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BYD Passes Ford, Gaming Out the UAW Strike, A (Very) Mild MIC Model Y Refresh - SAI Newsletter 37



 

Another week but still no progress on the UAW - US Three contract negotiations. Folks are starting to get pretty discouraged about the parties finding common ground in order to sign on the line that’s dotted (name the movie that line is from).

GM actually raised the stakes by securing a $6B line of credit so at least PR wise, they seem to be digging in for a prolonged fight. The UAW has been picking on the General it seems more than either Ford or Stellantis so far, but we’ll have to see how things evolve. If negotiations are happening in good faith, even as they spit venom at each other in public, maybe there’s an off-ramp in the next few weeks.

The factories that have been walked out on peculiarly (dare I say strategically) aren’t the ones that earn each of the automakers the most. Those being the full-size pick and SUV factories. They’ve been, up to this point, the factories that make up the smaller (%) of the US Three's revenues. We should also note that any significant lift in this next UAW contract will hit Ford the hardest since they have the most UAW employees. This points squarely to the fact that they are the LEAST international. Which I’ve pointed out in previous newsletters.

The WSJ broke down the UAW’s ask into a fully burdened hourly rate and its ugly. And isn’t sustainable as the US Three try to build up EV demand in the US for their products.


As you can see, the 32 hr. work week (but still being paid for 40 hrs.) makes up the largest portion of the cost increase. My guess is that’s off the table completely for the US Three but perhaps the hourly workers will be offered a lump sum along with significant raises throughout the 4-year contract along with a path to eliminating the tiered wages.

The spreadsheet jockeys for the US Three are working OT these days to game out how an additional half a point here and there will push out their profitability. Let’s also be clear that there won’t be $12k-20K profits on the electric versions of their trucks and SUVs for quite some time, if ever. The plan is to eventually make up for those profits via services revenues that are forecasted by the US Three to start hitting later this decade. With which services, they’re still all back in the lab figuring that out.

GET SMARTER

- Using game theory to understand the current UAW vs. US Three strike. I learned about game theory while at b-school at Carnegie Mellon, where coincidentally John Nash, the main character in the movie ‘A Beautiful Mind’ went to undergrad. He developed the Nash Equilibrium, an outcome in game theory and which was explained in a major scene in the movie.

For those that aren’t familiar, game theory is what it sounds like, a framework for evaluating situations where you have parties that have conflicting goals. From the article “It uses mathematics to model and predict human behavior when two or more people or parties have potential conflicting interests.”

Specifically, it’s important to clearly identify the players involved, what their motivations are, what they stand to lose, what moves they may make and the likelihood and result of those moves that increase the odds of a favorable outcome. It's been used in economics, negotiations strategy, poker, parents vs. children, leveraged buyouts, wartime scenarios, etc.

In this instance, as the article states the ‘hurt’ being put on by the UAW isn’t that intense YET so there isn’t as much incentive for the US Three to concede too much. A different dimension is that the longer the strike lasts, the more likely the UAW begins to look like

QUOTED

I had the pleasure of being a guest on Reuters BreakingViews podcast with Katrina Hamlin. She and I discussed in detail what everyone is talking about these days. How heavy was China’s thumb on that scale?

It’s a nuanced discussion that’s tough to articulate to folks with blinders on, on both sides BTW, so have a listen if you want my take on what’s happened historically, how we got here and what I think needs to happen in order for Legacy Auto to be competitive.

BIGGEST NEWS OF THE WEEK

- NIO’s sales ups and downs continues. They delivered 15,641 vehicles in September which was 19% lower than August 2023.

The roller coaster ride for NIO investors and STANs continues as NIO management works to recalibrate their model in order to firmly point the trajectory in a consistently positive direction. A couple things going on here that I think contributes to the ups and downs. First, there are too many products, not enough space between them and not enough marketing RMBs to nurture their positioning in the market.

Next, there is this consistent (and seemingly never-ending) launch of new brands and products that pull the attention of Chinese consumers away from companies like NIO, XPeng and now even Li Auto. Are those three well positioned to weather the price war storm, yes. The new brands may eventually slow to a trickle but the new products and what seems like 6 – 8 month refreshes on existing products may never.

Finally, I am betting that some of the premium brands and products from existing premium brands that have launched within several months will begin to make their way onto the big (sales) board. Will that happen at the expense of NIO’s sales, we will have to wait and see.

- IndiEV files for Chapter 11 bankruptcy. This is the 2nd company that was supposed to have Foxonn build its EVs at their Lordstown facility. The first one was Lordstown Motors whom Foxconn purchased the factory from as part of a bailout that Lordstown Motors believes obligationsby Foxconn was not fulfilled and are trying the gets the courts to decide.

For those that thought Foxconn was going to have an easy go of it. Car design and development is really hard! Foxconn REALLY hasn’t gotten to the manufacturing part yet and it seems they need to do better due diligence if they want to get any value out of that very large and right now, very empty Lordstown factory.

CHINA EVs & MORE (CEM)

Special episode tonight. Not a great time for anyone but I’ll be traveling tomorrow to CA for meetings and then have two events on the weekend with Sunday being Cal Berkeley’s China Summit 2023 where I will be a panelist for one of the discussions. For those in NorCal / East Bay, please join the conference!

If you’d like to join the live show, follow me on X: @sinoautoinsight and at 9am at the top where the Spaces rooms show up, you should see our show. It’s an opportunity to ask any questions and have discussions with Lei and I so if are itching to know more about something, join us tomorrow morning!

If you can can’t join the live show, I invite you to listen to our recorded China EVs & More episodes at this site. And as always, we appreciate any feedback that will make the show better.

BYD

- BYD brand passes Ford (brand) as the 4th best-selling car brand in the world. If this doesn’t sound the alarm bells in Detroit, Dearborn, Stuttgart, Wolfsburg, Munich, Toyota, Auburn Hills, Turin, Seoul and the other motor capitals of the world, then I do not know what will. It’s now crystal clear why Ford Motor desperately needs affordable batteries for their EVs. They are in real danger of becoming a regional player for passenger vehicles. The stakes are higher than ever for all the legacies and still I find folks in the auto sector in complete denial. Or that there's still time. For anyone that thinks that BYD, Tesla and other emerging China EV Inc are eventually gonna let up or run into their own set of challenges, you’ve not been paying attention. And you’ve definitely NOT been reading this newsletter or listened to the ‘China EVs & More’ podcast. The China market has conditioned these companies so that anything they’ll eventually face in the EU & the US won’t be more intense than what they’re currently dealing with in China. Let’s be clear here. This isn’t about subsidies, protectionism or any tech advantage as much as the politicians want to point to those excuses. The challenges inside most legacies have more to do with culture, poor management, bad decisions, acceptance of the status quo, the wrong skillsets and an inability to read the market or take their competitors seriously (read: Tesla & BYD). Now, all legacy auto management needs to do is rebuild their teams so they can compete against Apple, Waymo and yeah Tesla & BYD Piece of cake , right? In a digital world, things move faster so each day they fall further behind. An impossible task? It will be for some. For others, drastic changes need to happen sooner than later. Or else. The next several years for all of them will be the toughest they've had to deal with ever. For the others, it'll be time to press the panic button.

- The EU really WANTs to hate it but… The BYD Atto 3 (Yuan Plus in China), BYD’s best-selling export EV received a 5 Star rating, it’s best score from Europe’s New Car Assessment Program (NCAP) which evaluates cars on how much harm they cause the environment...

The Atto 3 IS Chinese but at a starting price of €44,625, it’s NOT CHEAP.

TESLA

- (Very) Mild refresh for the Tesla MIC Model Y. Doing what they can to keep up with the Jones or in this case, the Lis, Xiaopengs, Wangs and others. And we’re talking very minor with barely significant ranges increases as they hold price steady. This seems like it was a software update that got these range bumps because I don’t believe there were any interior / exterior updates. I’ll confirm in next week’s newsletter though if there are. The base price of the MIC standard range Model Y stays at ¥263,900 or ~$36,140, the lowest in the world.

BY THE NUMBERS

3456. That was the delta between Tesla and BYD EV sales for Q3’23 with Tesla eking out the win. Note, this is BEVs ONLY since BYD actually sold a total of 822, 094 NEVs.

For those that are confused, China is the only country that uses the term New Energy Vehicles (NEVs) to account for clean energy vehicles. NEVs = Battery Electric Vehicles (BEVs) + Plug-in Hybrid Electric Vehicles (PHEVs) + Fuel Cell Electric Vehicles (FCEVs)

When people compare BYD sales to Tesla’s and don’t specify if the sales include BYD PHEV sales (since Tesla only makes BEVs), the Tesla STANs tend to get fired up.

_________________

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 global automotive and mobility sectors. 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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