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2020 In Review, Tesla Shanghai Giga Expośe, Who Will Build The Apple Car - SAI Newsletter 49



WOW. We are closing out 2020, I hope everyone was able to balance spending time with their loved ones while staying socially distant and keeping their pods small – What a weird and for many, a really challenging year. My family started out what we thought would be a three-week visit to the US in January only to stay there for almost three months finally boarding a flight that was NOT canceled (three were) on us and getting back to Beijing 1 day before China closed its borders in late March. Covid is still wreaking a lot of havoc globally in these winter months but there is a small but growing glimmer of light peeking through the end of the tunnel with the vaccines beginning to be administered. No one is out of the woods yet by any stretch though as infection rates continue to increase in many countries. The effects of the pandemic will be felt for years to come by economies around the world as each tries to dig itself out of the massive hole that COVID-19 threw them into.. It has been absolutely freezing here in Beijing and recently there have been small outbreaks throughout China so there’s a lot more caution from the central and local govts with testing and travel. Speaking of which, I don’t see any real progress in travel – leisure or business – until at least late in ’21. That’s not to say that some countries won’t be able to negotiate bilateral agreements to allow their citizens to travel back and forth. Further, I DO see China and perhaps other countries loosen their visa and travel restrictions towards the middle of the year but still requiring a 14-day quarantine period once travelers return which should discourage many. There is just still too much risk of spread. For this newsletter, I’ve browsed through what I’ve written this year and am highlighting what I think were the most significant events that will drive a lot of the change/progress/evolution of the EV/mobility/AV/transportation sector in 2021 & beyond. It was tough to keep the list small so I’ve done the best I can through order of elimination (in chronological order): Newsletter #2: Let this sink in. Tesla is the most valuable American automaker EVER. Newsletter #4: Why China is leading the way in EV adoption. Newsletter #5: The quietest AV company may be the best? Newsletter #6: With Chinese citizens mostly confined to their homes during the coronavirus outbreak, gaming, fitness, health, and enterprise collaboration apps have increased significantly in popularity. Newsletter #7: Hillhouse Capital, at one time NIO’s third-largest shareholder, offloaded ALL its NIO shares as of the end of 2019. A pretty substantial loss of confidence in the EVStartup. ( Could this be the mother of all ‘take-backs?’) Newsletter #8: German auto sector taking losses and layoffs to the tune of 800K jobs over the next 10 years. Newsletter #11: A major rustbelt city is taking a HUGE step towards welcoming EVs into their town. Newsletter #12: The Chinese govt. has decided to extend the NEV subsidies for an additional 2 years, which includes waiving the 10% sales tax. A welcome announcement for the China EVStartups. Newsletter #13: New York legalizes the use of e-bike and scooters – FINALLY. Newsletter #15: Even in the shadows of the coronavirus, Chinese AV startups remain aggressive and upbeat. Newsletter #16: NIO’s bailout …I mean funding comes through from the Hefei govt. Newsletter #17: Paris’ local govt. is fast-tracking transforming some of their boulevards into bike lanes while streets are less crowded due to coronavirus. Newsletter #20: Zoox finds a buyer – maybe. Newsletter #21: Ford and VW Group are now officially partners in crime. Newsletter #21: China auto sector sees two consecutive months of growth. Newsletter #24: Didi will have 1M autonomous taxis on the roads by 2030. Newsletter #25: The plug-in vehicles (hybrids + BEVs) market share hits 7.8% in Europe. Newsletter #25: Byton throws in the towel. Newsletter #26: A big test for Chinese EV brands. The European market. Newsletter #31: DO NOT sleep on Geely. They may just surprise you. Newsletter #32: I was pleasantly surprised to see that Michigan announced this week that they’d dedicate a 40 mile stretch of I-94 going from Detroit to Ann Arbor to test connected and autonomous vehicles. Newsletter #33: Blackberry making its bones with connected vehicles now? Newsletter #37: The safety driver in the Uber robotaxi that killed a pedestrian in Arizona in 2018 has been charged with negligent homicide. Newsletter #40: WM Motor preps for its big debut on the Shanghai StarBoard likely early next year. Newsletter #43: India’s own Ola Electric wants to be the biggest, baddest electric scooter manufacturer on the planet! Newsletter #44: The UK is making an aggressive move towards zero emissions pulling in a ban on petrol & diesel engine vehicles from 2040 to 2030. Newsletter #46: India sets some ground rules (read: regulations) for the ride-hailing companies that compete in the market. Newsletter #47: ‘Mission T’ is what VW is calling their reorg, let's just call it what it is, in order to catch Tesla. Newsletter #48: NYC’s Metropolitan Transportation Authority which runs NYC’s subways, buses, and commuter rails services 4 of 10 of the US’s public transit riders. Oh, and here were my predictions for 2020 (and self-assessed grades for each) that I wrote for the first newsletter of the year:

  • This will be the year of the electric bicycle. (Grade A-)

  • Its use and protection will be clearly defined but still misused. (Inconclusive)

  • One World, Two internets will be clearly defined. (Inconclusive)

  • Huawei will find it VERY difficult switching out American-made chips and software but will be thrown a lifeline by the US govt. (Grade C+)

Yeah, I agree I was pretty lenient on myself but in my defense, COVID-19 threw all the inconclusive into '21, well at least that's my story, and I am sticking with it! Next week, I’ll post my predictions for 2021. One HUGE omission on that list of ’20 predictions was that a pandemic was going to tear through the world and change the business, travel, cultural, and health landscape forever. There was a pretty damning article on Tesla about the poor production and manufacturing build quality coming out of their Shanghai Gigafactory that posted this week. IF ANY part of the article is true, it will catch up to them in 2021. I’ve stated in the past that even at China speed, it was hard to believe that there weren’t some important steps missed in building the Shanghai Giga and setting up the production line for the MIC Model 3 and I stand by my statement. Could this be Tesla’s ‘chickens coming home to roost?’ I fall on the side of the people that have legitimate concerns about Tesla - Any real potential safety issues with their vehicles and/or manufacturing processes should be fully investigated and reported. Elon does himself NO favors pushing back on journos that ask tough questions – that’s their job. Finally, as a publicly-traded company that is currently the 7th most valuable in the world should, Tesla should be required to be more transparent. For those hating on Tesla for everything from their market capitalization to Elon’s tweets, you’re are missing the point. Up till now, their customers haven’t cared about all that other stuff. With the important part of that statement being “Up till now…” I don’t see that continuing to be the case as Tesla penetrates further into the US, China & EU markets. At a certain sales volume, say >800K units globally a volume they could hit in 2022, Tesla moves more towards the ‘mainstream’ customers and farther away from early adopters who are more impressed with the tech, gadgets, and features and can overlook poor build quality. As more viable EVs enter the market going after Tesla’s customers, then quality, reliability, and affordability will force all force its way into the ‘buy or not’ equation. Poor build quality is NOT the exclusive domain of Tesla BTW, but they ARE the most valuable car company in the world so this type of scrutiny was and is still inevitable. Oh, and I’ve been watching the Apple TV + docuseries ‘Long Way Up’ where Ewan MacGregor and his buddy Charley Boorman ride electric Harley Davidson’s from the bottom of Argentina to LA, a 13K mile bike ride! It’s been pretty entertaining and watching with my boys it’s a good way to learn more about South America, a place we’ve unfortunately we’ve not been able to visit since we live in Asia. I’ve been inspired by their trip to visit of course when borders open. It’s marketing GOLD for Harley and Rivian, who supplies two support trucks that follow Charley and Ewan throughout their journey. It really does also highlight the need for robust charging infrastructure as well if we’re to live the way we currently do now in our petrol world. I may wait a week to send my first edition of 2021 so to all – Happy New Year. 2021 is going to be great, let’s ALL get it started on the right foot! TESLA IN THE NEWS - Tesla still top dawg for batteries but competitors are learning …and catching up. Cost, Innovation, cost of innovation, quality, and reliability will determine leadership positions in the future. That’s where the larger OEMs have an advantage since they can amortize costs over more units. At least in an accounting sense. - Jay Leno, car collecting god and close follower of the auto sector kicks us knowledge on why he thinks Tesla is tops in EVs and the genius behind Elon. A great piece if you have the time to watch. IN THE NEWS - US opens the door to flying drone delivery? You bet, flying drones have been approved to fly over people and at night. Not sure when this will be commercially viable, I’d say late ’21 but symbolically this is a HUGE step. - E-scooter sharing startups, have you been paying attention to what happened to Mobike, Ofo, and the other 70ish other bicycle-sharing startups that flamed out in China? If you do not heed the lessons that should be learned from that 5ish years of one BIG up followed by a long down, you will be doomed to repeat them. - Apple’s CM for the Apple Car, two of the three are NOT very likely – Trust me on this one. CM = Contract manufacturer BTW. So for Tesla, they wouldn’t want ANYONE from Silicon Valley controlling their ability to succeed like Tesla would be AND they’d NEVER cede control, especially as Elon would likely ‘throw up’ all over Apple’s design even IF he thought it was OK. Same with VW, Apple would never give up control (of ANY major decisions) and I know for a fact that Apple thinks they can do it better than any current automaker out there – that’s because ANY market they enter that’s what they think. The difference between them and everyone else, they can execute. The investment costs to do it on their own just don’t make sense for them at least not YET. That’s where Magna Steyr comes in. Magna would bring expertise and experience similar to Foxconn and Magna would gladly take a back seat to Apple as long as that Apple Car was built in their facility. There’s a lot in it for Magna Steyr here from a learning standpoint. Only companies that are willing to cede control need apply to being Apple’s CM on the likely game-changing Apple Car. There was a rumor years ago about how close BMW and Apple were to shaking hands on an Apple Car but Bimmer wanted control of the project. Tim just said ‘….uh NO.’ One thing I do want to stress is that Apple DOES get how difficult creating the ‘Apple experience’ is going to be for a car, even for them. Cars are NOT phones, computers, tablets, nor headphones. First off, none of those products is likely to kill its user should it not work as planned. The orders of magnitude in complexity, risk, and cost, by entering the market have not been anything they’ve taken lightly. Also, Apple isn’t and has never been in any hurry to be the ‘first’ at anything. Their bogey has always been to do it ‘best.’ That doesn’t change with the Apple Car. Those two analysts who said Tesla & VW are REALLY off IMHO. - Could funding their future be a problem for VW Group? The exposure and financial risk from diesel-gate hangs over their head even as VW Group recently announced >$80B investment over 5 years to digitize. Wolfsburg – Do we have a problem?? TRENDING ON SOCIAL MEDIA - Best sneakers of 2020. I need to cop some of these for myself, especially those New Balance 992s and ‘Ben and Jerry’ Nike Dunk Lows! - Kia has REALLY stepped up its SUV design game, first with the Telluride and now with the Sorentos. Those rims really bring it. Ford Bronco, LR Defender, and reigning champ Jeep BEWARE – Kia doesn’t seem like they’ll be satisfied with 2nd - Hey car guys. Get familiar with these software languages and what they can do for which applications. It’s going to rule your professional lives starting next year. JUST THE NUMBERS - Bolt, Uber’s EU rival raises $182M to continue to pivot & grow their EU business. Notable backers: Didi Chuxing, Daimler. - AV startup WeRide raises $200M in Series B from Chinese bus maker Yutong. I visited WeRide and was pretty impressed with their tech way back in January so I am thinking among the serious competitors here in China WeRide is going to be just fine. - 100 XPeng G3’s delivered to customers in Norway. Step #1 in their bid to be an international player in the EV space. PRODUCT & SERVICE INTRODUCTIONS - Canoo’s $33K delivery van. Yes, these things are really coming to market. It won’t start shipping until 2022 so Canoo should have a bit of a track record by then so we will hold out our judgment until they get some rubber on the road. —— This weekly newsletter is a collection of articles we feel best reflect the happenings of the week or important trends that have effects on the automotive and mobility sectors here and in the US, we also provide a point of view that we hope educates and sparks debate. The Sino Auto Insights

Sino Auto Insights is a Beijing, China-based market research and advisory firm that specializes in assisting companies analyze, strategize, and develop products and services that will shape the future of mobility and transportation. Members of our team have experience working in Detroit, Silicon Valley as well as here in China across multiple sectors and functions as entrepreneurs as well as working at larger companies like Apple, Google, Amazon, GM and FCA, and many others.

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