Yu Chengdong: We cannot sacrifice quality for the sake of low cost.

On the evening of June 1st, Lei Jun, the chairman of Xiaomi Group, posted a blog: "We are fully preparing for the large-scale mass production of Xiaomi Yu7, which is expected to start in July. I just learned a famous quote from Mo Yan: 'Slander is actually a form of admiration.'" The outside world generally believes that this Weibo post was a response to the speech made by Yu Chengdong, the executive chairman of Huawei, at the Future Automobile Pioneers Conference.

At the just-concluded Future Automobile Pioneers Conference, when talking about the evolution of the car-selling logic in the era of intelligent vehicles compared to traditional cars, Yu Chengdong mentioned that there are companies from other industries. Although their product quality and assisted driving capabilities are not that good, they have created popular products with their strong traffic and marketing capabilities.

Whether Yu Chengdong's words were actually alluding to Xiaomi; whether Xiaomi's product quality and assisted driving capabilities really do not match its sales volume - these are still open to discussion. However, one thing is certain: as the penetration rate of new energy vehicles continues to increase, safety and quality issues are becoming increasingly prominent. At the Future Automobile Pioneers Conference, Yu Chengdong gave a sharp evaluation of the current safety and quality standards of automobile manufacturers.

In response to the hotly debated battery safety issue in the industry since the beginning of this year, Yu Chengdong pointed out sharply that quality is the lifeline of products. According to Huawei's quality standards, none of the batteries of many automobile manufacturers could leave the factory. However, some competitors are still shipping them in large quantities, which really scares him. Therefore, he called on the industry to produce high-quality products. Quality is the lifeline of automobile manufacturers, and they should not sacrifice quality for low costs.

Moreover, he also admitted that in fact, the quality standards of many automobile manufacturers are not as high as Huawei's. Huawei not only has an extremely strict quality management system but also attaches great importance to user experience. When evaluating Huawei's consumer business, Yu Chengdong never looks at KPIs but only at the Net Promoter Score (NPS) and user satisfaction. In his opinion, a product with a low failure rate but poor usability is useless; a product with good quality but poor usability is just junk.

Meanwhile, in the field of assisted driving, which was the focus of rectification by relevant departments in the first half of the year, although Yu Chengdong also supports cracking down on the practice of making exaggerated claims without considering safety, he believes that the performance of the worst student in the class should not be used as a standard to restrict the performance of excellent students and stifle the advantages of new energy vehicles in global competition.

This so-called "excellent student" of course refers to Huawei. At the Future Automobile Pioneers Conference, Yu Chengdong announced that Huawei ADS 5 will achieve L4 autonomous driving on highways and in urban areas.

With such strong technological capabilities, Huawei's sales volume is less than a fraction of some competitors, which Yu Chengdong regrets. He believes that if any brand were to carry the Huawei logo, it could easily succeed. Now, all five brands are new, and building brand trust and reputation is a significant challenge.

Fortunately, the Wenjie brand has already gained some popularity, and the other brands are still growing. Yu Chengdong believes that they will all gain wide recognition in the future.

The following is the full text of Yu Chengdong's speech at the Future Automobile Pioneers Conference:

I'm very glad that today, the five brands under Hongmeng Zhixing are gathered here. I particularly want to thank the Shenzhen Municipal Government and the organizers of this forum for their support.

The first time the four brands gathered was in Sanya. At that time, we didn't expect to add a fifth brand. However, many things changed later. With the strong promotion of Mr. Jia and other leaders, we added another brand. I think this might be the end because it's already very difficult for us to manage two or three brands, and it's extremely challenging to manage five. But we found that the manufacturers of these five brands are all very excellent. After much thought, we realized that a fist needs five fingers to be powerful, so there can't be six fingers. Now we've clenched our fist, and from now on, we'll work hard together to conquer the market.

Yesterday, we launched the Zunjie brand here. Zunjie is an important force for our brand to move upmarket and lead the upgrading of the Chinese automotive industry. The topic of my report today is: "Rooting in Technology, Collaborating in Ecosystem, and Helping the High - quality Development of the New Energy Vehicle Industry."

In the era of intelligent vehicles and the scenario of smart mobility, Hongmeng Zhixing is the name of the mobility scenario in Huawei's full - scene strategy for consumer business. Our smart home solution is called Hongmeng Zhijia, the office solution is Hongmeng Office, and the mobility solution is Hongmeng Zhixing.

The concept of Hongmeng Zhixing fits well with the current era. In the past, the automotive industry mainly focused on manufacturing, sales, and services. Once the products were manufactured and sold, the process was over. But today, in the new era, after the products are sold, they need continuous OTA upgrades, and the product iteration speed is very fast.

In the era of intelligentization and electrification, intelligent electric vehicles have entered a state of rapid technological iteration, similar to consumer electronics, and the competition is extremely fierce. At this time, we not only need the traditional manufacturing, sales, and service capabilities but also a strong ability to understand user experience, as well as the capabilities of product definition, product analysis, product market positioning, and design.

In the era of the Internet and social networks, traditional media advertising doesn't work very well today. You can see that some companies from other industries have made a single car model a big hit. Although their products may not be that good in terms of quality and intelligent driving capabilities, they still sell well because they have strong brand power, traffic - attracting ability, and powerful marketing capabilities in the new media era, so a single product can become extremely popular.

Our products are better in every aspect, with good quality, excellent experience, and high performance, but we still can't sell as well as them, not even a fraction of their sales. This shows that in today's era, things are different. Also, the retail channels are changing. In the past, we sold cars in 4S stores, but today, we sell them through mobile apps and online.

In the past, the core technologies of automobiles were the engine, transmission, and chassis. Today, intelligentization has become the core component of the automotive industry because the engine is almost obsolete. Range - extended vehicles have lower requirements for engine technology, the transmission is gone, and the capabilities of the chassis have been greatly enhanced after digitalization and intelligentization. For example, the chassis performance of the Zunjie S800 launched yesterday far exceeds that of current high - end cars priced at tens of millions of yuan, which is achieved through new technologies.

When traditional technologies are moving towards intelligentization, electrification, and networking, the old technologies are almost obsolete. Today's core technologies are intelligentization, electrification, and networking. The traditional three core components are also almost replaced by new core capabilities.

Regarding the capabilities required in today's era, Huawei's Automotive Business Unit can help automobile manufacturers in intelligentization, Huawei Digital Energy can assist in electrification, and Huawei Terminal can support in networking. However, many traditional automobile manufacturers are not good at brand marketing for new brands, retail through new channels, product definition and design, building a full - scene ecosystem, and understanding user experience.

Huawei didn't have these capabilities in the past either. However, through more than a decade of hard work and learning from mistakes in the consumer business and terminal business, Huawei has accumulated rich experience, including both successful experiences and failure lessons. These valuable experiences can help automobile manufacturers build capabilities in brand marketing, product definition, product design, understanding user experience, building a full - scene ecosystem, and retail through new channels.

When we tried to cooperate with automobile manufacturers by offering these capabilities, many large automobile manufacturers looked down on us. I'm very grateful to Chairman Zhang Xinghai of SERES. He has the courage and determination of an entrepreneur and was the first to choose to cooperate with us. After several years of accumulation, the Wenjie brand has risen and achieved great sales, establishing itself as a top - tier brand in the high - end market. Now, the real king of high - end cars in China is Wenjie. The M9 is the best - selling model above 500,000 yuan, surpassing BBA. After the launch of the Wenjie M8, it became the sales champion above 400,000 yuan, which is an absolute leading position. It sold 80,000 units in just one month, with an average price close to 420,000 yuan, and the average price of the Wenjie M9 is close to 550,000 yuan. We can see the rise of domestic high - end brands. I believe that all the subsequent iterations of the Wenjie series will become best - selling models and will continue to rise.

Huawei has made huge R & D investments in the automotive field. More than 10,000 people are working on intelligent vehicle solutions. In fact, considering our InView business, the intelligent electric product line of Digital Energy, the T - box for vehicle networking, and other businesses related to chips and others, the number is far more than 10,000. Our annual R & D expenditure exceeds 20 billion yuan.

Huawei currently provides technologies in six major areas: intelligent driving, intelligent cockpit, intelligent electrification, intelligent vehicle control, intelligent vehicle cloud, and intelligent networking. These six aspects of intelligence are important supports for Huawei to contribute to the transformation of the automotive industry. We believe that we can be the strongest in all these six technological fields.

For example, in intelligent driving, we're not just in the first camp; to be honest, we're number one. We're confident that we can maintain and further expand our leading position. Our Hongmeng intelligent cockpit once led the development and progress of the intelligent cockpit industry. In the past two years, because we've been focusing on the development of the single - framework Hongmeng ecosystem, the innovation and progress in this area have been a bit slower, but we're still at the top, and others are chasing us.

I can tell you that after the next version upgrade and iteration, we'll leave the entire industry far behind. I'm making this bold claim today, and let's see if we can achieve it.

In the field of intelligent electrification, we've also done a great job. You can see that the three - motor high - voltage silicon carbide system of the Zunjie S800 launched yesterday, from the chips to the entire system, is all developed by ourselves. We've also built strong capabilities in areas such as vehicle - domain collaborative control and EMB.

In terms of intelligent vehicle control, yesterday, we globally launched the world's first all - domain six - in - one all - domain fusion architecture solution, which can be said to have subverted all the technological practices in the automotive industry over the past 100 years. So, you can see that the Zunjie S800 seems to have light - footed skills. When it passes over a pothole on the road, the wheels lift up just in time and then return to normal after passing the pothole, as if the pothole and speed bumps don't exist.

Whether it's a curve, a straight road, a complex road surface, or a slippery road, traditional high - end cars priced at tens of millions of yuan will lose control because it exceeds their physical limit control capabilities. However, our new - generation vehicle control technology, with the AI central brain controlling and the intelligent driving system fully integrated, combined with our spatio - temporal reasoning network, has built a powerful ability that was previously unavailable. Then there's our intelligent vehicle cloud. You can see that many functions such as BMS management and car keys are managed by the vehicle cloud. Also, our OTA and a large number of services and continuous upgrades all rely on the capabilities of the vehicle cloud. Our vehicle cloud is outstandingly leading in terms of safety, reliability, privacy protection, and performance.

Finally, there's intelligent networking. As you know, Huawei is a communication company, so in this field, we're far ahead of the industry in terms of technical capabilities, product capabilities, performance, and user experience. This is Huawei's core business, and we've been doing it for more than 30 years. Even if we're not good at other things, we'll definitely be the best in this area.

Before the US sanctions and the halt of chip production, almost all the mainstream automobile manufacturers in the world chose Huawei's vehicle networking solutions. Of course, now we've solved these problems. I believe that in terms of capabilities and performance in this field, we're definitely the strongest in the industry. Our performance is 2.8 times that of our closest competitors.

Now, we're combining satellite communication and space - terrestrial networking. So, I believe that we can achieve the number one position in all these six technological fields.

Our intelligent electric vehicles may not be the number one in terms of sales volume and shipments, but they can be the number one in terms of technology, reliability, safety, and efficiency. This is what I'm telling you at this conference today. The Internet has a memory, and let's see if we can achieve it in the future. Am I really just a big talker or can I really deliver?

Our cooperation models with automobile manufacturers include the parts supply model, where we provide standardized parts; the HI model, also known as the Huawei Inside model, where we provide a full - stack integrated solution; and the Hongmeng Zhixing model. The only difference between the Hongmeng Zhixing model and the HI model is that we use the To C capabilities accumulated by Huawei's consumer business and terminal business over the past decade to help automobile manufacturers, including understanding user experience, product definition, product design, and product quality management.

So, the Hongmeng Zhixing model is the HI solution model plus the To C capabilities of Huawei's consumer business to empower automobile manufacturers. This is how we operate the five brands under Hongmeng Zhixing.

The five brands under Hongmeng Zhixing started with Wenjie. Wenjie makes the best - selling SUVs in China. Zhijie focuses on sporty sedans and SUVs loved by young people. Xiangjie produces high - end sedans. Zunjie is the king in the million - yuan market segment, and it received a very good response after its launch yesterday. I'll give you some more information about it later. Under the leadership of Mr. Jia, Shangjie has extremely high combat effectiveness, even surpassing that of many private enterprises, which I really admire. However, the market segment that Shangjie targets has intense competition because it's a large - scale market. The cost pressure is also very high, so we need to expand widely to reduce costs and achieve sustainable and healthy development. As Mr. Jia said, first expand widely, and then stand out.

All the five brands we've created are mid - to high - end brands. We don't have low - end brands; it's just a matter of high - end and ultra - high - end. Our mid - end brands are also considered high - end in the general sense of the industry.

Hongmeng Zhixing has achieved some results in the past. It has ranked first in quality for three consecutive years. In fact, we can do even better in this regard.

Our IPD system is a very strict one. This system was first applied to SERES, and the product quality has been significantly improved. Now, the other brands have also introduced this system, and we've found that the end - to - end full - process quality management concept and the IPD system are very effective.

This system has helped us improve the quality of Huawei mobile phones. Initially, the failure rate of our phones was an order of magnitude higher than that of our US competitors, but soon, it became an order of magnitude lower. Now, this system will continue to empower the five brands and help them achieve an absolute leading position in terms of quality.

When evaluating Huawei's consumer business internally, I don't look at KPIs but only at the Net Promoter Score (NPS) and user satisfaction. Only when the user satisfaction is high can Huawei's consumer business become more and more successful. So, for each product launch, I evaluate user satisfaction and the Failure - Free Rate (FFR). A product with a low failure rate but poor usability is useless; a product with good quality but poor usability is just junk.

A low FFR is just the bottom of the barrel. The user - concerned experience is the side of the barrel, and it also needs to be good. There can't be any short - board. If the quality is poor, the barrel has no bottom; if the user - concerned experience is not good, the barrel can't hold much water. So, according to the barrel theory, we need to do well in the key user - concerned experiences to improve competitiveness.

When we started to cooperate with automobile manufacturers, we encountered some difficulties. The automobile manufacturers said that they had years of experience in making whole vehicles and that they could handle quality issues, and we only needed to focus on intelligentization. But problems still occurred because they only required the windshield wipers to be able to wipe water, the rear - view mirrors to be able to see behind, and the air - conditioners to work.

However, we require that the windshield wipers not only wipe water but also adjust the wiping speed according to the rainfall intensity and operate silently. The air - conditioners should not only be able to cool and heat but also operate quietly, without noise, and provide good air quality without musty odors. Sometimes, the rear - view mirrors would shift by themselves. The automobile manufacturers said they would ask the suppliers to solve the problem, but the suppliers couldn't solve it for a long time, so we had to send in our experts.

So, later, we uniformly adopted Huawei's strict quality management system and raised the standards and understanding of user experience because we want to create high - end brands and excellent - quality products.

Huawei's consumer business has ranked first in quality for more than a decade, but I still think it's not enough. We need to