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China Pt. 2 Lockdowns, China EVs & More in Detroit, Durant Guild for China - SAI Newsletter 34


Lockdowns are back in Chengdu and Shenzhen. I was told that Shenzhen is supposed to only last a couple of days. But the Chengdu lockdown seems to be much more severe. And automotive manufacturing is already being affected with VW & Bosch having facilities there. Will continue to monitor closely but if Shenzhen lasts more than a few days, it could potentially disrupt BYD, who’ve been on a tear recently putting up 174K in NEV sales on the board for August and its highest sales ever overall. How and when China will decide to change COVID strategies is still up in the air but let me assure you, someone who has been in the US now for the better part of three weeks, the rest of the world has indeed moved on and accepted Covid as part of daily life. As for me being here, things are starting to make sense to me. Kinda sorta. I’ve been focusing on meeting with folks and seeing what’s going on here in the D. One reason I came back when I did was to attend the first North American International Auto Show aka the Detroit Auto Show in 3 years! The press schedule seems a bit light and the only notable unveil I know of so far will be on Wed night (September 13th) in Dearborn when Ford unveils the new Mustang. What I am really looking forward to is meeting all of the people I’ve spoken with, some numerous times online or on the phone. Also, outcomes from the IRA getting passed are starting to emerge and some of that goodwill is going to head to MI. How the state will react to it remains to be seen but I must think it’ll be a catalyst and a kick in the a$$ that some folks need here to move faster, be bolder and try different things. There are a lot of organizations here wanting to help push Detroit towards leadership in mobility but is Detroit ready to take its rightful place among the world’s leaders or will Silicon Valley, LA, Austin, Pittsburgh or Boston unseat it? I think you know who I am rooting for… Lei and I will be attending the Purpose Jobs happy hour on Monday, September 12th from 5pm onwards at the Brakeman in Detroit during auto show week for those interested in meeting up to talk shop. If you decide to stop by, that first beer will be on us! You can sign up for it here. This is a happy hour that’s hosted by Bamboo, a local office sharing space, Purpose Jobs – a recruiter that specializes in sourcing for tech jobs in the Midwest and Detroit Venture Partners – a Detroit based VC. Also, if I can put my other hat on for a moment, China EVs & More is co-lab’ing with Move America to become media partners for their event in Austin, TX that’s scheduled for Sep 27-28th. I will be moderating a panel at the conference so anyone who’s interested in attending, hit me up – I have some discount codes to share. For those curious about the event, it's going to be MEGA so check it out here. I look forward to meeting any new or old readers of the newsletter and/or listeners of the pod in the coming months as I make my way around the US to do some overdue visits to friends, partners, startups & other companies as well as clients. China EVs & More is scheduled this week for Thursday, 09.08 – 9pm EST, Friday, 09.09 – 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 aren’t able to join us live, 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 - I spoke with friend of Sino Auto Insights Jill Shen of Technode for her story that focused on Li Auto and XPeng’s disappointing August sales numbers. While their domestic counterparts NETA, Leapmotor and Zeekr and others continued their strong gains & MoM/YoY growth, XPeng and Li Auto sales actually fell. I pointed to old product and in Li’s particular case, customers preferring the new L9 or waiting it out for the Li One replacement - the L8 - that’s supposed to ship within the next couple of months. This was an own goal that could’ve been avoided had they strat planned their product roadmap a bit more carefully. TESLA - Tesla slashes lead times for for MIC Teslas. Many of the lead times for the Model 3 and some versions of the Model Y have been reduced by at least 6 weeks. This may have to do with the upgrade performed to ShanghaiGiga and perhaps partly a defensive play against the NIO ET5 that’s launching this month. Long lead times for cars that have been in the market for 2+ years makes for customers walking straight into a NIO or other competitor’s retail locations to inquire and potentially purchase their new products. IN THE NEWS - NIO’s Q2 was bleh. Is the hockey stick growth we’re waiting for coming in Q4? On NIO’s earnings call, management forecasted a steady 10K/month for Q3 but dropped on us that they plan on almost doubling that number in Q4 on the back of their new small, premium sedan – the ET5. Rumors flying around that they’ve received 200K orders for the new, stylish EV sedan but that’s likely not an accurate number. The small sedan market is small relative to the overall China passenger vehicle market and by my calculations, the ET5 would need to be almost 30% of the market if it sold that many units …for the full year let alone in the last couple of months. Not likely. That said, I could see a few months of 15K as they clear out their backlog but that’s an operational issue more than anything – NIO hasn’t proven that they can consistently build to capacity over a sustained period of time. Part shortages and other ops issues seem to be their gating items. Great manufacturing teams and ops teams push through those challenges and get the job done. See BYD/Tesla. - TSMC goes from really small to tiny with their chips. We are talking 3nm now and 2nm by 2025. And they’ll be using US design software supposedly which means there are two particular countries that won’t be able to order them. How close is China Chip Inc to 2 & 3nm chips? Not very, so for the foreseeable future we will continue to see leadership from the US and its allies in chip design & innovation. China will likely need at least 10 years to be self-sufficient without needing foreign fab’d chips to operate its most important products. - Porsche is about to be one of the largest IPO’s in Europe this year. And the Porsche family will likely regain a controlling minority stake in the company after it lost it in 2009 during a takeover of VW gone bad. Porsche is truly an iconic brand if there ever was one. The 911 is a car that ALL true car enthusiasts would welcome into their garages. But I can’t help but to think that the Porsche family getting back into the family business isn’t a good idea. The changes that need to be made to the company are significant and the family isn’t likely ready to accept that the changes in structure, design, features, services, etc. that are all necessary for Porsche to continue to be an iconic brand for the next 100 years. But that’s where we are. Diess was doing what was necessary at VW and he got fired for it. The Porsche family were part of the decision to do that. I just hope their unwillingness to change doesn’t’ doom the brand that invented the 356. - Juneyao EV? Yes! With the purchase of a controlling stake in Fujian based Yudo Auto, what has been known as an airline will get into the EV manufacturing business and compete with the likes of XPeng, BYD, Li Auto, NIO and many other companies. My take on this is outlook: not good. TRENDING ON SOCIAL MEDIA - A Cruise robotaxi crashes in June a day after it gets its commercialization non-safety driver operators license from the state of California. Software needed to be updated on 80 of 100 vehicles. This is in addition to the early June mishap where > 6 Cruise robotaxis decided it would be a good idea to all meet up at a busy San Francisco intersection. Back to the drawing board GM. - Durant Guild launches in China for GM to spotlight their set of ‘halo’ cars. This list of halo cars includes the Corvette, Hummer EV, Tahoe and Yukon so far. This launch amidst a 33% decline in sales over the past 5 years. This seems like a really interesting idea, and I get the reason for the new business, sales of the halo cars increase awareness for the brands and give more cachet to products from those brands that mere mortals can afford. The headscratcher is that this should’ve been launched years earlier. And NO ONE in China is going to know what a Durant is let alone who he is. Most of the damage from China EV Inc has been done to GM’s sales. This makes them no different than many other legacy brands who now find themselves unable to compete with a market that has moved swiftly into EVs and where EV launches are the norm and any notable ICE launches are muted and no longer headline grabbing. The only EV among the early Durant Guild portfolio is the Hummer and a few sales of that isn’t going to right the ship for GM. GET SMARTER - Understanding Supply Chains 101. Full disclosure: I was a supply chain / ops person in a prior life so understanding supply chains, logistics, master production schedules, manufacturing was who I was. So I get it. But many folks still don’t and it’s important that supply chains are managed well by manufacturing companies, whether they manufacture consumer products or EVs. If not, prices could spike for the products you want and make them unaffordable. For those that want to understand the basics of supply chain management (SCM) and the ‘whys’ – why things happen, why costs increase, why lead times are longer, why the shelves at my local Target are bare – should click the link to this article and get educated. It’s very easy to understand when written this clearly and concisely. You’ll then likely want to know the ‘how’s’ once you’ve figured out the ‘whys.’ As in how’d we get to this point? BY THE NUMBERS - 10M. That’s how many NEVs are predicted to be sold in China by 2023. At nominal growth from 2021’s 21.5M passenger vehicles sold, we are looking at close to a 50% take rate. By 2023! Let this sink in. The US in 2021 sold 15.1M passenger vehicles TOTAL. The Chinese govt initially just wanted 20% by 2025. - $1.5B. That’s how much Leapmotor wants to raise when it IPOs later this year in Hong Kong. The proceeds of the IPO will go towards launching between 1-3 EVs/year or 8 total by 2025. ---------- 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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