DJI, the world’s largest consumer drone maker, made an unexpected appearance at this year’s Shanghai Auto Show held in April. To the left of its exhibition booth was global auto parts giant Valeo; to the right, Robosense, a lidar upstart.
While the company’s automobile trade show debut surprised many, rumors of it developing smart vehicle technology have been circulating for years.
As early as 2016, when DJI was on a winning streak in the global commercial drone market, the company started toying with the idea of making automobiles.
Despite its linchpin status in the global drone market, DJI’s expansion into the automobile sector has been rather bumpy, which is in part the reason why the exploration was only announced in 2021, five years after it started in 2016.
DJI has tried a number of ways to break into the automobile sector. It invested USD 20 million into Koenigsegg, a Swedish sports car maker, set up a joint venture specializing in autonomous driving with China’s Dongfeng Motor, provided L1 autonomous driving technology for carmakers, and sold lidar. However, none of these efforts made a splash in the market.
An unforetold expansion
DJI’s quiet obsession with automobiles was motivated by multiple factors. The most obvious reason is that it has almost reached the ceiling of the commercial drone market, a feat followed by the haunting US-China geopolitical tussle that resulted in DJI being added to the entity list last year.
The company’s “growth bubble” burst in 2018, the same year it stopped releasing its revenue performance publicly. Its revenue and net income only saw single-digit growth two years in a row in 2018 and 2019, local business media 36Kr learned from people familiar with the matter.
“After 2017, I feel like we have beaten almost all of our competitors in the drone game, and that’s when it hit me that we might soon reach the industry’s ceiling,” a former DJI employee told 36Kr.
DJI didn’t just start exploring other possibilities without putting up a fight with what it’s good at. From 2014 to 2016, the company branched out into three new areas with meager results.
The new areas include industrial drones (such as those used in the agricultural industry), sports cameras and handheld devices, and educational robots. DJI’s agricultural drones reaped over RMB 2 billion (USD 307 million) with half of the market share in China under its belt last year. Industrial drones seem to be a new growth opportunity for DJI; the only catch is that drones applied in various industries, such as agriculture or security, usually require heavy customization that entails handsome R&D investments. In comparison, consumer-oriented drones could win over the market with just one model. In addition, making industrial drones is not an easily scalable business.
In the sports camera and handheld device sector, DJI was entangled in red-hot competition with other more established players. And lastly, the educational bots brought in hundreds of millions of US dollars in revenue, which is still a meager sum for the commercial drone king.
The automobile market seemed to be the perfect new growth engine for DJI, which is valued at tens of billions of dollars.
“If DJI doesn’t make it through this transition, it’s done. It’ll get stuck and start to go downhill,” a person in the auto industry familiar with DJI told 36kr.
In 2016, Wang Tao, DJI’s low-key founder and CEO, thought about making robotaxis, which was a hotly contested area at the time. Manufacturing robotaxis is often compared to climbing the Mount Everest of AI, as artificial intelligence and algorithms play an essential role in robotaxi development. However, DJI failed to attract the right person to lead the effort.
DJI’s job offers were among the best in the drone industry, a market it conquered. Yet, in the autonomous industry, it’s a different story—it doesn’t have enough attraction for top talents.
Taking one step back, DJI switched gears from L2 to L4 self-driving technologies for carmakers and hired Wang’s alumnus Shen Shaojie to lead the team. Shen, who is also an associate professor at Hong Kong University of Science and Technology, had to balance his time between research and business and wasn’t able to devote himself to DJI, people familiar with the matter told 36Kr.
Recruiting wasn’t the only issue that tripped DJI’s automobile push. The company also has little if no experience in dealing with automakers.
“It takes time for a newcomer to the auto industry to nail a customer (carmaker). Having excellent technology doesn’t guarantee a deal because the two parties might have different goals. The stronger and tougher you’re, the more difficult to let down your potential partner’s guard,” an executive in the autonomous driving industry told 36Kr.
A former DJI employee told 36Kr that, given the company’s anointed status in the drone sector, it was able to sign several favorable deals. More or less, the company carried on that pride in its extension into the automobile business.
“I can’t imagine DJI working with SAIC or FAW, both Chinese state-owned carmakers. While SOEs tend to be arrogant, DJI also has pride,” an automobile industry insider told 36Kr.
Even though DJI lacks the experience of dealing with big automobile clients, its “system infrastructure R&D” specialty will lend it strength in serving clients. If the company has the motivation and willingness to let go of some of its “traits,” it has the chance to serve its clients well. For instance, DJI will need to recruit and trust its new employees, build up a system where it can listen in order to adapt to customized client needs, share benefits with its staff to motivate them, and learn to balance the relationship between direct marketing and working with agents.
Read this: ‘Ace pilots’ in China lead expansion of agricultural drones
Taking ideas to the road
DJI’s backers are now suggesting the company make its own cars. Some Chinese tech companies, from 360, an online security company, to Oppo, a smartphone marker, both had no previous experience in the auto industry but have jumped on the bandwagon to try their luck.
In 2016, DJI thought the same, especially when NIO and XPeng, now both listed overseas, were only founded two years earlier.
Instead of doing everything from scratch, like Nio and XPeng, DJI chose to invest in a Swedish sportscar company, Koenigsegg. After investing USD 20 million for a 14.89% stake and a board seat in 2017, DJI was supposed to leverage its carbon fiber factory in Shenzhen to make car body and parts for Koenigsegg cars—starting at USD 1.4 million and known as the fastest road cars in the world—which were costly hand-built with a capped capacity of a dozen cars made every year. In addition, the investment deal stipulated that the two companies would at some point collaborate on new energy vehicles.
However, the deal didn’t carry through with what was planned, 36Kr learned.
The partnership ended with DJI divesting from the Swedish carmaker after friction between the two parties broke out. Koenigsegg announced in early 2019 that it was selling a 20% stake to National Electric Vehicle Sweden, which is backed by China’s Evergrande group. The two unveiled in March 2020 the Gemera, a plug-in hybrid grand vehicle.
The Koenigsegg tie-up isn’t the only deal DJI eventually walked away from. In 2017, the same year it invested in the Swedish carmaker, it launched an autonomous driving joint venture, FJDynamics, together with China’s Dongfeng Automobile, to produce self-driving agri-vehicles equipped with L4 automation. Two years later, in 2019, DJI divested its 20% stake in the joint venture.
After five years of hustling, DJI appeared at this year’s Shanghai Auto Show, alone, to start over with its descent from the sky to the road.
This story first appeared in 36kr, and was written by Wang Yijing.