Deep Diving Uber's AV program, India's Mobility Sector, the EU's Silicon Valley - SAI Newsletter #7
Not a lot up top this week, so let’s get right to it. BTW, that prototype SUV in the above picture I am guessing is the Suburban version of the Escalade that’ll likely be launched later this year.
IN THE NEWS THIS WEEK:
- GM exiting more international markets (Oz, New Zealand, Thailand) to get their balance sheet in order and shed money losing businesses. So they can deploy more capital towards their self-proclaimed future …EV/AVs and services.
- Hillhouse Capital, at one time NIO’s third largest shareholder, offloaded ALL its NIO shares as of the end of 2019. A pretty substantial loss of confidence in the EVStartup.
- Beijing Auto show, it alternates between BJ and SH each year, will be postponed to a later not yet known date.
- Trying to define the suitcase word ‘Artificial Intelligence.’
- A big get for Detroit Bikes. Doing final assembly in Detroit for Nishiki, one of the brands that Dick’s Sporting Goods sells bikes under.
TRENDING ON SOCIAL MEDIA:
- China’s F1 race originally scheduled for April 19th in Shanghai may be pushed to much later in the season.
- For the robotics geeks like me, you can watch the DARPA SubT Urban Circuit Competition here. Click on the link for more deets about the competition.
- Bill Gates buys a Porsche Taycan, Elon trashes him for it.
- Didi launching their ridehailing service in Sydney on March 16th.
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
Between the 9 months the program was tabled in March 2018 due to a tragic accident where an Uber autonomous car hit and killed a pedestrian, to December 2018 when it was relaunched, the program was revamped and dare I say improved, to ensure that a similar accident will never happen again.
The key differences comparing version 1.0 vs. 2.0 of their autonomous car testing program:
- Latency between communication of vehicle sensors to software to hardware were reduced
- Program made more like aviation certification process
- Value ‘quality’ of data over ‘quantity’ of data
- Trust the human ‘safety’ driver much less and eliminate fatigue (from 12 hrs. behind the wheel to 2) as a possible risk
According to the article, there are ~35K vehicular deaths/year in the US or another way to look at it ~100,000,000 miles driven between every death. IMHO, for mass acceptance of autonomous vehicles, AV startups need to be safer than that - say >120,000,000 miles driven/death. Seems a bit morbid to write but that target seems quite a ways away after having spoken and visited with a few AV startups myself here and in China. Even though there are a lot
Further, that should shine a spotlight on the ‘good enough’ AV use cases like commercial (trucking) delivery (over the road, long-haul), last-mile delivery, and short distance slow moving shuttles that likely don’t need that level of safety in order to be deployed.
That should mean that there will be more emphasis and investment on each of these mini-verticals in the near term in order to pull the monetizing opportunities ahead (to please management and investors) which in turn will attract new entrants and more competition.
I plan to meet with more AV startups this year in order to compare/contrast their philosophies and approaches to testing, safety, data and personnel training so stay tuned.
Let me speculate a bit here. You can bet that the Chinese govt. will extend the subsidies to prevent the NEV market from cratering. They’ll also likely hand out ‘loans’(read: bailouts) to many of the tech and EV startups that are teetering and some of the larger companies that plead for handouts. The OEMs likely want to keep many of the EVStartups around since it will be better overall for the health of an NEV market that’s still in its infancy.
Where that leaves the multinationals is still unknown. Further, it will not likely be clear until after the virus has been clearly contained and will depend on how fast/slow the market begins to pick up.
A leading Indian venture capitalist said during an investment conference that the Indian electric mobility sector, including battery storage tech, will be a huge opportunity for the companies that arrive early, are able to navigate the political and business landscape while bringing innovation to the country over the next 5 years. I know, we’ve heard this before, right? But the Indian govt. seems to be behind the push this time and the govt. has recently alluded to implementing a new law that would require all mopeds and scooters to be electric by 2025.
It’ll be interesting to track India’s progress since the country is almost as large as China (by population), but lacks the infrastructure, political will, and investment capital. Also interesting to see how they approach and try to solve the same basic problems that China had/has (pollution, congestion), albeit with a different culture, climate, and traditions. I am betting that we could see some amazing and innovative (2, 3, and 4 wheeled) products and services coming out of the country over the next several years.
As I’d mentioned in last week’s intro, the global automakers would likely struggle to get back to full production quickly in China and you’re seeing a couple of them openly admit that coronavirus related parts issues could reach US and European shores.
This is just a reminder that many products are manufactured using a global supply chain and any hiccup along that chain can have negative consequences upstream. In one particular case highlighted in the article, a decal sourced in China could force GM to disrupt production at one of its most profitable plants as it waits for airlifted parts that are fed ‘hand-to-mouth’ to the factory in order to complete the manufacturing cycle.
For the OEMs to consider moving their factories as an analyst in the article suggested may happen, the OEM would have to believe that the virus will not be contained in the short term - right for now that’s still not a likely scenario. That having been said, I could see their sourcing teams evaluating the risk and could pull production of some of their critical path parts to outside of China until it’s clear that their current Chinese suppliers can get back ‘online’ towards full production capabilities.
I’ve been a part of these ‘war rooms’ and they’re not fun to be in, can have a ‘boiler room’ type of environment so I hope for the sake of the sourcing, quality, manufacturing, logistics, materials, and plant folks, that the wheels haven’t fallen off. And yes, part shortages means that all those teams need to get involved.
If we look at just the numbers for annual total vehicle sales for China for:
2020 – ???
Using actual China passenger vehicle annual sales numbers from Marklines as a reality check for those that may believe that once the coronavirus has been contained, that the auto sector will push itself back into growth mode.
Everything that was outlined in the piece, better and more public transit, ridehailing services, surge in used car sales, hassle of car ownership, vehicle ownership saturation in the major cities – all have played a factor in the sector losing sales momentum.
Let’s make sure we acknowledge that the China market is STILL the world’s largest and that a small piece of this market means sales in the hundreds of thousands of units. When growth stalls like this, in order to add that one incremental unit of sales, there’s a decent likelihood that you’re wrestling it away from a competitor so customer acquisition costs begin to weigh down profits.
This is where good and NEW product helps saves the day. That and amazing marketing and sales folks really earning their keep by positioning the brand and product in the market so that it stands out in a pretty crowded field of competitive products. Bringing in external help/advisors could be a prudent move, especially if they have a good feel for the market and understanding of the competitive landscape.
With no current end in sight yet, even when China gets past the coronavirus, which it will, everyone in the mobility/EV/AV/automotive space should mentally prepare for 2020 being a nasty year on profits and balance sheets.
I get it, I get it, the EU is not the US is not China.
And make no mistake about this post, I have a bias. Having lived and worked in both Silicon Valley and China I have experienced and like to think that I’ve contributed to the innovation that occurs at both places.
I applaud the fact that the European Commission recognizes that its behind and needs to play catchup with China and the US and develop its own ‘Silicon Valley’ but I am still not clear on how they would go about doing that. In order for innovation to happen, risks need to be taken – celebrated even, sh*t needs to break, and traditions need to be trampled on and A LOT of money needs to be invested in order to nurture the iterative process where bad ideas turn into better ideas that finally pivot into moneymaking businesses. Competition at its best where only the strong, smart and well-funded survive.
To my European readers and friends, I’d love to discuss this with you further since Ursula von der Leyen’s Op-Ed and vision for innovation, data privacy and creating the EU’s Silicon Valley doesn’t really explain how the EU gets from point A to B. I am confident that the EU can create its own Silicon Valley, it just might literally take 50 years and by then will it even matter?
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.