross-industry collaboration fuels innovation that amplifies vehicle

50、capabilities.Integration of artificial intelligence and machinelearning algorithms created by tech companies enabledvehicles to evolve into machines that can operateautonomously.Apart from having the ability to drivethemselves,these SDVs also collect driving data,adapt totheir environment,and evolve

51、,continually improving safety,efficiency,and driving experience.What did you miss at Auto Shanghai 2023?.SBD Automotive.https:/ 1.Geely and Baidu officially launch JiYue 01 Robocar with AI and voice-activated parking.Electrek.https:/electrek.co/2023/10/27/geely-baidu-launch-jiyue-01-robocar-ai-voice

52、-activated-parking-ev-china/2.1To better address fierce competition many OEMs havewelcomed collaboration with other local and globalcompanies.In 2021,a search engine giant Baidu partnered upwith Chinas largest automaker Geely to build AI-poweredelectric vehicles.Two years after the partnershipannoun

53、cement,they presented a market-ready futuristicelectric vehicle equipped with one of the most advancedlevel-4 autonomous driving solutions.2The rise of Chinese SDVs9Customer-Centric Approach to InnovationWhile technological prowess is surely one of the key drivers behind the rise of Chinese OEMs,the

54、 customer-centric approach to vehicle design is what separates them from the competition.Chinese OEMs have been successful at taking note of evolving customer needs andanticipating demand for advanced features.This entails not only intuitive interfaces andergonomic designs but also comprehensive aft

55、er-sales services,such as curated dashboardapplications,mobile device integration,and various infotainment features.The application of AI in vehicle functions spreads beyond autonomous driving,allowing forfuturistic capabilities within infotainment.Chinese OEMs have taken vehicle infotainmentfeature

56、s to the next level.By utilizing the power of artificial intelligence they introducedtechnologies like facial recognition and gesture control that make the user-machine interactionsmoother and more intuitive:Facial recognitionGesture ControlGesture control is another smart recognition feature thatfa

57、cilitates seamless vehicle control by allowing drivers tointeract with the dashboard with a swipe of a wrist or a flick ofa finger.The integration of gesture control not only enhancesconvenience but also represents a significant leap in fostering asafer driving environment.By minimizing manual distr

58、actions,drivers can effortlessly navigate the cars interface withoutdiverting their gaze from the road,enjoying both convenienceand safety.Artificial Intelligence AssistantsFacial recognition technology has previously been utilized forvehicle unlocking and authorizing cloud payments.Yet,someChinese

59、vehicles take facial recognition a step further.Oneexample is XPENG G3 which uses facial recognition technologyfor vehicle interior setting customization.The car uses facialrecognition to identify who is in the drivers seat and readjust carseat positioning and ambient lighting settings to the driver

60、spreference.Many Chinese OEMs are starting to incorporate conversationalAI assistants within their vehicles.These AI assistants useadvanced language processing,biometrics,and deep learningto perform a wide range of tasks that aid the driver.Forinstance,you can ask the AI assistant to tell you the we

61、ather,plan your journey home with a charging stop,and even orderyour groceries for you.Xpengs new G3 knows your face and heart rate.YouTube.https:/ 1.1The rise of Chinese SDVsSource:XPENGSource:NIOSource:BMWBLOG10Beyond infotainment for convenience,the range of entertainment offerings in China-madev

62、ehicles is expanding rapidly,with some models offering in-car gaming tools,built-inkaraoke systems with wireless microphones,augmented reality(AR),and voice techutilizing interactive user manuals.Unique entertainment features set these vehicles apart fromcompetitors and redefine the very purpose of

63、a vehicle beyond mere transportation.As self-driving becomes more widespread,consumers will make purchasing decisions based on the in-car experience,which means these entertainment features will become increasingly important.Investment in unique in-car experience helps Chinese automakers differentia

64、te themselves fromwestern OEMs who are still catching up.It also creates communities around products,fosteringbrand loyalty and turning customers into brand ambassadors.Chinese OEMs have successfullyadopted a holistic approach to user experience,going beyond the vehicles physicalattributes,to create

65、 a car that seamlessly fits into a customers highly personalized digitalecosystem.Source:Xchuxing11Changing Perspectives and Lessons LearntThe changing perceptions about China-made vehicles mark a significant shift,not just inconsumer preferences but also in global industry dynamics.As these OEMs co

66、ntinue tochallenge traditional automotive powerhouses,we are witnessing a new era where innovation,adaptability,and customer-centricity reign supreme.Industry leaders,who once did not consider Chinese OEMs a threat,are acknowledging thecompetition coming from the emerging market.“We see the Chinese

67、as the main competitor,not GM or Toyota,”said legacy automaker Fords CEO Jim Farley.“The Chinese are going to bethe powerhouse.”In the final quarter of 2023,BYD overtook Teslas spot as the top EV manufacturer in the world,outselling Tesla by over 40,000 units.BYDs rise to the top is a manifestation

68、of industrydevelopments that have been unfolding for years now.The shift caused by the emergence of Chinese automakers provides invaluable lessons for thebroader automotive industry.Emphasizing the importance of agility in responding to marketdynamics,the necessity of collaboration and partnerships

69、in fostering innovation,and thesignificance of sustainable and user-focused approaches in product development have becomethe pillars of innovation that propelled Chinese OEMs to the top of the automotive industry.This transformative journey illustrates that success in the automotive sector isnt sole

70、ly aboutmaking technological breakthroughs.It is also about effectively aligning these breakthroughswith societal needs and preferences.Praised by Elon Musk,top Chinese EV maker BYD urges Chinas car brands to go global and“demolish the Old Legends.”Fortune.https:/ BYD is selling more electric cars t

71、han Tesla.CNN.(n.d.).https:/ 2.12The rise of Chinese SDVs12The ascendancy of Chinese OEMs in the realm of SDVs isnt just a testament to theirtechnological capabilities,it is a result of a holistic approach encompassing innovation,strategic partnerships,government support,and a deep understanding of

72、consumer needs.The role of government support in the rise of Chinese OEMs cannot bedownplayed.From subsidies for both manufacturers and consumers to extensiveinvestments in infrastructure development,the government fully supported thedevelopment of the domestic automotive industry as a whole.A major

73、 factor contributing to the competitiveness of Chinese automakers isaccess to raw materials for EV battery manufacturing.The geographicalproximity to these essential metals reduces the risk factors associated withsupply chain disruptions.In addition,vertical supply chain integration helpedlocal OEMs

74、 gain greater control of their production and eliminate dependencieson third-party vendors.One of Chinese OEMs competitive advantages is their expertise in softwaredevelopment.Emphasis on building robust partnerships,both domestically andinternationally,has fortified SDV development in the region.Fu

75、rther boosted bythe entrance of tech companies into the automotive industry,local OEMs havebeen delivering the most technologically advanced vehicles in the market.Chinese OEMs have not only leveraged technological advancements but alsofocused on improving the user experience,identifying specific co

76、nsumerneeds,and tailoring their offerings accordingly.This targeted approach hasdifferentiated them from competitors and boosted their market penetration.The Chinese automotive industrys development offers a blueprint for the global industry,emphasizing the necessity of comprehensive strategies that

77、 integrate technologicaladvancements with consumer-centric approaches.As Chinese OEMs continue to lead the charge in reshaping the automotive landscape,theirtrajectory serves as an inspiration for industry players,illustrating that success hinges onembracing change,prioritizing consumer experiences,

78、and fostering an environmentconducive to innovation.123413About AUTOCRYPT In the age of software-defined vehicles,the need for cybersecurity is asapparent as ever.The essence of an SDV lies in its software.Theunderlying software enables advanced features that consist of millions oflines of code.With

79、 a complex system like that,vehicles need to beprotected from malfunctions and bugs.On top of that,advanced features like cooperative autonomous drivingrequire a high level of communication with the surrounding roadinfrastructure.Receiving sensor signals,exchanging messages withnearby vehicles,and r

80、eceiving software updates are all necessary parts ofstandard SDV functions.However,the high level of connectivity mayexpose the vehicle to external threats.To ensure safety,messagesexchanged with external entities must be encrypted.Automakers need toimplement cybersecurity by design to deliver the m

81、ost advanced andsafest SDVs on the market.AUTOCRYPT is a leading player in automotive cybersecurity and smartmobility technologies.It specializes in the development and integrationof security software and solutions for in-vehicle systems,V2Xcommunications,Plug&Charge,and fleet management,paving the

82、waytoward a secure and reliable C-ITS ecosystem in the age of software-defined vehicles.Helping clients achieve 360-cybersecurity,AUTOCRYPTs offeringsinclude a wide range of custom solutions that ensure SDVs are safe fromboth internal and external threats.AUTOCRYPTs proprietarytechnologies establish

83、 cybersecurity by covering threat analysis and riskassessment,smart fuzzing,penetration testing,embedded securitysoftware,and much more.Driven by two decades of experience andexpertise in encryption,authentication,and intrusion detection andprevention,AUTOCRYPT offers end-to-end security for safercommunications between road participants.For more information about AUTOCRYPTs mobility security solutions,visit autocrypt.ioFor partnership inquiries and solution consultations,contact globalautocrypt.io