Industry Insights | China's automotive industry continues to expand, driving the vigorous development of the automotive R&D and testing sector

Automobile R&D and testing are important components of the new vehicle R&D and manufacturing process in the automotive industry. By testing the performance, quality, emissions, and safety of products, it ensures that automobiles meet requirements such as safety, reliability, comfort, and compliance. Currently, the Chinese automobile R&D and testing market mainly involves areas such as powertrain testing, vehicle performance testing, safety testing, and intelligent driving testing. These tests include evaluating the performance of engines, transmissions, motors, and electronic control systems, assessing driving performance and safety aspects such as braking systems, suspension, chassis, and driving stability, evaluating the safety performance of automobiles in case of collisions and accidents, as well as evaluating the performance and reliability of autonomous driving and intelligent driving assistance systems.

The automotive R&D and testing market can be mainly divided into the new energy vehicle R&D and testing market and the fuel vehicle R&D and testing market. Among them, the new energy vehicle R&D and testing market focuses on drive assembly testing and complete vehicle testing, while the fuel vehicle R&D and testing market primarily involves engine testing and powertrain testing.

The automotive R&D and testing industry's industrial chain mainly includes upstream raw material and parts suppliers, midstream automotive testing enterprises, and downstream customers.

upstreamThe raw material and component suppliers mainly include manufacturers of raw materials, testing equipment parts, including metal materials, mechanical components (such as transmission guides, control valves, etc.), electrical components (such as drive motors, instruments, frequency converters, etc.), IT software and hardware, fuel, etc.

middle streamAutomobile testing enterprises are the core link in automotive power system testing. They are responsible for integrating raw materials and parts provided by upstream suppliers, conducting systematic design, research and development, and production. They sell testing equipment or provide testing services to downstream automakers and parts manufacturers for the research and development of complete vehicles and parts.

downstreamCustomers mainly include component manufacturers, numerous traditional automakers, and new energy vehicle manufacturers, among other major users.

1) Automakers are continuously increasing their R&D investment

China is the world's largest automobile producer and exporter, with fierce market competition. To maintain competitive advantage, automakers need to continuously invest in research and development, constantly innovating to meet consumer needs. At the same time, with the application of new technologies such as intelligent driving and smart cockpits in the automotive field, automakers also need to increase investment in research and development to stay ahead in technology. Therefore, the R&D investment of traditional automakers and new automotive forces in the domestic market has seen explosive growth in recent years. The development of the automobile research and testing industry is closely related to the intensity of R&D investment by downstream automotive enterprises, and the increase in automaker R&D investment will directly drive rapid growth in the demand for research and testing.

2) The technical capabilities of local automotive R&D and testing enterprises continue to improve

The automotive R&D and testing industry has a long history of development in overseas markets. Compared to the leading overseas companies with an early start, domestic enterprises are currently at a critical stage of rapid industrial development and technological upgrading due to the late inception of China's automotive R&D and testing industry. With continuous investment in high-tech enterprises focusing on automotive R&D and testing in China, the innovative integration of intelligent technology with this field, as well as the further standardization and normalization of the standard system, have greatly improved automotive R&D and testing technology in terms of test function types and accuracy. Test capabilities and scope have gradually strengthened, and they have gradually formed the strength to compete with international manufacturers, even surpassing them in some areas. As the technical capabilities of local automotive R&D and testing enterprises continue to enhance, the proportion of outsourcing R&D and testing services by automakers is also gradually increasing, driving the growth of the R&D and testing market.

3) Accelerated technological iteration in the automotive industry

Currently, the technological update speed in the automotive industry is accelerating rapidly. Especially in the field of new energy vehicles, there has been rapid development and application progress in areas such as powertrains, battery packs, intelligent driving systems, and connected vehicles. For example, motor technology is rapidly developing towards high rotational speed, high power density, and high motor efficiency; the application of silicon carbide components in electronic control systems has enhanced the stability of electronic control systems under high-temperature and high-pressure environments; the use of new materials and packaging processes has continuously increased battery energy density, solving the problem of range anxiety; the electronic and electrical architecture of new energy vehicles is developing towards domain-concentrated architectures, and so on. These rapid and diverse innovative technology applications will drive the continuous growth of different R&D and testing requirements for vehicle and component research and development.

(4) The launch speed of new models is accelerating

With the upgrading of consumption and changes in consumer concepts, consumers' demand for car purchases is also constantly evolving. While emphasizing the quality and brand of cars, consumers are paying more attention to the personalization, specialization, intelligence, and safety assurance of vehicle models. Under the wave of software-defined cars, coupled with the continuous upgrading of technology and design in the automotive industry, the lifespan of popular models is getting shorter, and the speed of product updates is accelerating. Especially in the field of new energy vehicles, with the successive release of supportive national policies and the growing environmental awareness among consumers, the number of new models is continuously climbing. The development of new models brings new demands for product reliability testing, promoting the continuous development of the automotive R&D and testing industry.

1) The outsourcing ratio of automotive R&D and testing is gradually increasing

The outsourcing model for automotive R&D and testing services is deeply integrated with the automotive industry, representing one of the optimal paths to promote high-quality innovation and transformation in the automotive sector. New energy vehicle R&D cycles are shorter, and automakers purchase fewer test rigs and build less R&D and testing laboratories, instead adopting a professional third-party outsourcing model for R&D and testing, thereby enhancing flexibility and reducing development costs. Against the backdrop of a gradual decline in the number of new fuel vehicle models, automakers are also gradually increasing the proportion of R&D and testing outsourcing due to economic considerations, and choosing less expensive R&D and testing equipment.

Therefore, in the future, China's automotive R&D and testing market will show a trend of increasing service revenue while decreasing equipment revenue. Automotive R&D and testing enterprises will also demonstrate a transformation from production-oriented to service-oriented businesses.

2) Automotive R&D and testing are developing towards digitization and intelligence

Traditional automotive R&D and testing mainly rely on manual control, with single test items, low precision, poor testing efficiency, and mainly based on past project experience. It is unable to effectively summarize and analyze test data and results. With the development of sensor technology and information technology, adopting a digital control system can effectively improve data collection and analysis capabilities, allowing for full-process traceability of each component's operating status.

In the future, by applying computer simulation, massive experimental data, artificial intelligence, advanced algorithms, etc., to automotive R&D testing, effectively managing, analyzing, and applying data, and establishing a big data model for automotive R&D testing will help improve R&D efficiency and technology achievement conversion capabilities. It can also simulate the most realistic environment, jointly test multiple projects, thereby further precisely and efficiently enhancing product design and manufacturing capabilities.

(3) The technical difficulty of R&D and testing is increasing continuously, and diversified testing requirements are on the rise

Electrification and intelligence are irreversible major trends in today's automotive industry. As the maturity of the new energy vehicle industry continues to improve, bottlenecks that have plagued consumers, such as cost, range, charging efficiency, and vehicle safety, are gradually being alleviated. User acceptance has generally increased, and penetration rates are growing year by year. Intelligence is transforming traditional cars from single modes of transportation into large mobile intelligent terminals. Intelligent cockpits, autonomous driving, and intelligent networking are the three major development directions of intelligent vehicles. The overall architecture and technology of automobiles are significantly showing new changes.

The trend towards electrification and intelligence in the automotive industry has put forward new requirements for the testing of battery systems, motors, electronic control systems, and power electronics by automotive R&D and testing enterprises. It also demands that these enterprises possess diversified testing capabilities including new energy vehicle R&D and testing, as well as fuel vehicle R&D and testing. The industry is evolving towards greater diversification and complexity.

(4) The market share of domestic automotive R&D and testing enterprises continues to increase

With the long-term unremitting R&D investment of domestic automotive R&D and testing enterprises in this industry, the independent R&D system of domestic enterprises has become increasingly perfect, their independent innovation capabilities have significantly enhanced, and their technical strength has been continuously improved. At the same time, on the basis of meeting customer testing needs and product technical standards, domestic enterprises have an advantage over overseas enterprises in terms of timely response and convenient communication. Moreover, they are more capable of meeting the localized and customized needs of customers, offering higher cost-effectiveness.

Therefore, the proportion of domestic and foreign automakers outsourcing R&D and testing services to local automotive R&D and testing enterprises or choosing to purchase test equipment manufactured by local enterprises is gradually increasing, which in turn leads to a gradual rise in the market share of domestic enterprises in the automotive R&D and testing industry.