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China EVs are TAKING OVER, Lotus going public, Tesla DEMAND jumps in China - SAI Newsletter #5



 

Since it’s been Lunar New Year in China the updates coming out have been slow. A few big pieces of news coming out of the west that I’ve highlighted below though so enjoy. I’d also like to ask for your help - if you find this newsletter informative, useful and (sometimes) entertaining, please do recommend it to your colleagues, friends or anyone that you think would also find it a good use of about 7-10 mins of their time each week. I needed to put this up top since it validates why I’ve been covering China EVs for the last several years – not that I need it or wanted it - and launched a podcast to talk about it. China EVs are taking over the world! They are exporting to …everywhere effectively and have become market leaders in the Middle East and Latin America while they’re gaining in Europe. They’ve not yet blitzed the US market but that’s coming. And for those that think there are parallels to Japanese & S. Korean companies entering Europe and the US in the past – this is a completely different situation. A digital world moves faster, much faster. Next – many of China EV Inc’s vehicles can compete with their European, American, French, Japanese and S. Korean rivals TODAY. In many cases, they are better, more affordable and feature-rich. That’s what a brutally competitive domestic market will do to a company, it’ll create battle-tested companies that make good/great products. Finally, the scale of Japan and S. Korea back then pales in comparison to China EV Inc today. And trust me when I say this – some of the weaker Chinese players would rather export since they still have a chance at selling in volume outside of China than they would competing domestically IN China. That is how crazy the market in China is. A prime example of that: Tesla. They’re not dictating the market in China. FULL STOP. So for those folks you know that are beginning to wake up to China EV, AV, battery, chip, drone and rare earth metal Inc. Tell them they should review each and every past newsletter that’s been written and listen to our 100+ episodes of China EVs & More – doing that will tell you more about those sectors than anything else on the internet. I promise. INTERVEWED/QUOTED - Grid News: Not many deep dives into the charging infrastructure in China, especially ones that chart the history and the numbers to back it up. This one does. I had the chance to speak with Lili Pike for her piece about how the charging infrastructure in China got so far ahead of the rest of the world’s. It’s worth the read for those who want to know the ‘how.’ - The China Project (formerly SupChina). In this video interview, I speak with Lizzi Lee about the ‘Rise of the Chinese EV Industry, The Stories Behind BYD’s Success, EV Trends for 2023.’ I invite you all to spend a few minutes listening/watching me answer Lizzi’s well-thought-out questions. CHINA EVs & MORE Lei and I are on today at 4pm ET, Twitter Spaces. We had to push back from our normally scheduled 3pm due to a meeting I have. 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 you think will make the show better. Also, if there are any companies/questions you have, you can let us know. TESLA - Tesla to boost production at ShanghaiGiga to accommodate that bump in sales from the price cut. As some people remain pissed about the price cuts just after purchasing their vehicles, others in China are taking full advantage of the new pricing on the MIC MY & M3 as they should. The weekly run rate will be pushed to 20K for Feb & March which projects out to ~1M units of sales for 2023 but those price cuts will likely lose their effectiveness in March/April and they may need to go to the well once or twice more before the year is out to keep that volume going. NEWS THAT GOT OUR ATTENTION THIS WEEK - Ford follows Tesla down the price cut rabbit hole, just as Tesla planned. As I’d said in a previous newsletter or podcast, the price cuts for Tesla in China are defensive but they’re offensive in Europe and the US. They know that it’s going to be painful for every single automaker that decides to follow them with price cuts for their own products. With Ford’s price cuts though, I don’t think they’re near enough to compete with Tesla’s and they’ll likely need to revisit again, very soon. But therein lies the rub, Ford’s top-end Mach E doesn’t qualify for the tax credits and their economy two-wheeled drive versions only got ~$1K price cuts. Tesla can go even further on price cuts, which they likely will whether they launch a new product this year or not. They want to see the legacies squirm. In the US – Kia/Hyundai, what’s your play? - The Central govt hasn’t moved to goose the EV sector and that’s because the provinces are doing it. Shanghai has extended its ¥10K subsidy if Shanghai citizens trade in their petrol engine vehicle for an EV. Beijing has extended its 5% purchase tax exemption to last the entire 2023. These are just two examples, other cities and provinces are also creating their own ‘incentives’ to try and keep EV sales from slowing significantly. - City of SF to Waymo, Cruise: Slow your roll …out of autonomous robotaxis! Those that follow the space have likely seen the videos/pics of some of the Cruise & Waymo robotaxis being piloted in SF randomly stopping at intersections and not knowing what to do in certain scenarios. We weren’t the only ones who noticed, the city of San Francisco transportation authorities have seen this as well and are telling Cruise and Waymo to slow down any further expansion of their pilots in the city until more data is collected about the traffic incidents they cause and when there is more transparency for Cruise and Waymo as to why these blockages happen. This actually doesn’t surprise me and we are lucky that until now, no one (that I know of) has been seriously injured by one of the robotaxis. New technology does this and when it does, there needs to be a period of investigation along with validation of the solution/patch before they should be able to continue on launching more vehicles in more parts of the city. - Lotus is indeed going public but via a SPAC. The company will be valued at $5.4B – let’s see how long that lasts though since it’s still not built or delivered a single vehicle yet. For those that don’t know, Lotus is now a Chinese brand that’s part of the Geely portfolio. Geely, whose founder would like Tesla-like valuations for his companies has a very diverse set of brands within the Geely Auto Group umbrella including Volvo which in turn owns Polestar alongside Geely. Managed well, this unique set of brands (with a few Chinese brands that will never sniff any western roads) could catapult Geely into the global ‘leader’ in mobility conversation over the next several years but Li Shufu is going to have to get in line behind Wang Chuanfu & Elon for the title of the best, most ambitious auto/transportation CEO in the world. TRENDING ON SOCIAL MEDIA - YES! AV startup investment does provide a decent return, just not the companies you’re thinking of. We all know of the empty promises made by AV companies years ago about how robotaxis would be a ‘thing’ in the next few years. After traffic jams being caused by robotaxis in SF and billions of dollars of investment later, investors are now realizing that they’d need to invest A LOT more in those companies and wait several more years (perhaps a decade and a half) to see any type of significant progress. As those AV startups got all the ink and much of the capital, there are other AV startups that are commercializing as we speak and have returned multiples to the VC community. The less glamorous AVs that help farmers, mine rare earth metals or clean airports – the ‘off-road’ AVs that can operate in environments that don’t involve innocent bystanders becoming unwitting participants in another company’s pilot program. When I visited Pittsburgh a few years back, I was able to get a tour of Carnegie Robotics where I saw many of these types of AVs and was amazed that they weren’t getting the attention I thought they deserved. It seems a few investors thought the same thing. - As my partner-in-crime tweeted yesterday – TuSimple -> TuComplex. More details about the trouble that TuSimple leadership is potentially in was articulated in a WSJ article yesterday. To sum it up – (potentially) LOTS! Innocent until proven guilty of course and I’ve heard all kinds of things about this situation but when TuSimple went IPO – I thought this might have some challenges in the future. This is one of the reasons that Chinese AV companies with significant operations in the US have paused or completely taken off the table any aspirations of going public in the US. Since I linked to the WSJ article, it’s only fair that I link to Hou Xiaodi’s post on LI rebutting the WSJ article. You can find that here. - GM to look at cylindrical cells for upcoming passenger vehicles? Currently, the Ultium platform uses the pouch form factor for its battery packs and there’s a lot to consider making a ‘switch.’ But I applaud GM exploring all opportunities to make their products better: more affordable, better designed with longer range. - NIO sharpens its pencil and reduces hard to find vehicles by up to ¥100K (~$15K). The discounts are mainly for the 2022 ES6 & ES8s that have been in inventory for longer than 120 days which aren’t many. So even NIO is jumping on the price cut wagon to move the metal! BY THE NUMBERS - 6%. That’s the number of white collar jobs that’ll be cut at Rivian as they look for ways to keep enough money in the bank to fight the impending ‘price war’ instigated by Tesla. This is where the legacies will have a distinct advantage since manufacturing efficiency completely in their wheelhouses. Their issue won’t be building EVs. - $650M. GM is getting into lithium mining to the tune of a $650M equity investment in a mining company with rights to a mine on the Oregon/Nevada border. This is serious business too. It’s the largest investment in a mine by any automaker. Important to note that the lithium coming out of this mine would be completely eligible for the IRA subsidies which is money in GM’s pocket! ___________________ 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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