• Tu T. Le

BMW leadership change, more EVStartup layoffs, spotlight on 2-wheeled transport - SAI Newsletter #26



Was in Saigon this week and wow, it reminds me of Beijing and Shanghai when I first moved to China. So much development that every time I go back, there is something new and/or different. Progress that amazes me and, in some cases, saddens me.

For those that have never been, I encourage you to take a visit since a lot of what currently makes it charming and one of the more engaging, vibrant cities in the WORLD let alone Asia, will be ‘progressed’ away unfortunately.

It also reminded me about how many people use mopeds and scooters in a lot of Asia. Whole families, meaning 3-4 people, it could be two adults and one or two children riding on a scooter most Americans think would be too small for two people. Safety concerns aside, that's how most Asian developing countries get around town, to work or any other place they need to get to. Finalizing my schedule for the U.S. trip so for those who’ve reached out, I look forward to catching up very soon!

This weekly newsletter is a collection of articles I feel best reflect the happenings of the week or important trends that have effects on the automotive and mobility sectors here and in the U.S. I also provide a point of view that I hope educates and sparks debate about how I look at the issues. We will mostly divide our articles into these buckets: AI, Mobility/Ridesharing/Ride-hailing/Bikesharing, OEMs, EVStartups, Investments, and Other.  If you know of anyone who would like to sign up for this newsletter please have them visit: www.sinoautoinsights.com. Thanks for reading.  The Sino Auto Insights team

OEM

BMW wasn’t happy with its CEO’s performance, and he agreed. (www.wsj.com)

If you reference my post in last week’s newsletter regarding BMW’s Klaus Fröhlich and his attitude towards NEVs, this shouldn’t come as a big surprise. BMW’s board obviously doesn’t feel the same way about NEVs and has decided that current CEO Harald Krüger, hasn’t moved fast enough to stay ahead of competitors, in both tech and auto, so they’re forcing him out.

What would be a VERY BOLD but equally unlikely move by the board would be to poach someone from the tech sector to get that fire burning under the BMW management team’s seats. I am not saying that this would be the ‘right’ move, that would depend on the individual and what Bimmer’s intentions and goals are for the future.

For other automotive OEMs, there is still time to make strategic AND bold moves to secure their futures in the mobility and services sector (see Ford + VW Group). It’s refreshing to see that some companies are still able to quickly decide on a leadership change. If you look at most other auto OEM’s with the exception of scandal ridden VW, management and leadership stay in place for decades before boards realize that the company has made a wrong turn somewhere or they’ve missed opportunities that will cost them dearly. The title of this article says that Krüger ‘resisted change,’ I am sorry but if your title has a ‘C’ in it, your role should be to DRIVE change. These CEO’s should’ve seen this coming a long time ago since that’s what they get paid to do!

In Bimmer’s case, they were initially one of the leaders in electric vehicles with their i3 and i8 but that leadership quickly evaporated after not enough attention or capital was paid to the obvious signs that China was moving towards NEVs.

Let’s hope that this time, Bimmer’s board will promote someone who will have the guts to make BOLD and Strategic moves!

#BMW #Iquit #movingtooslow #futureisnotNEVs

VW believes Ford, or more appropriately Argo.ai can help them win. (www.wsj.com)

This is what I infer from VW executing this investment:

-  VW believes in Argo’s management team & it’s product/service, in other words they see value

-   VW believes their internal team does not have the resources nor the expertise, to accomplish the mission in the timeframe or budget, in this case, the investment amount, that makes ‘financial’ sense

-   VW has SOME confidence that they can work alongside Ford

-   VW wants to have a ‘seat at the table’ or a say in influencing some of Argo’s strategy and decision-making

-   VW still sees themselves in the future as a global player and that the U.S. is still a strategic market for them

-   VW was desperate enough, evaluated the other players and saw that Argo gave them the best opportunity to pull VW back into relevancy

These are general outcomes in the ‘Make vs. Buy’ analysis and logic and not just specific to the automotive sector or VW. For VW though I think it was an ‘ALL of the ABOVE’ that pushed them to initiate deeper ties with Ford.

A couple of observations, first I wonder how those 200 AV employees in Munich feel about potentially being moved over to a U.S. startup? If Ford and VW are to compete with each other in the U.S. and European markets while using the ‘same’ technology to do so how will they differentiate themselves, I posed a similar question last week regarding the Daimler & BMW mashup.

AI should be looked at as a strategic difference maker for ALL the OEMs, it’s the reason why Waymo, Argo, Cruise, Pony, etc. exist in the first place. By abdicating this development to a ‘partner’ are they also giving up a strategic pillar of their future?

Finally, and this is more for the German companies involved in diesel-gate, I still don’t see a cap on anyone’s liability here. That has to create a HUGE amount of uncertainty with regards to capital so shouldn’t all the investment and funding announcements by the German OEMs have a big, fat asterisk (*) included that says states ‘depending on availability of funding?’

#VW #Ford #deeperties #Argo.ai #partners

EVSTARTUPS

Layoffs at another Chinese EVStartup. (www.theverge.com)

The company formerly known as SF Motors, rebranded as Seres, is laying off 90, or close to a third of the employees in their Silicon Valley office. Many had predicted that this was going to happen to many EVStartups as the combination of scarce capital, increased competition, and dim prospects for auto sales in China put more pressure on companies to build products that consumers will like, at a price point they can afford, while managing costs to conserve cash in order to help weather the slowdown.

This seems to be a pre-emptive strike as the initial vehicle has not even been launched yet in China or the U.S. We should expect more announcement like this (maybe from Byton?) in the next several months as more and more companies run low on cash and bloated staffs need to be pared down.

#wasSFMotors #NowSeres #layoffs #SiliconValley

MOBILITY

Coming straight from the horse’s or in this case, the CTO’s mouth. (www.cnn.com)

This shouldn’t come as a surprise for many that closely follow, Uber, Didi or Grab but consistent profits from those companies will not be established until far into the future. That’s what Uber’s CTO, Thuan Pham was quoted as saying at RISE, the Hong Kong tech conference last week.

For a couple of these companies, profits may NEVER materialize once the auto OEMs launch and expand their own ridehailing apps. This makes staying independent a VERY challenging thing so a likely scenario for one or two of these companies is that they get acquired on the cheap from an OEM that wants to buy marketshare into the space.


I could totally see a Grab or Lyft become the mobility arm of one of the major Japanese, American or European OEMs. They’ll likely pay too much and tout all the potential ‘synergies’ and ‘cost savings’ possibilities, but it WILL make them an instant player.

#wedowanttomakemoney #profitssitllfaraway #Uber #morelikeAmazon

What about us? An argument for 2 wheeled electric scooters being made by Niu’s CEO.(www.cnbc.com)

Niu, a NASDAC listed electric scooter company, is going global. Earlier this year, it announced that they will be launching their scooters for sale in the U.S. and that’s after they already begun to sell in Europe.

When they launched here in China a few years back, there was a TON of excitement about them with aggressive pricing of ~$450 for their first product. They’ve been able to grow their product line-up and now have scooters that fill the higher and lower price segments as well.

Moped culture is very well established in Europe so there’s a real opportunity for them to grab some market share but with electric versions of scooters coming from Vespa, Honda and a few other well-known scooter manufacturers, it will take quite an investment in marketing for them to gain significant share.

For the U.S., although there are more and more people, especially young people, utilizing two wheeled solutions to get around, the majority of people still utilize cars to get around.

In addition, many cities in the U.S. don’t have the policies in place that would encourage using two-wheeled modes of transportation so it could be better for Niu to initiate pilot moped ‘sharing’ programs to educate and help influence more favourable 2 wheeled transportation policies.

Oh, and the pricepoint of >$2.5-3K is likely another constraint for wide adoption.

#Niu #worlddomination #comingtoamerica #challengingtimes


2 wheels better than 4. (www.electrek.com)

As someone who’s been touting the potential of the electric (pedal) bicycle sector since I’ve started writing this newsletter, this should hopefully convince a few more people. The conclusion of this report is fairly obvious albeit extreme, that bicycles are better than cars for urban congestion and traffic since the readers that live in BIG cities know that being stuck in traffic jams on a daily basis really sucks.

OEMs have powerful lobbies though and in order for the e-bikes to take their place as a valid mode of transport, it’ll take the political will of A LOT of elected officials to make this happen. It’s going to take some time and again, for those who have read my newsletter in the past I predict that eventually many major cities in the future will limit the number of cars that can enter city centers, provide better infrastructure for 2-wheeled modes of transport and that’ll be another major spark for the slow erosion of auto sales.

#2wheelsbetterthan4 #lesstraffic #changewillhappen

ECONOMY

That slight bump last month in China car sales was a mirage. (www.wsj.com)

There was finally some good news that came from China auto sales as June 2019 sales had a 4.9% bump when compared to June of 2018. In the ‘too good to be true’ category, this bump was mostly due to China consumers taking advantage of ALL the ‘money on the hood’ aka sales discounts that automakers gave to consumers to reduce the HUGE vehicle inventories they were carrying before the new emission standards go into effect this month and the cars aren’t able to be sold.

This also means that for the bulk of next quarter, we’ll see a pretty steep drop in sales since many purchases were likely pulled into June, sales that would have likely occurred in the current quarter. This ‘auto’ recession is real and pretty deep and I see it lasting through the end of this year.#salesgrowth #carsales #shorttermgains #stillstruggling #tradewar

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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