Coronavirus effects on manufacturing, China car sales tailspin - SAI Newsletter #6
The PR machine is working OT for the manufacturers in China.
With announcements that some manufacturers are starting to fire back up, there are pockets of China watchers that seem to think that production across different sectors, specifically autos will be back to normal soon.
Let me throw a dose of reality on that notion. First, even if manufacturers get all the workers they need back from their hometowns to start production back up, they likely don't have alot of parts on hand or enough of them at least that it would make sense to restart production in any significant way …and therein lies the rub because that’s just one of the challenges to getting production up and running.
The suppliers throughout the supply chain also need to be manufacturing parts, then the logistics companies all need to be delivering those parts to the plants.
If ANY one of those things isn’t happening then production just isn’t going to happen. It could be a nut, bolt or some innocuous seeming part that is the ‘showstopper.’ It could be that there aren’t enough masks for their employees to wear during their shift.
That’s not to say the sourcing, planning/ops, and logistics folks at each of these companies aren’t working OT to pull in supply to get production back online ASAP because I bet they’re all holed up in virtual ‘war rooms’ getting regular status updates of each and every part they’re chasing making sure that their part or truck is not being shipped to or used by one of their competitors ahead of them.
With the recent spike in coronavirus cases reported yesterday, companies are more hesitant than ever to get out in front of the Chinese govt on any moves they make that would imply that they're giving up on ramping production in the short term so we’ll continue to see no firm commitments one way or another until the Chinese govt. decisively declares that the coronavirus has been contained and infections are on the decline, which could well be another few weeks.
On a lighter note, I was a guest panelist on CGTN’s ‘The Heat’ talking EVs in China and the US. It’s been posted on YouTube and you can watch it here. I was definitely longer EVs than either of the other two panelists who were more focused on the US market and the much slower adoption here. The fact that one of the panelists questions the validity of EVs was a bit odd since that ship has sailed, that’s where the Chinese market is moving, hence the US market will move there too
and it’ll be sooner than people think.
Have a watch and let me know what you all think, would love your constructive feedback.
I spent time in Toronto this week attending the ‘Intelligent Infrastructure & Connected / Autonomous Vehicles’ conference hosted by the Hamilton Innovation Factory. One memorable speaker with Mike Branch of Geotab, a company that specializes in data analytics for fleet operations. I thought he provided a lot of good insight into what Geotab does and where the sector is moving.
IN THE NEWS THIS WEEK:
- Techstars is closing shop in Detroit due to a lack of capital. Can Plug and Play fill that void?
- One analyst believes that the Chinese economy will grow by only 4.6% in CQ1’20.
- Chery partnering with HAAH Automotive to bring a new, premium SUV brand, ‘Vantas’ to the US. Market. HAAH Automotive has also inked a deal with Chinese car maker Zotye to import their cars into the US market.
- With Chinese citizens mostly confined to their homes during the coronavirus outbreak, gaming, fitness, health, and enterprise collaboration apps have increased significantly in popularity.
- Amazon dominates the smart speaker market (+70% share) crushing Apple and Google speakers market shares. Would it be too much of a leap to suggest that this could give Amazon an advantage getting into people’s cars as well?
TRENDING ON SOCIAL MEDIA THIS WEEK:
- Eminem performs ‘Lose Yourself’ at the Oscars 17 years after that song won an Oscar.
- Andrew Yang ends his run to become President of the US.
- The Mobile World Congress conference was cancelled due to a number of companies backing out due to coronavirus concerns. The world shrugs its shoulders and moves on.
More and more companies will not want to share the spotlight so we’ll start to see more companies launch products via Apple type exclusive events. Tesla is an example of a company that does this, just not very well.
- China car sales for January fell 18% year / year, NEVs shrunk a troubling 54.5% year / year.
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 US, I also provide a point of view that I hope educates and sparks debate.
The Sino Auto Insights team
With all the recent struggles that Ford has had which led to a management shuffle just last week, one thing they seem to be focusing well on since 2013 is the increase in submission for patents, especially when it comes to security, safety, and communication for in-vehicle operations systems.
Their filings have over the last several years eclipsed that of Alphabet, Apple, and Volkswagen. Now, patents aren’t necessarily directly correlated to innovation but could this mean that Ford vehicles within the next 5-7 years may really lead the way technologically when compared to their competition? We will have to wait and see.
With companies like NIO & XPeng in China choosing to contract manufacture their initial products we’re likely to see this trend continue as Canoo announces that Hyundai will co-develop a (likely a skateboard) platform for use on future Hyundai and Kia EVs.
This should save Hyundai a significant amount of R&D costs and help them bring products to market much sooner than if they were to go about it on their own.
This also instantly broadens Hyundai’s EV appeal since they now have access to two platforms, one they developed on their own AND Canoo’s, to develop new products on. Another good example of this is Rivian platform sharing with Ford and potentially VW. This helps the EVStartup by creating a revenue stream that will allow them to fund their own branded products.
Alas, this approval is only for delivery vehicles that will not carry any passengers nor go faster than 25mph. Nonetheless this is the first monumental domino to fall as it shows that the US govt. is starting to come around on this type of vehicle and opening its mind to more testing and piloting of them.
Nuro, the maker of these autonomous delivery vehicles will only have 2 years to test them and the number of units will be capped at 5K. Nuro has partnered with Domino’s, Kroger and Walmart to deliver pizza, goods and/or groceries to a designated location where the customer will meet the vehicle and use a special code to unlock the vehicle to receive their delivery.
I’d theorized in previous newsletters that commercial trucking/delivery would likely be the first to commercialize profitably but that it would need to be broken down into three distinct monetizing opportunities: 1. Entry/exit into delivery zone 2. OTR/Long haul trucking 3. Last mile delivery (where Nuro fits)
The pricing that Nuro will need to charge its partners in order to recoup its capital investments and turn a profit remains to be seen but this is a good first step in education, experimentation moving toward familiarization and adoption. Will keep tabs on Nuro and let you know how their pilot progresses.
LAST MILE / CITY SOLUTIONs
For early followers of the newsletter I’ve mentioned before that being an e-scooter startup is not sustainable in and of itself and that most of them would either need to partner, be acquired and/or fold into a transportation ‘platform’ ala what Uber is trying to pivot towards.
The big guns Lime and Bird have raised a TON of capital and both have abandoned the ‘growth at all costs’ strategy so it’ll be interesting to see how/if they’re able to prove me wrong and come
up with an equation where they can consistently be profitable as a standalone business.
My money is on e-bicycles emerging as a viable option when it comes to a ‘last mile’ solution, once a company is able to price them competitively and I am talking sub $600-700.
RAD Power Bikes, an e-bicycle startup out of Seattle was able to raise a $25M in funding. Not a great deal of money if you do a side by side next to the e-scooter startups raises but nonetheless, as one product type seems to be losing momentum is one starting to gain it?
I’ve spoken with a few e-bike startups and believe the future is bright for the sector. I think a combination of retail sales to consumers and being a part of a transportation/‘last mile’ transportation platform will allow e-bikes to become a predominant mode of transportation in 2020.
What if the car sharing service in your city offered a child seat as part of every vehicle in its fleet? What if it also offered free parking in any municipal public lot? Would that entice you into using their service?
That’s what a Romanian car sharing startup called CityLink is hoping.
In addition the platform will also offer 350 shared bicycles across three different stations in Bucharest, Romania’s capital and city to 2 million of its citizens, ranks third among European cities for traffic congestion so this startup was launched out of a need to try to reduce some of that congestion.
With the additional benefits that Citylink is offering, this may up the ante for other car sharing services to provide similar features. No pricing has been announced so it’ll be interesting to see how costs are offset in order to shorten the time to profitability.
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.