Tech Shifts Drive Investments — EV and AV

Previously I talked about a few tech shifts (hybrid cloud and deep learning) that are driving many of our investments. In this post, I’ll dive into another major tech shift — vehicle electrification and autonomous vehicle.

At last count, there are 55 companies registered with California DMV to conduct autonomous vehicle (AV) road test. Three years ago, when this number is still in single digits, we made a bet that China will adopt AVs faster, and that the overall market will be larger than the US market. Our reasoning was centered around three primary factors:

1. Chinese private car ownership is a relatively recent phenomenon which means most drivers are relatively new and the driving culture is not deeply rooted.
2. There are large number of cities with more than 1 million population (~200 in China vs only 20 in US). Due to the combination of the above factors, China’s traffic fatality rate is almost 10X that of US, normalized by miles or by number of vehicles.
3. There are much larger number (~80) of independent OEM brands, most of which do not have independent AV technology development capability; it is therefore a “seller’s market” for developers of AV solutions

We have since invested in Plus.AI (autonomous driving for trucking) in 2016 and JingChi (autonomous driving for robotaxi) in 2017. Both of them have R&D centers based in the Bay Area while entirely focusing on the China market.

Autonomous driving is technically more compatible with electrical vehicles (EV) due to the extra electric power consumption for computation and the sensor-based drive-by-wire controls required. In addition, AVs are likely to be driven far more intensively (in 2018, the average car was parked 95% of the time; AVs are likely to be driven a far higher % of the time, making the economics of the energy and maintenance of EVs far more attractive). Finally, AV will change the design of cars substantially; the move to EV facilitates wholesale design changes. By removing the role of the driver, AV will flip the current car design on its head:

• Cars will shift from 60% of value in metal parts to 60% value in AI software and entertainment.
• The shift to EV drivetrain alone is currently a $300B global market that will be completely replaced
• Both driving dynamics and cabin design will be focused on passenger comfort, content and entertainment rather than driver performance and control.
• With car ownership potentially de-emphasized, cars can be designed around use cases — short vs long distance, urban vs suburban, commuter vs family — instead of general purpose design.

The rise of the EV is reshuffling the world order of automobile design. For instance the current two fastest super cars are not German or American made: they are from Croatia (Rimac Concept One) and China (NIO EP9).

China’s automotive manufacturing base is enormous: already accounting for 30% of global production vs. approx., 10% from the US. As expected, the development of EVs is happening at a fast pace in China. Of the top-10 volume manufacturers of EV in the world, more than half are in China (BYD, Geely, BAIC, SAIC, ZD, Zotye). And two of the high-end EV companies challenging Tesla — NIO and Lucid Motors — are both backed by Chinese investors.

We see opportunities across many dimensions. In addition to investing in JingChi.ai and Plus.ai, we have invested in

• Energy storage: One of our recent investments — Nimbus Engineering — has invented an entirely new battery technology to complement the shortcomings of the ubiquitous Li-Ion batteries (Nimbus’ “photon battery” has the abilities to absorb the massive energy generated by regenerative braking, and to have virtually unlimited recharge cycles)
• Computer vision: Waylens has used the “auto enthusiast” market to record thousands of hours of driving video, overlayed with performance data that can be used as a training set
• LiDAR sensors: Quanergy (TEEC Angel Fund 2 seed round investment) is already a Unicorn. They lead the market in solid state LiDAR that is far superior than the current industry standard of mechanical ones
• HD edge mapping: CivilMaps (TEEC Angel Fund 3 seed round investment) has created significant innovations in reducing HD map size and lowering associated processing needs

We believe that this is only the beginning. EVs and AVs disrupt more than a trillion dollars worth of entrenched industries. There has never been a shift of this magnitude and speed, both in terms of dollars and in societal impact. It fits well within Tsingyuan Ventures’ core areas of focus: automotive technology is the poster child for cross-border (supply chains are all global) and cross-disciplinary (the number of technologies involved is staggering). We will continue to watch and invest in this space.