Editor’s Note: Over the past decade, CrystalStream Capital has captured champions in several niche sectors within mainstream industries such as TMT, consumer goods, and hard tech, earning a reputation for making stable, precise, and insightful investments. In recent years, CrystalStream Capital launched an original tech column—The Other Side of the Coin. Through conversations between CrystalStream partners and tech company founders, the column shares stories of tech companies backed by venture capital in today’s investment landscape. CrystalStream Capital will continue to focus on emerging tech sectors.
Today, our featured guest is Cai Xudong (Jason), the founder and CEO of Watson Rally.
The article includes the following content, and will take about 10 minutes to read:
• EMB is the ultimate braking solution for vehicles, with China and foreign companies on the same starting line.
• Watson Rally Committed to becoming the global leader in EMB.
• 30 years of automotive experience shaping a sector star.
• Collaboration with CrystalStream is like two magnets attracting each other.
• Why CrystalStream invested in Watson Rally.
Shanghai Watson Rally Automotive Technology Company Limited (Watson Rally) was founded in August 2022 and specializes in Electro-Mechanical Brake (EMB) systems for the automotive industry. The company has expertise in brake module design, system integration, and full vehicle braking system solutions, with a strong focus on hardware-software integration and forward R&D from concept to production.
The founding team has over 20 years of experience in the automotive brake sector, having led global R&D and production of core brake products for internationally recognized auto parts companies. They have produced and sold tens of millions of brake products worldwide, generating billions in sales. Watson Rally meets the demands of domestic OEMs for advanced technology, stable mass production, and reliable quality.
Currently, Watson Rally has developed and launched several EMB product series for passenger vehicles, with an 80%+ mold opening rate. The company has completed performance and durability tests, installed prototype parts in vehicles, and collaborated with top industry clients.
Cai Xudong (Jason), the founder of Watson Rally, has 30 years of experience in the automotive industry. He has managed the entire process of automotive brake product development, from concept to production, at leading domestic and international companies, and is highly familiar with the full sales, R&D, production, and after-sales processes.
EMB is the ultimate braking solution for vehicles,
with China and foreign companies on the same starting line.
CsrytalStream: Can you introduce Watson Rally?
Jason: Watson Rally is an automotive parts company focused on the ultimate solution for automotive braking: the Electro-Mechanical Brake (EMB) system.
Jason: EMB is the inevitable trend in the development of brake systems. With Tesla leading the way in the development of automotive electronic and electrical architectures, OEMs are looking for ways to "software-define" their vehicles on a new platform. OEMs want to take control of software features related to their product characteristics, which has made decoupling hardware and software a universal demand. EMB products lay the groundwork for this decoupling in the next generation of automotive electronic and electrical architectures, enabling complete separation between software and hardware, and allowing OEMs and suppliers to divide responsibilities effectively.
Jason: The brake system market can be divided into three main categories. The first is the traditional hydraulic brake system used in fuel vehicles, which includes front hydraulic brake calipers, rear hydraulic electronic parking brake calipers (EPB), vacuum boosters, and hydraulic-controlled brakes (ESC). The second category is the electronic hydraulic brake system (EHB), which is used in new energy vehicles, including front hydraulic brake calipers, rear hydraulic EPB, and EHB systems for hydraulic control. The third and most recent type is the Electro-Mechanical Brake (EMB) system, or dry brake system.
Traditional hydraulic brakes have dominated the market for decades, with EPB being a mature parking brake product. International companies currently occupy about 70-80% of China’s EPB market, so there is a strong trend toward domestic replacement. Chinese companies have already mastered the hardware and software technologies for EPB, and the future competition will be focused on achieving excellent cost-performance. I believe this market has great potential.
EHB has grown rapidly with the rise of new energy vehicles. Every new electric vehicle creates an opportunity for EHB because these cars don’t have an engine to generate vacuum for braking assistance. Instead, EHB uses a servo motor to replace the vacuum booster, which improves performance but also increases system costs. The market for EHB is highly concentrated, with Bosch holding around 90% of the global market share. Some carmakers are now fostering internal or related companies to develop their own EHB systems, so domestic companies will need to compete intensely with the giants. For domestic companies, the first task is to bring their technology to the same level as international companies, and then focus on offering better cost performance.
Although EHB can also separate hardware and software, the fact that it’s all bundled into one system by a single supplier means it remains a “black box” for OEMs. They can’t fully open it up. That’s why many OEMs are actively seeking new braking solutions — there’s a lot of demand for it.
The EMB market is brand new and developing rapidly. I believe that EMB will inevitably replace the EHB market in the future. First, EMB supports the decoupling of hardware and software, which meets the demands of many OEMs. EMB has a shorter response time (80-100 milliseconds, compared to 150 milliseconds for EHB), is more compatible with autonomous driving, offers higher safety, and has overwhelming advantages in terms of vehicle weight, energy consumption, and system cost. Unlike the EPB and EHB markets, which are dominated by mature overseas manufacturers, both domestic and international manufacturers are still in the early stages of EMB development. Therefore, Chinese companies with strong forward R&D capabilities have the potential to stand out in this competition and become global leaders.
I believe the automotive braking market will evolve into a "three-way split" in the future. According to our forecast, by 2030, nearly half of the automotive braking market will still be EHB, while EMB will account for about one-third of the market share. The remaining portion will be traditional hydraulic brake systems used in fuel-powered vehicles.
Jason: I don't fully agree with the term "leapfrog" in this context. Every product development follows a learning curve, and it takes significant effort and resources to reach a critical point that gives you a competitive edge. People often say that China has "leapfrogged" in the new energy vehicle market, but we must recognize that behind this leapfrog are the massive investments from the government, OEMs, and component suppliers like us, while other countries missed out on the substantial investments in new energy vehicles, which has led to a relative lag. The so-called "leapfrog" is about taking the right direction, making the right investments, and achieving success.
What I truly believe is that, at the right time and place, with huge investment and a relentless focus on doing the right things, your growth curve will eventually outpace others, and your product will be better. That’s how you build an unbeatable competitive edge in the market.
Right now, a lot of big international companies and publicly listed firms are also putting some resources into EMB, but they don’t treat it like a make-or-break situation. When an EHB company tries to move into EMB, it’s like they’re fighting against themselves. This is the innovation dilemma that large companies face—they can’t fully commit to new products. Startups that focus solely on EMB don’t have that problem. We can go all in on it, and that gives us a much higher chance of success.
Watson Rally Committed to becoming the global leader in EMB.
CrystalStream: How is the company progressing now?
Jason: The company's progress has been really fast—our original investors even said it's "beyond the expectations."
First, on the product side, we completed the concept validation (CV) prototype testing in 2023, including performance and durability tests. Our performance results were excellent, and we completed over 2 million cycles in durability testing, which is leading in the EMB industry.
Second, on the client side, we are currently working with more than five OEMs and system suppliers on EMB prototype deliveries and testing. These customers have provided valuable feedback, helping us drive product iterations.
Third, on the business front, we’ve already begun mass production of some mature brake products, which has allowed Watson Rally to meet industry entry requirements by 2024. This clears the way for EMB product qualifications and helps us transition from a pure R&D company to one that integrates R&D, manufacturing, and supply chain development, laying a solid foundation for large-scale EMB production in the future.
Fourth, on the organizational front, we’ve successfully assembled our partners and key team members. The company structure is thriving, and the team’s cohesion is strong. I’m very pleased with this progress.
Finally, we’ve made great progress in terms of financing. CrystalStream also participated in our recent Angel+ round, and we are continuing with our fundraising efforts. Despite the challenging "winter" season in the capital environment, Watson Rally has managed to move forward and achieve these milestones. Overall, things are looking very positive, and we're truly grateful for everyone’s confidence in us.
CrystalStream: How were you able to quickly land five clients in the relatively traditional automotive supply chain industry as a startup?
Jason: First off, OEMs are really eager for EMB. They see global leaders like Tesla are already working on EMB, so they're scrambling to find resources both inside and outside their organizations to push it forward. They feel the pressure to move quickly. Our team has built a strong reputation in the braking industry over the past decade, so a lot of OEMs and system suppliers already recognize us. When they earned that we were working on EMB, they were really interested, and it clicked right away. We've secured quite a few EMB sample orders.
But we're not just trying to get orders to show investors—we’re really using them as input for the design process. We know that developing EMB samples requires a full vehicle environment and continuous feedback from customers, which means we need OEMs’ support. At first, customers approached us because of our reputation and qualifications, but as they saw how committed our team was to making this happen, they realized we’re serious about mass-producing EMB products. That built their trust, and they’ve been more open to moving forward with the collaboration.
CrystalStream: Can you share your plans for the future of the company?
Jason: In the short term, our strategy is to focus on two main areas: the first priority is to complete the design verification (DV) of our EMB products, and the second is to ramp up production of our mature braking products to ensure stable and reliable sales revenue.
In the next 3 to 5 years, we aim to achieve mass production and get EMB products approved for mass production, while rapidly growing the sales of our mature braking products. As a result, the company's performance will see strong growth, setting us on track to meet the criteria for an IPO.
Our long-term vision is for Watson Rally to become a global leader in the EMB industry, which has been our goal since the company was founded.
30 years of automotive experience shaping a sector star.
CrystalStream: The entry barrier for EMB is quite high. Why Watson Rally?
Jason: That's a great question. The barrier lies in the fact that EMB is a critical safety component for vehicles. The team must have a fundamental respect for and understanding of automotive safety parts, and ideally, have experience in related areas to understand the complexity and how to mitigate risks. Watson Rally’s strength comes from its years of experience and forward R&D capabilities built in the braking industry. Personally, I have 30 years of experience in the automotive industry, having been involved in the entire process of developing, manufacturing, and selling brake products from scratch for both international and domestic listed companies. Our team has over 15 years of collaborative experience in R&D, production, and sales of brake products, with millions of brake systems sold both domestically and internationally, generating tens of billions in sales
Compared to typical startups, we have deep technical expertise, and our team has a thorough understanding of the fundamental characteristics of EMB as a braking system. Additionally, we bring years of experience in gearbox development, which is a critical mechanical structure required for EMB. Many companies lack this capability. These two factors enable our team to excel in original development.
CrystalStream: Why do you place so much emphasis on "original development"?
Jason: Because there are no existing EMB products to draw inspiration from. While patents and concepts have existed for over 20 years, no company has achieved mass production. This makes original development capabilities absolutely critical. The team needs to leverage past experience, skills, and knowledge to push development forward, while also maintaining a mindset that embraces trial and error. It's through learning from mistakes and iterating that we can eventually find the right path.
Here’s an example: when we previously worked on the original development of an EPB product, the first round of CV prototypes only achieved a lifespan of 5,000 cycles, far below the 100,000-cycle requirement. A less determined team might have given up and opted to source the part externally. But for us, the immediate reaction was, “This is normal.” Next, we analyzed the issues and explored solutions. That’s the mindset required for original development.
CrystalStream: With 30 years of experience across multinational corporations, state-owned enterprises, and listed private companies, why did you decide to start your own business this time?
Jason: Over the years, I’ve worked in many different types of companies, but the common thread has always been starting from scratch. At the state-owned enterprise, I built an R&D lab from the ground up. At the multinational, I helped establish a company in China to develop braking systems. Later, within a listed company, I essentially started a new business—buying land, building factories, and setting up R&D, manufacturing, and sales systems. I feel like starting things from zero is my destiny—it never stops, haha!
During this venture, some OEMs reached out, hoping to “bring our team on board.” But from my past experience, there are a few essential conditions for truly accomplishing something:
First, the company must operate independently, so we can take an end-to-end approach in defining our products. Second, there needs to be a strong incentive system—only with the right framework can we attract the best talent. Third, we need visionary shareholders who understand the challenges of entrepreneurship, provide support rather than obstacles, and help the team see things through.
When you combine these three factors with the team’s hard work, the odds of success increase significantly. Independent entrepreneurship better aligns with these conditions.
CrystalStream: How is this journey from 0 to 1 different from your previous experiences?
Jason: In the past, I’ve always worked in more stable environments. Even during my previous internal startup at a listed company, the funding was already secured. But with a new startup, the uncertainty is much higher. Everything—funding, customers, and team—can change quickly, and we constantly need to adapt to unexpected challenges.
Starting a business feels a bit like Magellan’s voyage around the world. You leave the familiar harbor, let go of the steady ground beneath your feet, and venture into an endless ocean. You know the destination might be on the other side of the world, but you have no idea what challenges lie ahead. You just have to find a way to overcome the difficulties and fears and keep moving forward. I’m grateful that my partners have been incredibly supportive, which gives me a lot of confidence to push on.
CrystalStream: How did you bring together such an experienced team that has worked together for over a decade?
Jason: There’s a TV show called Band of Brothers that I’ve watched at least ten times. It tells the story of the U.S. Army’s 101st Airborne Division during World War II, moving through Europe, facing challenges, and building bonds through shared struggles. That resonates deeply with our team. Over the past decade, tackling challenges and achieving goals together has created a strong sense of trust and teamwork. I still remember November 2022—just two months after the company was founded in August. We set up a small office behind a car dealership’s storage area. By December, we had delivered our first EMB CV prototype to an OEM. Seeing it installed in a customer’s car and working was a small milestone achieved in a short time, and it felt great.
A delivery driver who often brings meals to our company once said, "Your company is different—everyone here has a spark in their eyes."
Collaboration with CrystalStream is like two magnets attracting each other.
CrystalStream: Do you remember your first interaction with CrystalStream?
Jason: I got to know CrystalStream through an introduction by another investor. My first impression was that the name was quite interesting. At first, we didn’t talk much, but later I saw that your team went to Tibet for a team-building trip. That struck me as very different from other investment firms. Most companies choose more relaxing destinations with good food and drinks, but your team went trekking in Tibet. I really admire that kind of vibe. I’ve always wanted to visit Tibet, but I get altitude sickness, so it remains a dream for now.
During my later interactions with the deal team, I could clearly feel a strong sense of "I believe in you." Different investment firms have their own styles. Some investors' initial approach is to doubt you first and then verify if you're capable. But CrystalStream gave me the impression that they believe in the company’s potential to succeed from the beginning. Of course, they still do solid verification, taking a grounded and practical approach. This aligns closely with our company culture—when employees join, our starting point is always "I believe you can get things done," but in the end, we also check the actual situation.
CrystalStream: Why did you choose to accept investment from CrystalStream?
Jason: I don’t think it’s really about choosing, it’s more like two magnets naturally pulling together. We had another investor lined up for our last funding round, but a few minor issues came up that slowed things down, and that’s when I immediately thought of CrystalStream. I feel like CrystalStream is always genuinely interested in the companies they believe in and stays engaged. The CrystalStream deal team has this persistent spirit, which I can relate to. They always think that even if things are in a certain state right now, there’s still a chance, and they work hard to prepare for that opportunity. That kind of mindset really clicks with founders, and when an opportunity arises, I immediately think of CrystalStream.
There's one thing that left a deep impression on me. When I met Ms. Mengqiu, I asked her a question: "Imagine we're in the Dakar Rally in the Sahara Desert. Our team is the driver in the race car. As investors, would you want to sit in the passenger seat, directing the path, or would you rather sit in the back seat and cheer us on?" She replied, "We would never sit in the passenger seat trying to dictate the direction. We're here to support, help, and not add any confusion. We may not even need to be in the car to cheer you on – we can cheer you from the sidelines." I really felt that CrystalStream Capital approaches investing with the goal of helping the invested companies succeed, offering support where needed. This attitude has been great for us.
CrystalStream: Was there a moment when you felt that choosing CrystalStream as an investor was the right decision?
Jason: After CrystalStream invested, they provided us with a lot of support, including feedback on customer status, assistance with post-investment delivery, and PR support. They’ve also proactively reached out to ask how they can help, providing support exactly where we needed it. I can truly feel that as an investor, CrystalStream is fully committed to supporting the company. I really appreciate that.
We understand that investors have ultimate return goals, but what's important is that, in pursuing these goals, they allow the invested company to grow in an organic direction, offering help without causing disruption. CrystalStream has done this, and that's what makes them a great investor.
Why CrystalStream invested in Watson Rally.
The value of new energy smart vehicles to human society’s future is immense, and their penetration rate continues to rise. The new energy vehicle industry chain is deep and long, making it a massive market. Amid the dual-driving waves of intelligence and electrification, CrystalStream Capital has consistently focused on investment opportunities in the automotive industry, with particular attention to areas such as new energy commercial vehicles, steer-by-wire chassis, automotive-grade semiconductors, smart sensors, and high-precision positioning. Steer-by-wire chassis is a key execution system in automotive intelligence and the final piece of the puzzle for achieving autonomous driving. The chassis includes steering, braking, and suspension systems, with a clear technological evolution from mechanical to hydraulic to steer-by-wire. Especially in the braking field, there is a rapid evolution towards the direction of Brake-by-Wire (Electro-Mechanical Braking) systems.
The braking field is divided into parking and driving brakes. The parking brake, EPB (Electronic Parking Brake), is relatively mature, and the electronic handbrake has almost become a standard feature in new vehicles. Before 2017, the domestic market was almost monopolized by foreign brands, but since then, the localization rate has gradually increased to nearly 20% by 2022. The market concentration is quite high, with a CR4 of 75%. As vehicles continue to electrify, driving brakes are progressively shifting towards brake-by-wire. The current mainstream product is EHB (Electronic Hydraulic Braking), which is primarily dominated by Bosch, holding a market share of over 90% in 2022. In China, the market was opened up by Bosch's chip shortage in previous years, leading to the entry of new companies.
EMB is currently in the early stages of development and introduction, with all major automakers and Tier 1 suppliers laying out their plans. Tesla in North America is conducting comprehensive road tests, and mass production is expected to begin in 2025. CrystalStream Capital is optimistic that EMB will gradually replace EHB to become the main driving brake system. The core reasons are:
1. EMB offers superior braking performance compared to EHB. It has a shorter response time (80ms vs. 150ms), greater braking torque, and zero drag torque (no energy loss from a hydraulic system), meeting the high braking performance demands posed by autonomous driving and the increased weight of electric vehicles.
2. EMB features a more streamlined and efficient overall system. By removing the hydraulic system, it reduces the vehicle's assembly volume and lowers the component weight. Its highly integrated design aligns with the evolving trends of automotive electronic and electrical architecture.
3. EMB has a more advantageous BOM (Bill of Materials) cost structure. On one hand, it eliminates the basic hydraulic brake system and the EHB control system. On the other hand, it can reduce 1-2 assembly steps, further lowering production costs. Overall, it is expected to reduce costs by 10-20%, aligning with the industry's ongoing trend of reducing vehicle production costs.
At the same time, policies related to EMB are gradually being eased. Currently, the front-wheel EHB and rear-wheel EMB configuration can already be mass-produced and integrated into vehicles. Abroad, four-wheel EMB is also gradually being adopted, and it is expected that relevant regulations will be implemented in China by 2025. OEMs and leading international Tier 1 suppliers are actively making plans to accelerate the establishment of the domestic supply chain.
So, we believe that EMB will be a key area in the future of automotive electro-mechanical braking. With the continued penetration of new energy smart vehicles and the leadership effect of top automaker Tesla, EMB is expected to gradually open up market space. According to CrystalStream's market research, by 2028, the domestic electro-mechanical braking market will reach approximately 55 billion yuan, with the EMB market accounting for around 13.3 billion yuan.
The comprehensive innovation of the EMB technology roadmap and the demand for higher integration have eliminated the cost and scale advantages that the previous industry giants once held. Emerging companies with exceptional original development capabilities are now on the same starting line as traditional industry giants. The key factor for customer selection will be who can offer differentiated, cost-effective products driven by innovation. This also provides startup companies with the opportunity to outperform traditional giants in the growing market.
CrystalStream believes that Watson Rally has seized the historical opportunity of the evolution of wire-controlled braking systems. With a team that brings decades of experience in brake system development and successful industrialization, Watson Rally has entered the EMB (Electro-Mechanical Brake) field. The company fully meets the requirements for large-scale mass production, original R&D capabilities, customer business development, and supply chain management—four key areas needed to succeed in EMB. This makes Watson Rally the highest-quality investment target we have seen in the EMB field.
Today, Watson Rally is successfully meeting each milestone as planned. EMB samples have been delivered to leading automakers and Tier 1 customers, receiving consistent positive feedback. The company has already secured mass production orders for mature brake products from major car manufacturers, and the factory setup has been confirmed. The team is also continuously strengthening. We believe that Watson Rally will stand out in the upcoming EMB race and lead the next generation of automotive braking systems!
Post-interview notes: Before the interview, Jason took us on a tour of the company's new office. He proudly showed us the advanced testing equipment in the R&D lab. As we returned to the office, he casually pointed to the break area outside and said, "These two second-hand armchairs were bought for just 100 yuan on Xianyu (a second-hand marketplace)!" The deep-rooted awareness of quality and cost in the older generation of automotive professionals has led him to achieve the perfect balance of "saving where possible and spending where necessary" in this company.
Source: CrystalStream Capital WeChat Official Account