Where do I begin!? I spent Monday shuttling back and forth between all of the product launches that seemed to happen ALL at the same time. Yesterday, I blocked out a few hours just so I could take it all in, sit in cars, and get a general sense of how so much has changed in the sector in a year’s time. Last year, the Beijing auto show was late and very much subdued due to the pandemic (and the fact that it was in Beijing) so there wasn’t anything I can recall that was too flashy or memorable with the exception of a few new brands launching. As for this year, I knew traffic to the convention center was going to be unbearable so I opted to take the subway. As I was exiting the train I was a bit nervous because I hadn’t received any physical tickets or lanyards from the agent I purchased my ticket from and was told that facial recognition software was going to be used for entry / re-entry, another wildcard. Whenever I go to these HUGE events in China I am always a bit apprehensive because there is often never any clear instructions on what to do, where to go or how to do it. When I arrived I scanned a QR code that logged me into an app that had my confirmed ticket which I showed the guard. At the next checkpoint, I had to show my updated health code. Just before the entry gate, I had to go to another kiosk to verify my passport and scan my face for the facial recognition. After that was done, I walked to the entry gate where there was a kiosk, it was something similar to what you’d see at the airport nowadays. I placed my passport on the scanner and looked at the camera – VOILÀ! I was in. The night before I’d reviewed all of the times for the media events and mapped out where I wanted to go which was a HUGE help since the map was humongous and wasn’t something that I’d pull out each time I wanted to go to the next booth. The theme of this year’s auto show is ‘Embrace change’ and that seemed to be a very appropriate one for a few different reasons. Now, here are a few of my observations: - It felt great to be back at an auto show. I did go to the Beijing auto show the year before but this felt different. Last year was very subdued due to the pandemic whereas building up to this one was a number of product launches by the manufacturers so there was already an electricity and excitement about all the new products, brands, and technologies being introduced. - Bold and mature. The Chinese automakers across the board, both legacy, and EV startups seem to be very confident in the market and their place in it and it’s reflected in their vehicles. Designs are less kitschy and more evolved. With the exception of Tank (Great Wall’s new brand) and the Land Rover Defender, there wasn’t much cheap, funky molded plastic on very many cars. Interiors now mostly have a combination of physical buttons & knobs or just one or more screens that make up the front console. Contrast the Mercedes EQS front IP / screen, which looks like Nintendo threw up all over it, to the Lincoln Zephyr’s ‘coast to coast’ screen that seems much more elegant and functional. In the past, these screens seemed to be afterthoughts that were haphazardly bolted onto a previously designed front console. Whether the software supports these more mature designs and better UX, I’ll need to comment on that later when I get the chance to really play with them. Let’s just hope they know that any latency in the touchscreen is a ‘showstopper’ for most consumers. I am talking to you VW ID.4. - All the tech stuffed into the vehicles. This may be a controversial statement but if you squint, the vehicle silhouettes in the same segments all kinda flow along the same lines. Think small, medium, large SUV, crossover, coupé, even boxy SUV, it doesn’t matter. If you pulled logos off the vehicles some of them would be very difficult to make out of a lineup. I could see a scenario in <10 years where the exteriors aren’t differentiated by much. They could be rolling boxes that are use case-based. They could be autonomous retail stores, delivery vehicles, ambulances, barbershops, robotaxis you name it. Right now when exterior design does still matter, there is some liberal ‘borrowing’ of design on all levels. I think the new battlefield for differentiation is moving to the interior. And we’re not talking the quality of materials being used for the seats or the overhead although that does matter. I am referring to how well the software integrates into a potential customer’s digital ‘life’ and how it can enhance their digital life for the better. If not in the US or the EU yet, Chinese consumers - especially the target market for most of these automakers - are digital natives and expect that their vehicles will be able take them on a better digital ‘journey’ that’s customized to their needs and desires and is even able to anticipate their needs in the best-case scenario. We aren’t there yet but that’s definitely where we are moving. LiDAR EVERYWHERE. Xpeng announced that they’re making LiDAR standard on some versions of their newly launched entry-level vehicle, the P5. Others have as well including Honda, Toyota, and Great Wall. This is HUGE as safety is the #1 concern for Chinese consumers when car shopping. This effectively democratizes the tech and moves it from a ‘nice to have’ option to a ‘standard’ qualifier feature that if you don’t have, you’re behind the market. There are a TON of LiDAR suppliers and the hardware is still in its early stages so it’s hard to validate which company’s tech is legit and who are the poseurs. The valuations of some LiDAR startups that have recently SPAC’d seem to be out of whack with the market so expect the weaker players to be gobbled up or leave the market entirely. - China First from the foreign automakers. There were a number of foreign OEMs that made global product debuts at the Shanghai Auto show. There is no getting around the fact that China leads the world in vehicle sales so the importance of the market needed to start being emphasized to the Chinese consumer by foreign automakers through global debuts here. One of the big reasons that the foreign brands are starting to move towards a China first strategy is that they know that a rebadged US or German designed vehicle that’s just bit longer isn’t going to cut it in this market anymore. The local brands have stepped up and Chinese consumers are much more favorable to local Chinese brands than they’ve ever been. There shouldn’t be ANY further doubt about how important the China market (should be THE most important for most) is to most foreign automakers be it American, German, Japanese, or Korean. Here’s a brief list of some of the more notable global debuts:
Audi A6 e-tron
Honda SUV e: prototype
Citroën C5X Hybrid
Ford Motor and Hyundai both took it a step further at the Shanghai Auto show. Ford intro’d the Ford EVOS & the Lincoln Zephyr Reflection (concept) and touted how their roots were deeply set in China with most of the design and engineering being done locally. The Lincoln will also be a China ONLY model. Hyundai debuted the Genesis brand to the China market with a drone show over the Shanghai skyline and launched the electric version of their G80 which was a first for Hyundai since all of their vehicle debuts till now have all been in Seoul. - The global ambitions of the Chinese companies. As I’d mentioned earlier there seems to be a confidence in these brands that wasn’t there in the past. More importantly, this time the product (in some cases) may match the ambition. Enough confidence to have global ambitions that I think they believe they can be successful outside of China. That’s not going to be true for ALL of them of course but without question, there is only one way to find out and you can bet they’ve ALL launched studies to see what it will take. The EV startups like NIO, XPeng, WM Motor, Aiways, and Li Auto have all already taken initial steps towards entering with NIO saying that they’ll enter before the end of this year. I was also told this week that NIO had recently shipped some of their swapping stations over to the EU for testing. Aiways is already there, albeit not very successfully to this point. XPeng has shipped units to Norway as well. Other companies, including some SOEs, have even created new brands with western sounding names like Arcfox, Zeekr, and Voyah because they eventually want to ship their products to foreign markets. I could see a few having success as long as they take the time to create awareness for their brand, its products and really understand the local market(s). I say markets with an ‘s’ because selling in Germany is not the same as selling in France and each country needs to have its own entry strategy that starts with awareness and education. There’s also going to be countries that don’t have the infrastructure to currently accommodate EVs but it could be worth being there for when they do. Legendary UCLA basketball coach John Wooden used to say to his team, ‘Be quick, but don’t hurry’ and that is sound advice for those China manufacturers that have ambitions to build their brands in the EU & US. Again, not all of them will succeed. Not all of them will succeed in China frankly. I could see a scenario in 5-6 years where there is some market penetration by a few brands. That’s unless there is any protectionism put up or the local automakers get their shit together to put a viable product on the road that would make owning an imported EV much less attractive. - The market for vehicles in the 150 – 300K RMB ($23 - $46K) pricepoint in China is going to be CRAZY competitive! - Shanghai is just an overall more convenient city than Beijing – There I said it. Wifey is not gonna like me saying that since she's 北京人. - The US has VERY little room for error if they're gonna come close to catching up with China. The Good
Lincoln Zephyr Reflection
Honda SUV e: prototype
Audi A e-tron
Wuling Hongguang Mini EV convertible
The Bad & Ugly
Just a few links today. All of which have my fingerprints all over them. The first is a pretty interesting article that I just happen to have been interviewed for about the China EVs global ambitions. You can find that here. I also give a quick take on my thoughts after Day 1 of the show to China Plus, you can find that interview here. The last thing I’ll touch on is the current Tesla situation. There was a protest on Day 1 where a woman jumped on the roof of a Model 3 and repeatedly yelled ‘Tesla brakes don’t work!’ Social media has been tough on Tesla the last couple of days here as well and here’s a good take in the FT with the latest news from that situation. Lei and I decided that it was too much to unpack #AutoShangahi2021 in one episode so for this week we are having two Clubhouse episodes. Unfortunately, the first was last night and we went over all the foreign brands and all the products they launched. As part of our updated schedule Part 2, we will dedicate the entire episode to what the Chinese EV brands, OEMs, and tech companies have to offer and what we think of everything. As always, we’ll leave time at the end for questions and comments so I invite you to join us tomorrow, Friday 9am China local time on Clubhouse. For those who do NOT have an account but have an iPhone and a non-Chinese phone number please get in touch and we can sort you out.
—— 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.