Geely-linked ECARX has edge over tech giants in car computing, founder says

The Geely-backed tech startup ECARX has an advantage over bigger rivals such as Nvidia or Qualcomm: It is purely focused on automotive applications, Chairman Ziyu Shen said ahead of the company’s recent market debut.

ECARX went public on the Nasdaq exchange (symbol ECX) in New York City on Dec. 21.

The listing, through a reverse merger with the special purpose acquisition company (SPAC) Cova Acquisition, raised $410 million for the five-year-old ECARX, which was co-founded by Shen and Geely Chairman Eric Li.

"We are very, very focused on the automotive industry only," Shen said in an interview with Automotive News Europe from London, ECARX’s European headquarters. "All our revenue is from automotive. Our main competitors are tech giants, so they are from gaming, cloud computing, high-performance data center or TMT (telecom, media, communications). 

"But their automotive revenue percentage is still very small," he continued, and they are leveraging existing products and modifying them for automotive use.

That gives ECARX a cost and efficiency advantage, Shen said. "We provide a very automotive-focused platform, so we can keep control of the costs," he said. "We actually reduce some of the features that some other competitors are providing that are not helpful for automotive."

ECARX is entering the market at an uncertain time for SPAC mergers. One index that tracks such companies is down more than 70 percent over the past 12 months. Automotive startups that merged with SPACs have especially struggled, with one, Electric Last Mile Solutions, filing for bankruptcy protection in June.

Unlike some peers, though, ECARX is recording revenue. Shen said his company generated $415 million in 2021 and has customers, including Mercedes-Benz, Volvo Cars, Polestar and a handful of other car brands, although all of them are connected to Geely in some way.

Shen said raising capital was crucial for ECARX to expand beyond Geely-affiliated brands and to meet a goal of being profitable by the end of 2024 on revenue of $1.32 billion. 

"We are growing revenue 30 to 40 percent annually, and we have a very robust gross margin rate," he said, but capital expenditures remain high to build an international presence. 

"That's why from a capital perspective we are raising money on the public markets to achieve our next two to three years' expansion," Shen added.

ECARX's product road map includes infotainment; digital cockpits, starting in 2021 (and with its own SE1000 system on chip processor launching shortly); and a central computing platform that will appear first in 2025 and replace more than 100 electronic control units (ECUs) in a typical car. 

Volvo CEO Jim Rowan told Automotive News Europe in a separate interview that by 2024-25 the automaker will switch to an updated version of its SPA2 platform with the goal of significantly reducing the number of ECUs in its future models.

"When we get to the next platform, we will be much closer to a pure core compute architecture, which will take out more cost and give us more control," Rowan said.

ECARX is also building an operating system, in a joint venture with Volvo called HaleyTek, for Android-based infotainment systems. Other operating systems will focus on autonomous driving and functional safety.

ECARX is acting as a Tier 1 supplier, providing integrated systems for Geely brands, but also as a Tier 2 supplier to Tier 1 suppliers and other automakers, which could use its solutions individually rather than purchase an entire system. That second path offers larger margins, he said, because stand-alone products require less testing and a lighter supply chain.

Shen said collaborations with Geely-associated companies such as Volvo enable it go to market with new products very quickly.

"We can, in the early stage, work closely on R&D with Geely to accelerate the new architecture and other features" on the SEA platform, which will underpin a broad range of full-electric vehicles across the Geely brands, he said.

He said ECARX was not "setting up boundaries" with regard to new customers, especially electric vehicle startups such as Nio, XPeng or Li Auto. "We would like to work with creative [automakers] because they also give us a lot of insight and share their thinking."

ECARX would be interested in working with Apple or Google, he said, noting that the company is already supporting a partnership between Geely’s Zeekr brand and Alphabet’s Waymo self-driving company.

Bloomberg contributed to this report