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CATL's Delicate Dance, GM Breaks up w/ Apple & Google, E-Scooters Out in Paris - SAI Newsletter 14


Am back in MI after a week in Washington DC with the family. Wow, what an amazing city! I visited a few times as a kid but forget a lot about DC, so it was great to retrace steps and take new ones with the boys. And boy oh boy did we. For Mon – Fri of last week, we averaged about 18-20K steps / day! Luckily for us the cherry blossoms and the weather both cooperated. Surprisingly, the Capital was open for visitors as well. We only popped in for a few minutes because you needed to schedule a tour to get the real experience. We did check out quite a few museums and monuments although there are still a few that we’ll need to push out till next time along with the Capital visit and we do plan on heading back very soon. Now, that walking – it reminded me of being in Beijing where I did A LOT of walking. I’ve done more driving in the last 6 months in the US than I did in likely the prior 4-5 years of living in Beijing especially at around the time bike sharing became really popular. And did I mention how cheap bike sharing was in China? This is where I hope the US can look at cities in Europe and Asia and their use of public transportation, micromobility (pedal and electric bicycles) and small(er) cars as models to experiment with. This is really our opportunity to redefine city spaces. For example, by taking back some of the parking lots in the cities that take up a disproportionate amount of real estate that’s really only used 1/3 of most days. I do understand that Americans do drive alot, so range anxiety is a real thing here. They also haul and tow more than their European and Chinese counterparts but there’s a HUGE opportunity to rethink how we get people and things around. The changes to the sector, the advancements in technology and the evolving needs of people all create the environment for positive change. Let's take advantage of it! I know I am working with some companies trying to bend the will of the traditional automotive sector towards their way of looking at movement. Will tell you more about them when the time is right! And here’s one of my theories. The US legacies are in quite a pickle. As long as big trucks are the most popular vehicle type regardless of powertrain (ICE or EV), it’ll be tougher for them to transition consumers over to the more affordable but smaller EV SUVs/trucks, which they could technically build profitably is using LFP batteries and accounting for the tax credits and subsidies. Remember that EV with an MSRP >$80K doesn’t get help from the US govt for purchase. For the foreseeable future, the minimum necessary range, let’s say is 300 miles, won’t be there for those big trucks, specifically for the use cases that involve towing or hauling anything decently heavy, I’ve been told it will cut range in half all else equal in MANY cases. So, unless the initial sets of trucks they launch have huge batteries (which adds cost and weight - see Hummer), they won’t be able to sell too many of them to consumers at that magical mass market price of ~$48K. Ford had to raise the price of the Lightning 42% to $57K from $40K just a few years ago because the bean counters original business case was SO wrong. They’ll begin to design SUVs and trucks smaller (see GM with the Blazer & Equinox) in order to make the vehicles lighter allowing for more range. Let’s just be real here. One of the reasons trucks became so popular is because the legacies could charge and arm and a leg for them so they marketed us to DEATH about how these BIG, BURLY trucks and SUVs = Freedom and if they made them even BIGGER and BADDER, they could charge even more. See Escalade & Navigator. That strategy worked to the tune of GM, Ford and Chrysler/FCA/Stellantis booking crazy profits on them, enough to keep the US legacies going strong for the past 30 years. If they can’t make money off the BIG EV trucks/SUVs like they can with ICE trucks, do you think they’ll want to sell 1M of them a year? If that’s not the case anymore, especially if range (with towing) is still a real gating item, then building BIG SUVs/trucks with short ranges won't sell. This makes for a HUGE reset for people but isn’t going from an ICE to an EV also a BIG reset? As I’ve stated before, OEMs are the best marketers in the business because they convinced us that spending $40K - $70K or more for a product we use about 5% of the time was a prudent purchase. They’ll need to pour buckets of marketing dollars into how they want to spin it but I have faith that if they will make more money selling a bunch of smaller EV / SUVs vs. a few low range BIG SUVs/trucks, they’ll try to convince us to do that. CHINA EVs & MORE We are scheduled for Thursday, April 6th, 3pm ET this week. Thanks for those of you who joined us despite the late audible we made to timing for the live show. Will update on topics on Twitter so stay tuned for that. Join us if you want to ask questions and / or interact with us. For those that 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. Also, if there are any companies you want our thoughts on, let me know. TESLA - Tesla price cuts worked! They continued to grow in Q1’23 but as we can see average pricing in the US and China of their vehicles has shrunk substantially. At a value of >$600B, Tesla is going to continue to be the one to watch for investors and those interested in the evolving automotive / EV sector. That means you’ll likely watch as they cut price again later this year in the EU/China and the US. INTERVEWED/QUOTED - CNBC. I caught up with CNBC’s Evelyn Cheng for XPeng’s Shanghai XNGP launch. XNGP is the city assisted driving service available on XPeng’s and something that it’s using as a differentiator to its many competitors in China. We compared and contrasted XPeng’s rollout and strategy with Tesla’s, who doesn’t actually offer Full Self Driving for the China market, only Autopilot. Previously, XNGP was only available in Shenzhen and Guangzhou. - Financial Times. This great piece by Ed White & team from Financial Times captures the current push and pull of the US & Chinese govts on CATL as it hitches its wagon to Ford and Tesla in order to enter the US market. This is part of that delicate dance that many companies must do as they push for growth either w/in China or outside. Specifically for Chinese companies, they must also watch how big and important they get as they continue to chase ambitions to be major global players. This story is just starting to be written so grab your popcorn – the US & China likely haven’t had the last word on those two announcements. NEWS THAT GOT OUR ATTENTION THIS WEEK - Paris, not in love with shared e-scooters. We are talking the Lime/Bird type scooters BTW. Parisians (but not many of them) voted to ban the use of shared e-scooters on its streets. If you own one, you’ll still be fine, but the city saw an increase in accidents as e-scooters became more popular and believe they’re not a necessary as player in their micromobility ecosystem. This is a BIG blow to the sharing apps that had aggressively moved into cities as they may now be persona non grata if more cities reconcile their usefulness vs. the danger posed to riders and pedestrians. TRENDING ON SOCIAL MEDIA - Pittsburgh based Aurora Tech says its HW/SW stack is complete. CEO Chris Urmson says that they just need to refine the system and will be able to commercially deploy it in 2024. Aurora has pushed out its robotaxi ambitions to focus on and begin generating what they feel would be much more significant revenues sooner rather than later. Don’t count these guys out. The struggles at TuSimple create a HUGE opportunity for Aurora in the long-haul commercial trucking space. They know this. And it looks like they’re trying to take advantage of it. - New Balance 990s. I have a pair. Maybe two. A great piece on how New Balance made the 990 a crossover hit among hip hop artists, tech CEOs and A-list actors/actresses. MUST read for any sneakerhead …like me. GET SMARTER - Why GM is breaking up with Apple and Google. I’ve gone out of my way to read A LOT of the articles documenting GM’s major announcement about heading in its own direction with infotainment software/OS. A LOT of bad takes out there. Many from car journos that still have their auto hat on while judging this decision by GM. They’re likely typing on their MacBook Pro and checking their Twitter feed via their iPhone. When they’re not checking their Twitter feeds, they’re likely using their iPhone to play music via their Apple Music subscription, watching YouTube videos (brought to you by Alphabet) or checking their newsfeed via Apple News. That last paragraph above is the EXACT reason GM MUST do this. They do NOT want to be beholden to Apple and/or Google as they build out their own digital ecosystem. They don’t want to share data, they don’t want to share a screen, they don’t want to share revs. They want to be the one that gets their 30% cut from Apple in order to have Apple’s digital services be part of GM’s ecosystem. An impossible task? Maybe. Likely for most automakers. BUT and there’s always the ‘but’ let’s get our heads around the numbers for a minute. 2022 Global Sales: Toyota – 10.5M Volkswagen Group – 8.3M GM – 5.94M Now imagine you are an app developer or a digital service provider that has the latest new app that’s virally growing. GM approaches and pitches this - Let’s work together. I can put your app in the hands of millions of vehicles tomorrow (flashing software via OTA if you are wondering the how). Oh, and BTW, we can help you with designing it as if it was native to our Ultifi platform and if you give us 6 months (or however long) of exclusivity, we will host it free of charge and only take a nominal fee (<30%) after those 6 months expires. What other company or sector can currently offer access to millions of ‘new’ potential customers like this? And it’s because Apple and Google currently do NOT play in the space the way that the automakers do. They do NOT make products for the sector. It’ s why Tesla is able to go it alone. They have a closed system à la Apple. But this scenario never happens if the automakers keep that door cracked open allowing the tech companies that much real estate in their digital ecosystems because that app has already been downloaded on the consumers iOS/Android mobile, so the revs get (disproportionately) divided by at least 3. And Apple and Google aren’t resting on their laurels either – have you seen Apple’s V2??? This is an existential business decision for ALL automakers. It has been since I talked about this years ago when I began this newsletter. And I’ll say it – I TOLD YOU SO. And there will be others. Likely most other automakers to be frank. Even if they don’t think they can build a Worldbeater experience that can compete with Apple or Google. Some automakers will give you a choice. But that’s folly too because most will still plug in or connect their Bluetooth so they can get the limited UX that Apple and Google allow for in their current versions. It’s as simple as this. The automakers have to and now is as good a time as any. All the surveys that say that customers won’t consider a GM vehicle because it won’t support Car Play or Android Auto? I believe it! It’s because GM’s initial attempts at going it alone were terrible! They have no track record of building any amazing in-vehicle user experiences so why would customers think they could in the future? Also, and this is the crazy part – Apple and Google’s products are so sticky, even when they’re not using their mobile phones people still won’t abandon them – they will stay with what they know …until a better more compelling alternative arrives. I am oversimplifying that scenario a bit for effect but why couldn’t this happen? What would be the roadblocks? If the business decision is correct – so what’s gonna allow for success? That GM/Volkswagen/Toyota execution of UX design, HW/SW integration and the entire in-vehicle experience needs not to suck. Simple to say, almost impossible to do well if you’re an OEM right now. That’s not to say they can’t improve because they MUST improve. They cannot win without this compelling (sticky) experience that’s not a complete retread of what Apple offers. And let’s be clear, Apple offers a mobile experience in the car. The OEMs can provide so much more. But therein lies the rub. It’s NOT likely to happen with a bunch of car guys still making most of the decisions. And this is the unfortunate part – we’ll continue to see reorgs, rebrands, talk about going faster, building a ‘software designed vehicle’ and all that other stuff but it ain’t gonna happen with the teams and leaders they have. Mary, Jim, Blume, Sato all need to make some really tough decisions and get the scores of car guys outta the management suite and let the tech guys (and girls) take over. Otherwise, it’ll be curtains for many of them. And it’ll start by closing brands down and then it’ll move to putting Apple and Android BACK in their cars. And then they’ll just be contract manufacturers. BY THE NUMBERS - 20M. That’s how many battery swaps have been completed at NIO stations to date. It took them 1,506 days to hit 10M swaps and 273 days to hit 20M. For those that don’t think vehicle battery swapping works – I have someone I’d like you to speak with. - 800K. That’s how many vehicles BYD expects to export in 2023 to foreign markets. The US bought 800K EVs. In total for 2022. - 66%.That’s the YoY % increase Li Auto had for Q1’23 deliveries. Here are the numbers for March 2023: 20,823 & Q1’23: 52,584. ___________________ 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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