Eve of upheaval: auto companies are transforming into software companies

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Auto News Europe
Source: brocade (ID: jinduan006)
Recently, NVIDIA( NASDAQ:NVDA )Huang Renxun, founder and chief executive officer, had an in-depth discussion on the prospect of automatic driving, industrialization and transformation of automobile enterprises in a video chat with the Deputy publisher and chief editor of Auto News Europe.
“The business model of automobile manufacturers will fundamentally change,” Mr Huang said. By 2025, many auto companies are likely to sell their cars at a price close to the cost price and provide value to users mainly through software. ”
The following is the video chat record:
By 2030, how many fully automatic cars will be on the way? How many of them will adopt NVIDIA technology?
Huang Renxun: by 2030, I think 20% of cars will realize advanced automatic driving.
In addition, the 20% of the vehicles will undertake 50% of the driving tasks in their driving areas.
This is because autopilot cars will take many forms, including passenger cars, trucks, taxis, shuttle buses, robot delivery trucks, etc. Moreover, these vehicles can work all day and never feel tired or distracted, so the utilization rate will be higher.
Do you mean L4 or even L5 by advanced automatic driving?
Huang Renxun: L5 automatic driving will be used in delivery vehicles, driving in parks, complex buildings or other closed areas.
This is the most cost-effective and safest choice, because unlike human beings, robots don’t mind “walking slowly”, and have a lot of time and won’t become impatient.
So L5 level automatic driving should be applied in these areas.
What about passenger cars?
Jen-hsun Huang: by 2030, I think most cars will achieve L2 automatic driving, but these L2 grade self driving cars will have amazing performance. They can almost drive according to your wishes.
These cars will operate according to your idea while ensuring safety. At that time, cars will be able to drive automatically when they stop, pick up, drive on expressways or in traffic jams.
Just L2 level self driving cars will bring subversive driving experience. AI (Artificial Intelligence) and robotics should not replace human beings, but strengthen our working ability. They don’t replace driving, but they optimize driving.
Although I love driving, I also like to use Tesla’s autopilot, which makes driving very relaxing.
What are the biggest challenges facing the automotive industry between now and 2030?
Huang Renxun: the automotive industry is undergoing several changes at the same time. This is a rare event. One of them is electrification. Many people think that electric car owners buy cars because of environmental protection, which is wrong.
Of course, these car owners care about environmental protection, but they pay more attention to the luxury experience of electric vehicles.
The driving experience of electric vehicles is “silky smooth”, quiet and without any peculiar smell, and they are fully charged at home every morning.
I haven’t been to the gas station for many years. It’s a luxury.
The automobile industry initially ignored a key point, that is, this new function brings joy and joy to users through its convenience.
The main reason people buy electric cars is not energy saving, but luxury experience.
The second change is that the automotive industry must change the way of product development in the future.
Most of the user experience, car performance and functions in the car will be realized by software.
From the moment you get on the bus, the car will interact with you and remember your habits and preferences.
The user experience will be very pleasant, as if whether you are driving or not, the car can anticipate your needs, which will make you feel comfortable and confident in the car.
Nowadays, many drivers do not have enough driving ability.
In the future, no matter how bad a person’s driving skills are, the overall driving safety will be improved. The car will ensure the safety of other people and drivers. The software capabilities of a car will define the car.
How will this change the traditional auto business model?
Huang Renxun: one of the most important aspects of customers will be software that can be continuously improved, developed and enhanced.
As long as customers own the car, they may enjoy the pleasure brought by the new software, so the business model will change fundamentally.
Many auto companies are likely to sell their cars at a price close to the cost, and provide value for them mainly through software ordered by users or purchased regularly.
At this time, the car will be defined by software, and the excellence of software is bound to be crucial in the automotive field.
Because only in this way can we gain value again. There are many similar situations in other industries, and it is likely that the same will happen in the automotive industry.
Compared with other industries, what is the difference between the transformation of automobile enterprises?
Huang Renxun: the difference between the automobile industry and the mobile phone and TV industry is that the software running on the automobile is customized.
Therefore, in addition to automobiles, automobile manufacturing will have the opportunities brought by software for a long time. This is essentially different from the mobile phone industry. Except for a few mobile phone manufacturers, they can hardly benefit from software.
The premise is that they must build a programmable car. If the car can’t run high-quality software, the software they can provide to customers will be relatively limited.
When I bought a car in the past, the day I picked it up was the “peak” of the car. The software defined car is on the contrary. The day of pick-up will be the “trough” of the car, but it will be wonderful after that.
What is the long-term impact of this change?
In the past, cars had all the functions when they were sold, but in the future, most of the functions of cars will be added after they are sold, but this requires powerful software capabilities.
Therefore, as long as the customers own the car, the car companies can continuously enhance its functions, which will bring huge business opportunities. I believe that the world is now tapping this huge potential.

What you have to do is focus on the value of a car company. When you do a simple mathematical calculation of the number of times that software is installed, you will find that this is a market worth hundreds of billions of dollars.
This is probably the largest single economy in the world. This is an era of change, but also an exciting era. And for the auto industry, it’s a golden age.
What is the potential profit?
Huang Renxun: let’s make a simple calculation: if a car company produces 10 million cars every year and sells them at cost price, the software profit of each car may reach US $5000, then the annual profit may reach US $50 billion.
Of course, you have to write powerful software to seize the opportunity. But it’s still an opportunity to recover costs and make $50 billion a year. And the car companies will get all the profits. From this simple calculation, the market is also very attractive.
Is the $5000 profit generated in one go or annually over the life cycle?
Huang Renxun: I mean opportunity. Many customers decide not to upgrade their software when they buy a car, but after two years, they may lose the novelty of the car.
Then customers will find that the car company has launched a great software, which can make the car look brand new for only $1000 or $5000, and customers can upgrade the car before they sell it.
Therefore, no matter when or after purchasing a car, or in order to improve the resale value, there are many opportunities for car upgrading, and the rate of return on this investment is very high.
Volkswagen Group is trying to develop its own software, but it is struggling. Do you really think auto companies can transform into software developers?
Huang Renxun: large car companies will have their own software, because they are no longer just building cars, but operating teams. Car companies will be like media companies, because they have their systems on the road, they need to provide services for them.
I’m confident in this transition. However, not every company can achieve transformation in the same time and with the same technology. Therefore, there will be some changes in the positioning of auto enterprises. I think the successful transformation of the company will get a high return.
How long will this transformation take?
Huang Renxun: most auto companies have to complete a major transformation in five years, because I believe mainstream cars will be sold at cost price. Mainstream cars will have no profit margin, but software will create huge profits.
In the future, it will be very common for a good car to be sold at a cost of $25000 to $30000. You can decide whether to buy software in the future, and it will take time to develop software technology.
This is a new business model, so the traditional mainstream car companies must quickly complete the transformation, which has become a top priority.
Which companies will have an advantage?
Huang Renxun: as there is no “legacy” to protect, the transformation of start-up companies will be easier. Although the transformation is extremely challenging, many auto companies will have the courage to do it because of the rare opportunities.
Let me explain to you the reason behind this: you can not only buy a car, but also get a “private driver”. Together with the car, they will bring you a more pleasant and safer driving experience.
There are concerns that this transition will lead to a lot of layoffs. Do you agree with this view?
Huang Renxun: the auto industry will definitely employ more people. We need to think about this transition from another perspective, because as long as there are good economic benefits, there are good employment opportunities.
How will NVIDIA and other technology companies benefit from this change?
Huang Renxun: we have changed the way we provide technology, so that car companies can create their own models and decide their development direction.
The idea that the technology industry will take control of everything in the car is groundless and will not happen.
The reason is very simple, car companies will become team managers and service providers, rather than machinery manufacturers.
Will NVIDIA become a hardware supplier or a software supplier?
Huang Renxun: no matter how other companies choose, NVIDIA will become a full platform supplier cooperating with the automobile industry.
For example, robotaxi wants to develop their own software and run their own business, but they want to buy NVIDIA computing solutions and use our AI ecosystem and tools.
We have no problem with that at all. Some customers want us to build a complete stack so that they can have this capability by 2022.
We are not a car manufacturer. We are the creators of technology. We hope to introduce AD and AI into the car industry.
There are many different types of Companies in the world, and each company has different needs. We must be able to adapt.
Our strength is patient. We have been working in the field of autopilot for 6 years, and 4 years from 2024.
This requires the company to have great determination, persistence and influential core technology, but we focus on long-term development.
This article is based on public information, only for the purpose of information exchange, and does not constitute any investment proposal.
(statement: This article only represents the author’s point of view, not Sina’s position.)