The automotive industry is undergoing an unprecedented transformation. Intelligence has evolved from a concept to reality, from smart cockpits to autonomous driving, from connected vehicles to intelligent safety systems. The intelligence of cars is permeating daily life at an unprecedented speed and gradually changing our travel and lifestyle.
The debut of more new features, however, does not represent an absolute increase in the market. On the other side of the intelligence wave, the transformation of the automotive industry chain has become a "dance with shackles." On one hand, intelligent enterprises need to continue to innovate, accelerate the arrival of the singularity moment, and gradually turn intelligence into a necessity for travel. On the other hand, in the face of the current fierce "involution" in the industry and the increasingly fierce background of cost reduction and efficiency enhancement, how to open up and consolidate their own value space in the automotive value chain has become the core problem for the industry's sustainable development.
Established in 2017 and successfully listed on NASDAQ at the end of 2022, Yikatong Technology is the first Chinese automotive intelligence startup to enter the US stock market. Its unique global positioning and capabilities have allowed Yikatong Technology to submit a development report card based on stable operations in the past two years. On top of this, global forward-looking layout and resource allocation have brought Yikatong Technology a high growth advantage that gradually leads the industry.
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On August 8, Yikatong Technology announced the latest performance report for the second quarter of 2024. Against the background of steady growth in overall revenue, the revenue reached 1.258 billion yuan, a year-on-year increase of 31%, and a sequential increase of 34%; the gross margin reached 23%; the expansion of global business has become an important highlight of this financial report, forming a basic face for long-term sustainable development.
New media recently had an in-depth communication with Yikatong Technology on the current situation of involution in the industry and the opportunities and challenges in building the automotive value chain.
With a growth mindset, face the challenge of "involution"
At the beginning of 2024, BYD shouted the slogan "electricity is lower than oil", firing the first shot in the price war of new energy vehicles. Subsequently, many new energy vehicle brands followed suit. In the middle of the year, traditional luxury car brands such as BBA (Mercedes-Benz, BMW, Audi) also raised the flag of price reduction, trying to "trade volume for price".
However, the recent trend has changed, with BMW China stating that it will withdraw from the price war; Yang Xueliang, Senior Vice President of Geely Holding Group, stated at the 2024 China Auto Forum that in the face of the current involution challenges in the automotive industry, it is necessary to see the essence of involution, adhere to competition in accordance with the law, plan for the long term, insist on building foundations, practicing internal skills, and insisting on quality, service, and sustainable development. As long as the word "volume" is not eliminated, Chinese cars will not truly go global.
In the final analysis, car brands need to "sell in volume", using scale to spread the high R&D costs. Although each brand has a different attitude towards the price war, fierce market competition is inevitable. Once the price war leads to a decline in profits for car manufacturers, it will inevitably squeeze upstream and downstream enterprises. As an important part of the industry chain division with high R&D costs and high added value, automotive intelligence will face greater pressure.
"The core of competition in the automotive industry is volume, whoever has the volume wins, which is related to the cost and operating results of the enterprise." The CFO of Yikatong Technology clearly pointed out the core contradiction behind the phenomenon of involution in the communication with new media. In his view, challenges are everywhere, but how to turn the founder's vision into pioneering results through team cooperation in a complex environment is the growth mindset he is willing to adhere to, and it is also the key to achieving a sense of accomplishment with the team.Steady Operations, Building a Solid Foundation
Intelligent innovation requires a significant investment of resources, but in the current industry context, whether a company can maintain steady operations has become a "must-answer" question in industry competition, determining whether an enterprise can weather the cycle and achieve sustainable development.
"The era of relying on capital to stack up is over. To develop healthily, it is necessary to form a scaled, sustainable, and strong self-blood-making capability," said Shen Ziyu, the founder of Yikatong Technology, and Zhou Jing, the CFO, who share a clear common goal: "We must innovate and also make profits."
Unlike most CFOs, Zhou Jing is more willing to lead the team deep into the business, especially the fundamentals of business development. He works with the team to delve into the business, thus having a clearer plan and analysis for the company's subsequent capital market actions, shareholder returns, and the results of years of operations.
Yikatong Technology has currently established a real-time responsive system that supports and assists decision-making in the integration of business and finance. Every piece of data, every trend, and every change in the enterprise report can be traced, opened, and peeled layer by layer to find the core information that supports the business, promptly identify and fill gaps, and quickly provide key business with important resources. This real-time rolling financial system directly affects the achievement rate of business and injects a strong catalyst into the business team.
Looking at Yikatong Technology's financial performance since its listing, it fully verifies its solid foundation in R&D and global operations. The advantages brought by scaling up continue to improve, with Yikatong Technology's performance maintaining a high double-digit growth rate every year, exceeding the industry's average growth rate. Based on steady operations, global development strategies, and forward-looking product technology layout, Zhou Jing is very confident in the company's future development: "Yikatong Technology has maintained a compound growth rate of over 30% in the past few years, and we can still see a strong growth momentum in the future from our delivery and sales plans, with full profitability expected."
Achieving Increment in the Global Market, Becoming a Benchmark for Value Investment
Nowadays, the overseas development of China's automotive industry is a choice and a necessity, but it also faces unprecedented challenges: if participation in global competition still relies on the "cost war," then the unfriendliness and even resistance of overseas markets are almost certain answers.
From establishing global operation centers in various places to going public in the United States, Yikatong Technology has long established a global development strategy and has felt the "different climate" of the global market earlier. Zhou Jing emphasized: "Yikatong Technology's globalization is not only to support Chinese OEMs going abroad, but also to fully participate in the European and American markets, and can also support European and American OEMs to succeed in the European and American markets, which is our strategic goal."
Based on the path of "providing incremental value," Yikatong Technology is similar to well-known companies like Bosch and Continental today, which grew from the ecosystems of Daimler and BMW. Yikatong Technology's goal is very clear: to stand firm in the global automotive value chain division, represent the field of intelligence, and become the most solid automotive technology partner for the world's top OEMs.Despite not being as aggressive as the Chinese market in intelligent transformation, the European and American markets are characterized by market stability, stringent requirements for end-consumer experience and safety, and mature ecosystems with significant progress in legal norms and compliance. Yitutech views these as opportunities to enhance its technological capabilities and development quality.
Looking at the financial performance of global automotive groups in 2023, European and American car manufacturers represented by Volkswagen, BMW, and Mercedes-Benz are still far ahead. Yitutech aims at the European and American markets, valuing their market share and profitability. "We must serve the world's top automotive companies, especially the top five, so that we can have growth," emphasized Shen Ziyu, co-founder and CEO of Yitutech, in multiple interviews.
In 2021, Yitutech established a team of over 200 people in Gothenburg, Sweden, to be close to clients such as Volvo and Polestar, supporting these OEMs in leading software development. It was the collaboration between the Swedish and Chinese teams that developed Yitutech's flagship middleware product, Yunshan Cloudpeak®, a cross-domain, cross-controller general operating system capable of meeting the adaptation needs of different countries, regulations, and languages. It is the key for Yitutech to connect electronic and electrical architecture with intelligent services, supporting both Flyme Auto and GAS, achieving "one platform, serving the globe."
Currently, Yitutech has established 12 global operation centers in China, the UK, the US, Sweden, Germany, and Malaysia, deeply integrating into the main automotive industry belts worldwide and providing "close-to-body" services to overseas customers to accelerate product implementation. On one hand, Yitutech closely cooperates with global brands within the Geely ecosystem, such as Volvo, Polestar, Lotus, smart, LEVC, etc., to explore both domestic and international markets, collect feedback from different channels, and enhance global service capabilities. On the other hand, starting in the second half of 2022, Yitutech has also targeted customers outside the Geely ecosystem. In addition to FAW Group and Dongfeng Peugeot Citroën, Yitutech is cooperating with Lianyou Technology to explore the Japanese brand market; moreover, communication has been established with Volkswagen Group, Stellantis, Renault, etc., and is actively progressing.
Global business has also become a key highlight in the latest financial report. According to the report, the main new project locations for Yitutech this quarter are overseas models, and there is a continuous addition of new locations with a well-known European car manufacturer. Yitutech is winning the trust and choice of more and more global customers.
Yitutech's goal is to become an indispensable force in the Chinese and European and American automotive markets with its core technology. Against the backdrop of the long automotive industry cycle, Yitutech has a leading position in global development, stable operations, advanced technology products, and R&D and mass production delivery, achieving continuous compound interest development, the "long slope and thick snow." This sets it apart from competitors at this critical moment of industry transformation, making Yitutech a new and highly valuable investment target in the automotive field.
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