Did Toyota Sell Its "Soul" to Huawei?
In 2021, Chen Hong, Chairman of SAIC, stated that "the cooperation with Huawei (autonomous driving) has made Huawei the soul, while SAIC has become the body. SAIC cannot accept such a result because it wants to hold the 'soul' in its own hands."
Every time a car company cooperates with Huawei, the "soul theory" is brought up again. This time, it's Toyota, the world's largest car company, and one criticized for its slow transition to new energy.
Recently, according to automotive blogger Sun Shaojun, it has been confirmed by car fans that one of the "big three" Japanese car manufacturers will join hands with Huawei for intelligent driving. Subsequently, Tencent News' "First Line" reported that Toyota's global intelligent driving solution will adopt a three-party joint model of "Toyota + Huawei + Momenta."
This news has sparked speculation and discussion. Although there has been no response from Toyota and Huawei so far, insiders revealed that Toyota is expected to officially announce specific plans during the Beijing Auto Show.
This collaboration has attracted widespread attention, with two questions arising: Why is Toyota partnering with Huawei? Has Toyota really handed over its "soul" to Huawei?
According to Tencent's report, Toyota's intelligent driving solution in cooperation with Huawei differs from Huawei's existing ADS advanced driver assistance solution. Toyota has chosen Momenta and Huawei to provide software and hardware solutions respectively, and integrates them through a three-party collaboration model.
This means that Toyota is not handing over the most core "soul" to Huawei, but rather opting for Huawei's hardware solution, while the software algorithm part is still provided by Toyota's partner, Momenta.
The M9, created under Huawei's HiCar mode | Image Source: Wanjie Official Website
It is understood that Huawei's collaboration with car manufacturers involves three modes: parts supply mode, HI mode (Huawei Inside), and the Smart Selection Car mode (Hongmeng Intelligent Travel). From this report, it appears that the cooperation between Toyota and Huawei leans more towards the supplier mode.
At the same time, there are reports suggesting that Toyota's collaboration with Huawei in smart driving solutions may not be limited to domestic models but could cover Toyota's global lineup. However, according to Chip Flow Auto, Huawei's MDC (Mobile Data Center) currently only involves projects with BYD and Toyota's joint venture. This collaboration only pertains to Toyota's projects in China and is unrelated to overseas models.
It's worth mentioning that BYD Toyota Electric Vehicle Technology Co., Ltd. (BTET), established in 2020, as the name suggests, is a joint venture between BYD and Toyota. With each party contributing 50%, they jointly develop smart electric products more suitable for the Chinese market. Currently, their first pure electric product, the bZ3, has been mass-produced and launched, and a second collaborative model will be mass-produced and launched later this year.
The 9th generation Camry is equipped with an in-car system developed in collaboration with Huawei | Image Source: GAC Toyota
In fact, Toyota and its partner in this collaboration have long been old friends. Previously, Toyota and Huawei had cooperated in the field of smart cabins. For instance, the in-car system of the all-new 9th generation Camry was jointly developed by GAC Toyota and Huawei, with Huawei Hicar being standard across the lineup, significantly improving operational smoothness.
Toyota's collaboration with Momenta also has a history. As early as March 2020, the two parties reached a strategic cooperation agreement to jointly promote the commercial application of Toyota's automated mapping platform in China. In March 2021, Momenta announced the completion of a $500 million financing round, with Toyota being one of its strategic investors, further deepening their cooperation.
Toyota's choice to collaborate with Huawei and Momenta is not only due to the challenges faced in the Chinese market but also to accelerate its own transformation. Despite maintaining its position as the top-selling automaker globally, Toyota faces pressure from various competitors in the Chinese market.
In 2023, Toyota's sales in China declined by 1.7%, and in the first three months of 2024, GAC Toyota's sales plummeted by 29%. This downward trend in the market forces Toyota to accelerate its transformation.
Furthermore, Toyota's transition in the field of new energy has been relatively slow, especially in terms of intelligence compared to domestic models. This places Toyota under increasing competitive pressure in the Chinese market. Faced with competition from Chinese new energy car companies, joint venture brands like Toyota are gradually losing market share, and sales are at risk. In 2023, out of Toyota's global sales of over 11 million vehicles, pure electric vehicle sales were only 104,000 units.
Wang Chuanfu, Chairman of BYD, bluntly stated in a recent earnings communication that the current new energy industry has entered an elimination phase. The accelerated launch of new energy products by Chinese car companies will erode the market share of joint venture brands.
Over the next 3 to 5 years, the market share of joint venture brands is expected to decrease from 40% to 10%.
The way the game is played has changed
People hold complex and subtle attitudes towards Toyota's transition to new energy: on one hand, Toyota's chairman, Akio Toyoda, frequently suggests that pure electric vehicles are being overhyped, implying that they are not the best choice; on the other hand, according to the plan, Toyota will introduce 10 new pure electric models by 2026 and aims to achieve annual global sales of electric vehicles reaching 1.5 million units by 2026.
Many interpret Toyota's collaboration with Huawei as a "bowing down" or "surrender." However, the significance of this collaboration goes far beyond that. It reflects a significant change in the research and development model of international car companies.
In the era of internal combustion engine cars, Toyota's strategy in the Chinese market mainly involved bringing global models and slightly modifying them for sales. Simply put, foreign parties led product planning and development, while Chinese partners were responsible for channels and sales.
But now the market has changed. With the transformation of the automobile industry towards new energy, the pace of change in the Chinese market is much faster than in other markets, and the market landscape is being reshaped. Toyota hopes to leverage China's leading advantages in electrification and intelligence to lead its global development. This means that the Chinese market will lead the definition of products and the development of intelligent electric vehicle technology, while foreign parties will be responsible for branding and mechanical hardware development.
At the end of July 2023, Toyota China announced a major news: renaming its R&D center to "Toyota Intelligent Electric Vehicle R&D Center (China) Co., Ltd.", abbreviated as "IEM by TOYOTA". This change, while seemingly just a name adjustment, marks a significant transformation in Toyota's R&D strategy in China.
In this major strategic adjustment, R&D engineers from Toyota's three major joint ventures - FAW Toyota, GAC Toyota, and BYD Toyota - will gather to participate in R&D projects led by "IEM by TOYOTA". In the past, Toyota and its joint ventures with FAW and GAC each had their own R&D centers and operated independently.
At the same time, suppliers such as Denso and Aisin will also participate in the development activities of electrified powertrains. In the past, Toyota's working mode with Denso and Aisin was that Toyota made requests, and Denso and Aisin, as Tier 1 suppliers, produced products for Toyota.
In addition, Toyota also keeps an open attitude towards its partners' intelligent cabins and autonomous driving technology and accelerates local autonomous driving research and development in China.
In August last year, Toyota China, GAC Toyota, and Pony.ai deepened their cooperation, planning to establish a joint venture company for autonomous driving taxi-related businesses to promote the mass production of Level 4 autonomous driving. According to the latest news, the bZ4X ROBOTAXI version jointly developed by Toyota and Pony.ai will debut at the Beijing Auto Show.
In addition to more thorough localization of product development, Toyota also hopes to achieve risk sharing and win-win cooperation through building a strong cooperative "circle of friends" with regional operations as the core. Toyota China's recent cooperation with China Minmetals Corporation Limited is a vivid embodiment of this strategy, focusing on the cooperation in the utilization of onboard power batteries and resource recycling business.
Toyota's new development model has been implemented in some models, such as the bZ3. Developed through a collaborative effort between Toyota, BYD Toyota, and FAW Toyota, this vehicle showcases the respective technological and resource advantages of all three parties. This tripartite co-creation model not only accelerates the product development process but also signifies the comprehensive integration of the entire industry chain from R&D to production.
Similar changes are occurring in other international automotive companies. To compensate for their own deficiencies in smart electric vehicle technology, many have chosen to collaborate directly with domestic automakers.
For instance, Volkswagen has invested in Xiaopeng Motors, jointly developing electric vehicle models suitable for the Chinese market. Stellantis Group acquired a portion of shares in Leapmotor. Recently, Audi announced the inclusion of laser radar in the domestically produced high-end electric vehicle Q6 e-tron, along with employing a full suite of Huawei's intelligent driving solutions.
International automakers like Toyota have recognized that the shift from traditional fuel-powered vehicles to new energy vehicles involves not only a change in powertrain but also a comprehensive transformation of business models. This transformation extends beyond suppliers to encompass the entire production and sales process.
Traditional business models may not be well-suited to the structural changes brought about by new energy vehicles. Therefore, for Toyota, seizing market share in China's new energy vehicle market is no longer the sole focus; more importantly, it's about leveraging the technological environment and resources of the Chinese market to accelerate technological iteration and achieve electrification and intelligence.
