China Evergrande and Tencent Holdings have agreed to set up a company to develop an operating system for smart vehicles, as competition heats up amid Beijing’s push to accelerate the roll-out of automobiles that run on non-fossil fuels and artificial intelligence.
An electric vehicle unit of Evergrande, the largest Chinese real estate developer by sales, and the most indebted builder, will own 60 per cent of China Evergrande New Energy Vehicle Group, while Tencent’s unit Beijing Tinnove Technology will own the remaining 40 per cent, according to a filing to the Hong Kong stock exchange.
The venture, which aims to develop its own intellectual property right over the operating system for smart cars follows the national blueprint of integrated transport network unveiled last month to enhance the integration of smart technology in the transport industry and boost the development of smart vehicles. Together with new energy vehicles (NEVs), the smart vehicle segment will be key for companies to compete for market share in the world’s largest car market.
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“Both parties are expected to [maximise] their respective capabilities in new energy vehicle research and development, manufacturing, artificial intelligence, big data, cloud computation, commuting and other fields, [with the aim of] creating a world-leading smart vehicle ecosystem,” the filing said.
China is also set to become the world’s biggest market for EVs by 2025, when 4 million cars, or one in every five vehicles, will be powered by electricity, according to the government’s development blue print. That growth has attracted China’s technology giants including Huawei Technologies, Tencent, the search engine Baidu and this newspaper’s owner Alibaba Group Holding to up their ante in intelligent EVs since 2020.
The ultimate goal for the next generation of cars is autonomous driving, because of technologies such as the Internet of Things (IoT), 5G, cloud services and artificial intelligence have assumed great importance. To underscore the point, Li Shufu – founder of China’s largest car assembler Geely Automobile Holdings – said cars are now defined by software, rather than the conventional production line.
“To pursue a leading position in the future of mobility, a solid partnership with a leading tech firm is believed to be a good choice,” said Cao Hua, a partner at the private equity firm Unity Asset Management. “More tie-ups of this kind will take place in the coming years.”
In January, Geely and Baidu announced their plans to develop and build smart EVs before Geely said a week later that it would team with Foxconn, the world’s largest contract manufacturer of consumer electronics to assemble smart EVs.
Huawei has formed an alliance with Changan Auto and Contemporary Amperex Technology Limited, China’s biggest EV battery maker, to launch an upmarket car brand. Huawei, which last year launched its 5G ecosystem and the world’s first 5G vehicle module, the MH5000 in 2019, will offer intelligent mobility solutions for the EVs, which will go into mass production soon.
Alibaba last year acquired an 18 per cent stake in a venture between China’s largest carmaker SAIC Motors and Zhangjiang Hi-tech Park Development. The tie-up will develop EVs under the brand of IM, or Intelligence in Motion. These cars will be able to park themselves.
Share price of China Evergrande NEV surged by 77.2 per cent this year, as of Monday. The company said it was making its biggest fundraising yet -US$3.35 billion – at the end of January, from six private investors by selling 952.4 million new shares at HK$27.30 each.
In an email to reporters, China Evergrande NEV said the new venture is tantamount to the “joining of hands in strength”, which will deepen the integration of vehicle manufacturing and related system development to optimise its products.
Tencent has already invested in the NEV branch of China Evergrande. In Evergrande’s private placement of as many as 176.6 million shares in 2020, Tencent was among a list of investors including Jack Ma-backed Yunfeng Capital, Sequoia Capital and Didi Chuxing.
China Evergrande NEV is controlled by the country’s third-richest tycoon Hui Ka-yan. His plan is to raise its car production capacity to 500,000 to 1 million vehicles within three to five years, the company said on its website. Its plants in Shanghai and Guangzhou will be capable of rolling out 200,000 units a year each at the beginning, before reaching 1 million by the fifth year, it added.
Beijing Tinnove Technology was founded in July 2018, with Tencent’s vice-president Zhong Xiangping as the chief executive. It has established strategic cooperation with Qualcomm Technologies and entity under Chery Automobile in 2020.
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