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Back in the US, CA goes petrol free, Aussies Not Happy with BYD - SAI Newsletter 32


We are BACK BABY! Not just the newsletter but SAI is back in the US! Since we last left off two weeks ago, I was to embark on a trip to the US that was almost 2.5 years in the making. And as always, drama ensued during my transcontinental adventure but overall, what I was concerned about the most – my COVID tests, etc. played no part in any of the trip. For those wondering, my itinerary was as follows: PEK > HKG (4hr flight + 2.5hr layover) > JFK (11hr layover +15hr flight) > DTW for a total of ~33 hours. It began with my flight out of PEK – nothing too unusual but one unique observation was that >75% of the passengers were likely Chinese college students on their way back for fall semester. This against the backdrop of visas to Chinese international students studying in the US shrinking by 50% in the first half of the year vs. pre-Covid. I am certain that number is accurate but it sure didn’t feel like it on those planes. We board the Cathay flight out of HKG with no incidences and are about to take off on-time. As we accelerate on the runway to take off – the plane screeches to a halt! After about 10 mins of silence, the pilot comes on the PA announcing that flight control advised us to abort take off due to some foreign object on the runway and we couldn’t just turn around and try again because the brakes were too hot to take off and needed about an hour of cooling off before we could get going again. As we’re about half way into waiting for the brakes to cool, the pilots jumps back on and says the plane now has error messages on its control units and that they’d need to be remedied before take off – no new updated timeframe. After about 20 more minutes the pilot jumps back on to declare that the error messages couldn’t be resolved so we’d need to head back to the gate and de-plane. But because we wasted all of this time, the flight crew would run out of their hours prior to landing in JFK and there was no alternate plane or crew that could take us. A collective moan from the cabin. No one now knows how long this layover will be. We all de-plane and head back to the gate not knowing what to expect. Arriving at the gate we are told that we would all be rebooked on the 11am flight …the next day! For foreigners, that means spending the night at HKG since leaving the airport means mandatory quarantine. BUT we would be given sandwiches and access to the Cathay business lounge as our consolation prizes. Exacerbated, I pled my case to a Cathay employee Ewing Cheng, who basically in between listening to my plight along with 8 or 9 others simultaneously did in fact hear that my final destination was NOT NYC and that if I waited for the 11am flight the next day, I’d miss my connection to DTW. I know she heard me because after about 30 mins, she comes to find me still sitting at the gate trying to figure out something to do. She’s rebooked me on the 2am flight to JFK that would get me there in time (with 3 hours to spare actually) in order to make my connecting flight to DTW and the best part, my luggage would come with me all the way through! For all the challenges that Cathay has had the last few years due to the protests and pandemic, I must say that the DNA of great customer service is still there. Lest we forget, Cathay was always one of the highest rated airlines in the world just a few years back. As for re-entry into the US. A few observations. Michigan road construction is everywhere, and it is life draining. Trucks and SUVs have truly grown massive and outrageous. Finally, with how much we Americans shop at Target, Costco and Sam’s Club, it’s going to be tough to de-couple from China. I mean impossible tough. One of the first big events I got to check out was last weekend’s Woodward Dream Cruise. My bro-in-law has a few classics and was out there with one of them parked on Woodward, so we decided to join him for a few hours to smell the burned petrol and check out all of the cool cars. This was a car guys dreamland and a terrific community event that is part of what I missed not being back in the US for 2.5 years. China EVs & More is scheduled this week for Thursday, 08.25 – 9pm EST, Friday, 08.26 – 9am China local time so meet us in our Twitter Spaces room then to get a download on all that’s happening in the space. Those that can’t join, the China EVs & More podcast is available wherever you grab your podcasts from. Most of our back pods are posted and the descriptions will be able to tell you what we discussed that particular episode. QUOTED - China’s Hawaii plans to eliminate petrol engine vehicles by 2030. The first Chinese Province to announce the elimination of petrol engine vehicles, Hainan’s goals are very ambitious. Not only a complete ban of sales of ICE vehicles by 2030 but also a pledge that all public service & social operations vehicles will be replaced with NEVs by 2025. Not quite the same impact as the announcement from California, but quite symbolic for China since the Chinese govt likely won’t make any type of similar announcement anytime in the near future. TESLA - It seems that according to Elon, it’s a privilege to be a part of the FSD beta testing group (even though you pay through the nose for that privilege) and that means you shouldn’t complain when it can’t perform basic functions like turning right. When a customer dared post videos and highlight the challenges his car had, Elon said he shouldn't complain since it's still a beta version of the software. SMH. Dude is SEN-SI-TIVE. IN THE NEWS - California to ban the sale of petrol engine vehicles by 2035. For many close watchers of the EV sector, California had already made this announcement, so this isn’t a surprise – the difference in this particular case is that CA is ready to put pen to paper and formally vote on the measure. Why this is significant. California is the largest vehicle market in the US. It’s also the 5th largest economy in the world if it was a country. When California talks, people listen. Normally, when California makes a change to any automotive policies, automakers usually implement them to their entire lineup of cars lest they build one car for CA and other car for the rest of the US. Also, according to the article, there are >12 other states that tend to follow CA’s lead when it comes to protecting the environment, so this has much broader implications than just CA being out front. When combined with the Biden Administration’s IRA act, it takes a significant step towards substantially reducing carbon emissions for the US. The two policies combined will NOT eliminate carbon emissions but it’s definitely something the US can point to to say it’s trying to do its part as a global citizen. There’s going to be a ton of bitching and moaning about whether its achievable from certain interest groups, but this bold, HUGE step is worth celebrating. Is it coincidental that I come back to the US and all of these great EV adopting policies are being put in place?? Maybe not! - Aussies reading the fine print on their BYD Atto purchase/lease agreements – and they’re not happy about it. It seems that BYD pulled a bait and switch on their warranty for some parts and services and in the some cases of coverage, shorter than originally communicated. Even thought some Australian media outlets speculate that some of the Ts & Cs are not enforceable due to current Australian law, it’s enough of a controversy that people have stated that they’d cancel their orders for the Atto. Getting these BYD’s to Oz for sale was already sort of a nightmare and there was a ton of positive energy generated from the announcement weeks ago that delivery to customers was imminent. Now, some of that positive energy has vanished and we’re left with a cleanup in aisle ‘warranty’ for BYD and their Australian partners. - A small Chengdu Motor show preview. For those still wondering when the Beijing Motor show will be rescheduled to, it won’t so just look forward to the Chengdu Motor show kicking off this weekend. It’s considered an ‘A’ level auto show in China but this one in particular is suited for sales. But since BJ never happened it’s an opportunity to see some new products that otherwise might’ve been overlooked. GM is one company that seems to be taking advantage of the show with several new local products being shown for the first time including the Buick Envista, a sporty, small SUV aimed at younger buyers, the Chevrolet Seeker, a more conventional sister vehicle to the Buick Envista and an updated Buick GL8, an update to the MPV that’s been on sale here since 1997. There are some other notable new vehicles launching such as the Denza (a JV between Merc & BYD in which BYD wholly owns now) D9, another MPV that comes in two flavors: EV & PHEV. Click the link if you're curious about what they look like. - The Huawei founder believes that they are in a fight for survival over the next few years. Most China watchers know that the economy continues to struggle under the Zero Covid strategy and as part of the global downturn but China may be in worse condition than many westerners realize. Huawei’s luck turned for the worse after the US sanctioned them and to make up for the revenue lost in handset sales, they’ve turned to providing the ‘smart’ in smart EVs. Significant revenues in the connected space are likely still several years away which makes for a key next few years as Huawei aggressively partners with multiple EV makers to provide them with the HW/SW stacks that they believe can compete with the BYDs, NIOs, XPeng’s and all of the other domestic EV makers. That’s because they likely will have limited success getting any foreign OEMs to partner with them on their tech outside of China. So was this internal memo that’s been leaked to the media a rallying cry or a plea to keep grinding just enough to survive – probably a bit of both. TRENDING ON SOCIAL MEDIA - Is the US and China close to inking out a deal to keep Chinese companies listed on US exchanges? According to the WSJ, a deal could be imminent and that would trigger auditors flying over to HK to begin the inspection/audit process. I’d think this is still ongoing and there’s a lot of small details still being sorted out. It’s about time here. If I were a non-Chinese foreign company currently trading on the exchanges that had to fully comply with the audit rules, I’d be thinking that this is about time that Chinese firms be held to the same standards as all others. With that said, it’s not over till it’s over meaning that the Chinese govt have never known to make things easier so look for more challenges ahead IF we get to folks in the US flying over to HK to perform the audits. That’s just how it works. - Leapmotor is ready for the big time. Leapmotor is about to join a select few other China EV companies that have listed shares on the main board of the HK Exchange. It’s likely to happen later this year and is a long way from their near death experience several years ago when they had one pretty unpopular EV coupe that didn’t sell well at all. Contrast that with July 2022 sales of >12K units and things are looking up for Leapmotor. - Zeekr throwing out feelers to see what they’d be worth if they IPO’d. The article says they’d be looking to IPO either in the US or HK but let me just say that IPO’ing in the US might not be up to them if the SEC decides to boot Chinese companies off the US exchanges which seems to be getting likelier by the week. A much higher likelihood to IPO in HK. And with EV companies NOT getting much love in any market, having only one product in the market currently makes it difficult to estimate how much upside Zeekr has in the future. - The combination of the Li Auto L9 + the impending launch of the L8 has basically cratered Li Auto One sales. With Wk1 August registrations cratering to 800 units, it seems that buyers would rather wait for the L8 or upgrade to the L9. A bit of a headscratcher since I wrote in a past newsletter that I could see the L9 cannibalizing sales of the Li One even with its price premium of about $8K. Add to that the surprise L8 launch that effectively overlaps that L9 launch and you have scored an own goal by squeezing out the Li One, a vehicle I am certain they thought have several more months of significant sales in it. Think again. NEWS SHORTS - Great Wall Motors brand Haval announces an end to ICE models by 2030. - The NIO ET& is on its way to Germany, the Netherlands, Denmark, Sweden and Norway and will likely be delivered to customers later this year. ABB closely monitoring the reception the ET7 receives which I believe will be generally VERY positive. - Ex-Apple employee that was scheduled to begin working at XPeng pleads guilty to stealing trade secrets from Apple. XPeng comes out of this clean seemingly so nothing nefarious to be reported on their part. INTRODUCING - The Dodge Charger EV. I am a HUGE fan of this EV! Not a fan of the fake noise and the nostalgia behind it but Dodge, which is known for it’s in your face performance, has to pander a bit to it’s current target market so it’s understandable to have it. That said, I think it’s a great evolution of their current Challenger / Charger ICEs and if most of this concept’s design makes it to production, I’d be up for getting one! - The long rumored BYD premium brand is now confirmed. In what was one of China EV Inc’s worst kept secrets, BYD has confirmed that it’ll launch a premium brand with the initial vehicle being a premium SUV that’ll run you >¥1M or about $146K. The premium EV market is super crowded yet with domestic brands so there could be a real good chance for BYD’s premium brand to make a big splash! I am very curious to see how they define premium SUV and what unique features it’ll have when compared to foreign premium brands whose ICE products currently dominate the China market. Think Porsche, Merc, Audi, BMW, etc. BY THE NUMBERS - ¥540K. That’s about $80K. That’s how much a dealer had quoted a customer that got into an accident with his Polestar 2 and needed the battery pack replaced. He paid ~¥250K (~$37K) for the car itself! After social media picked up on this Polestar service backed off on this and the car has since been scrapped completely and is covered 100% by insurance. - 10K. That’s the number of Li Auto L9’s forecasted to be shipped by September after just launching production in August. That’s a fairly steep ramp if we’re comparing this to other recent China EV Inc launches. - ¥460M. Or about $67M. That’s how much New Energy startup DeepWay has raised for Series A funding. Specifically, it looks to be an electric commercial trucking startup. 2023 will be the year of the commercial trucking startups as they raise more capital, gain more traction and ultimately try to commercialize their product/service. I’ve been hearing about many more of these types of companies and I don’t see that changing anytime soon. ---------- 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 Team


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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