Automobile development enters a "24-month cycle": speed has become the new moat

McKinsey wrote an article titled "Automotive product development: Accelerating to new horizons," analyzing the understanding of development speed in China's automotive industry.

For the past forty years, the pace of automotive R&D has remained largely unchanged: it generally takes four to five years for a new car to go from project initiation to market launch. This cycle is both a guarantee of quality and a prerequisite for supply chain stability.

However, this logic is being overturned by Chinese electric vehicle companies and Tesla. In just two years, a brand-new model can complete the journey from concept to mass production. The pace has nearly doubled.

The speed is not driven by overtime work, but by changes in the industry:

◎ Electric platforms reduce the number of components, and modularization increases the sharing rate;

◎ Virtual simulation replaces physical prototypes, shortening testing time;

◎ Software and hardware are decoupled, allowing functions to be upgraded via OTA later;

◎ Tooling and supply chains are pre-positioned, enabling parallel development and mass production.

The acceleration of all processes makes "building a car in 24 months" possible. This speed not only allows for faster market launches of new products but also gives new entrants the opportunity to continuously refresh functionality definitions and user experiences.

The market and capital quickly provided feedback: the leap in sales and valuations of companies like BYD, Li Auto, and Leapmotor is a direct return on efficiency. In contrast, traditional manufacturers appear cumbersome within the five-year rhythm.

Part 1 Acceleration Mechanism: Changes from Product Architecture to Supply Chain

The compression of the new car development cycle is driven not by a single factor, but by systematic changes at the technical, process, and organizational levels. New entrants can complete the process from concept to market launch in just 24 months, fundamentally relying on a deep transformation of the automotive product development chain.

● First is the simplification and modularization of product and component combinations.

Compared to internal combustion engine models, electric vehicles have significantly fewer components. The simplification of the powertrain, the disappearance of the exhaust system, and the reduction of mechanical transmission complexity make the basic architecture of electric vehicles inherently more conducive to shortening development cycles.

Emerging Chinese automakers generally focus on pure electric platforms, with a more concentrated product mix that avoids the complexity of parallel development of multiple drive forms commonly seen in traditional manufacturers.

At the same time, at the component level, standardization and modularization have been greatly strengthened. A large number of invisible or digital components have been unified, increasing the sharing rate of parts between different models and reducing the costs and time associated with redundant design and testing.

● Secondly, the popularization of virtual simulation and intelligent testing.

In the traditional model, new models require a large number of physical prototypes for crash, durability, thermal management, and other tests, a process that is time-consuming and expensive. New entrants have shifted 65% of testing to the digital environment by increasing the proportion of software simulation and virtual prototypes, significantly ahead of the 40%-50% ratio of European and American manufacturers Virtual testing not only reduces reliance on physical prototypes but also allows for rapid design iteration in the early stages, avoiding large-scale rework later on.

At the same time, the level of automation in testing has increased, with some Chinese manufacturers achieving three-quarters automation in testing, while traditional counterparts are around two-thirds. As a result, the number of physical prototypes has been halved, saving an overall development cycle of 9 to 11 months.

● The third key point is the decoupling of software and hardware.

Modern vehicles have gradually evolved into "wheel-based computing platforms," with the amount of software code per vehicle measured in hundreds of millions of lines.

Traditional manufacturers are accustomed to developing software and hardware in tandem, leading to slow iterations and lengthy testing cycles. New entrants and disruptors like Tesla adopt centralized electronic and electrical architectures, with core controllers centralized, software developed independently, and functionality iterations achieved through OTA updates post-launch.

This approach saves 3 to 10 months of development time before production, while also allowing for continuous upgrades after launch, further enhancing market responsiveness.

● The fourth is the pre-positioning and flexibility of tooling chains.

Tooling is one of the bottlenecks for traditional automakers, as the development cycle of molds and stamping equipment often determines the pace of mass production. New entrants parallelize tooling production and design by starting virtual modeling and reviews early in the design phase.

They also use soft tooling (such as polymer molds) for the rapid production of small batch test parts, thus avoiding the lengthy processing of metal molds. This strategy creates advantages in the time dimension of 1 to 4 months.

● Finally, there is vertical integration and pre-coordinated supply chains.

Chinese manufacturers tend to self-develop or control core components such as batteries, electric drives, and motors through joint ventures and acquisitions. This not only avoids the time consumption of external negotiations and adaptations but also enhances the reusability of parts across different models.

For externally sourced components, these companies also initiate joint development with suppliers earlier, forming close cross-functional collaboration to ensure that supply and manufacturability are considered from the beginning of the design. In contrast, traditional manufacturers often engage with supplier resources later in the process, delaying the overall pace.

At the organizational level, emerging automakers have improved execution capabilities through lean governance and technological tools.

High-frequency decision-making meetings among small executive teams allow project changes and positioning decisions to be completed within days rather than weeks.

With the help of AI-driven project management systems, companies can monitor development progress in real-time, flag risks and delays, and maintain transparency throughout the entire process. This rigor in execution further compresses development time by 1 to 3 months.

Simplified product architecture, virtual testing, software-hardware decoupling, flexible tooling, vertical integration, and digital project management form a complete mechanism that enables new entrants to shorten their development cycles to half that of traditional manufacturers. This is not only a speed-up of processes but also a change in technological paradigms.

In summary, the speed advantage of emerging manufacturers is not accidental but a result of multidimensional collaboration, layering virtualization and intelligent tools on the architectural characteristics of electric vehicles, and transforming theoretical efficiency into actual results through strong execution. If traditional manufacturers want to shorten their R&D cycles, they must make systematic changes in these areas, rather than merely compressing timelines

Part 2 Industry Competition Logic: Speed, Value, and Lifecycle Risk

Technological acceleration directly translates into competitive strength in the market. Local Chinese manufacturers have gained dominance through rapid iteration, increasing the penetration rate of electric vehicles from 1% in 2015 to 46% in 2024.

Against the backdrop of a market size expanding to 350 million vehicles, the number of local brands is already double that of joint venture brands, with a 10% average annual growth rate primarily relying on the ability to respond quickly to the market.

The greatest value of speed lies in functional differentiation and consumer perception.

A 24-month cycle means manufacturers can introduce the latest battery technology, intelligent driving algorithms, and vehicle interaction systems into mass production vehicles within two years, while traditional manufacturers often have to wait over four years.

Leading in functionality directly leads to the capture of market share. In the cases of BYD, Leapmotor, and Li Auto, it is precisely this combination of speed and differentiation that allows them to maintain profitability amidst fierce price competition. In contrast, many overseas electric vehicle startups have yet to achieve scalable profitability.

The capital market has also reacted to speed.

In the past decade, the market capitalization of disruptors like BYD, Geely, and Tesla has increased more than fourfold, while the market capitalization growth of the traditional top ten automakers has been minimal. In terms of total shareholder return, BYD has grown by 550%, while traditional giants average only 153%.

Investors clearly prefer companies that can quickly launch products, validate markets, and achieve profitability, rather than relying on slow cycles and long-term amortization of traditional models.

Rapid development does not come without cost.

◎ The most prominent issue is the shortening of lifecycle and quality risk. The lifecycle of traditional models is 7 to 10 years, giving manufacturers enough time to optimize production, stabilize supply chains, and amortize tooling and R&D costs.

However, with a rhythm that requires updates every two to five years, the supply chain and manufacturing system must be highly flexible, and the reuse rate of components must be extremely high; otherwise, it will be difficult to maintain cost sustainability.

At the same time, shorter cycles mean potential quality hazards are more likely to be exposed. If testing and validation are insufficient, subsequent recall and repair costs may offset initial market advantages.

◎ Talent and organizational capability are also challenges. High-speed iteration requires R&D, testing, supply chain, and management teams to maintain a high level of coordination.

Emerging manufacturers often rely on streamlined organizations and strong execution, but whether they can maintain this agility as the company scales and expands across regions remains in question. For traditional manufacturers, how to instill an agile culture within a large and complex organization is a key challenge for achieving transformation.

Speed has become one of the core variables determining the landscape of the automotive industry.

New entrants have gained an advantage on both the capital and market fronts through rapid development and differentiated functions. Traditional manufacturers, if they do not adjust their models, may face the risk of being marginalized.

However, speed is not the only standard; quality, cost, and lifecycle management remain key to the industry's long-term sustainability The future winners may be the companies that find the best balance between speed and stability. The logic of industrial competition has been redefined by speed. It is not only a means of competing for market share but also a driving force for valuation in the capital market. However, behind speed lies risk; only by combining speed with quality, cost, and organizational capability can long-term competitiveness be achieved.

Summary

Building a car in 24 months is not just about accelerating the development process but rewriting the order of the automotive industry. Speed has become a new market threshold: the ability to quickly launch new technologies, capture demand, and complete iterations determines whether a company can survive in competition. But speed also comes with risks—shortened life cycles, increased quality pressure, and insufficient supply chain flexibility can erode profits.

Future competition will no longer be about "who has more features" or "who has lower costs," but rather "who can maintain stability while being fast." New entrants need to maintain agility during expansion, while traditional manufacturers must treat virtualization, modularization, software architecture, and flexible supply chains as essential courses. Ultimately, those that can thrive in a 24-month cycle, being both fast and stable, may be the ones that succeed.

Author: ZhiNeng XinXin, Source: ZhiNeng Automotive, Original Title: "Automotive Development Enters the '24-Month Cycle': Speed Has Become the New Moat"

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