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Detroit Auto Show On In '21, EV Adoption - Slowly But Surely, The Musk Method - SAI Newsletter 37

Updated: Oct 13



A few big pieces of news to come out this week. The continuing Nikola saga. Last we heard, Trevor Milton had stepped down, Steve Girsky, ex-vice Chairman of GM and a current Managing Partner at VectoIQ, the company whose SPAC Nikola reverse mergered into, takes over the chairman role at Nikola for Trevor. Don’t feel too bad for Trevor though, he still owns, ~25% of the company that as of today’s close is still worth north of $2.5B.

Now, if we play this out behind the scenes, it’s pretty serious triage when the chairman gets pushed out so maybe that’s what investors & management thought was needed to stop the bleeding? One thing that’s probably taken a beating is Steve Girsky’s reputation. If you look at the VectoIQ website there are 3 ex-GM’ers that are part of VectoIQ management. Bringing this deal to GM would make it seem like a conflict of interest UNLESS the partner was squeaky clean. It’s quite apparent that’s not the case since the SEC & Justice dept. have gotten involved. Now, I still don’t believe they’ll find fraud or anything else illegal but some definite oversight, financial control, and ‘telling of tall tale’ issues which is still very problematic.

If Steve did indeed communicate that to Mary, then caveat emptor and Mary needs to come clean as to why she went through with the deal which again has a bunch of upside for GM and not a lot of downside. But if VectoIQ did not communicate some of the major warts on Nikola to GM mgt., well then Steve must’ve called in all kinds of favors so that Bosch and GM wouldn’t walk away from their relationship with Nikola, which as of today they still have NOT. We will keep tabs on this and update as we learn more.

Other news. Tesla’s Battery day was today. Elon does an amazing job of building excitement, curiosity, and anticipation for his events. He’s a twitter wizard. But make no mistake, he needs to work on his presentation skills. Elon is NO Steve Jobs, at least not yet.

As for what was announced, I might pull that out separately to discuss since I’d like some time to chew on everything I think is significant. And for those wondering, I only woke up early enough to catch the last half. I wasn’t anticipating anything earth-shattering from the event and I ultimately made a good decision.

I had a good chat with SoonChen Kang from the S&P Global Market Intelligence about China Evergrande’s EV ambitions, highlights of which you can read here.

Last piece of news. I call it out below, but I am pretty impressed with WM’s raise amount. It’s a pretty intimidating number for any other Chinese EVStartup to follow. One thing is for sure, the ‘Fab Four’ or WM, XPeng, NIO, and Li Auto are getting ready for WAR. First in China, the EU, then the US, and I can’t wait. 

It’s China’s July 4th this week so we may or may not have a newsletter next week. SMH, we are a week from October!

2020 has been personally and professionally the weirdest and challenging year in my life as I am sure some of you can also attest.

IN THE NEWS:

-   WM Motor literally ‘raises’ the bar for the China EV startups by announcing a 10B RMB D series round of funding from a few local Chinese govts. and SAIC, Baidu, and SIG Asia.

-   VanMoof on a fundraising roll this time raising $40M right on the tail-end of a $13M B-round. One report forecast that the global e-bike market will hit $38B by 2025. For the doubters out there, this growth is real, sustainable and will lead to VERY different ways of people staying in shape, how to get around a city, while shifting paradigms on how far you can travel on a bike. I’ll go as far as to say that it will contribute significantly, along with the evolution of ridesharing, to a gradual, global reduction in the number of passenger vehicles sold. Mark it down.

-   The safety driver in the Uber robotaxi that killed a pedestrian in Arizona in 2018 has been charged with negligent homicide. It appears she was streaming a show on her mobile when she was supposed to have her eyes on the road. Nonetheless, there likely weren’t that many ‘safety’ drivers that ever thought they could be criminally charged for an accident taking place while they were behind the wheel of an autonomous vehicle.

-   Some of the abandoned bicycles from bankrupt bike-sharing startups in China are finding a 2nd life, although their cleanup is being funded by the Chinese citizens.

-   Shared mobility only works if customers do their parts after they’ve completed their rides to make sure that where they park the e-bike/e-scooter does not inhibit the flow of pedestrian/vehicle traffic. In Beijing, e-bikes are geo-fenced and most of them will only lock if they’re parked in designated painted areas on sidewalks. Not only will many of them not lock, they’ll also sound an alarm type noise to make sure you know that you’re not parking the bike in designated bike parking space. It seems to work well for me and I use shared bikes literally every day. There is still the challenge of finding available bicycles during peak usage hours but that’s another challenge in and of itself.

-   Chinese brands need to step it up on quality in order to compete with international brands according to JD Powers China. This will be important when they begin to export to new markets. As in, if this is not remedied, it’ll limit their competitiveness (read: sales) outside of China.

-   Michigan dealers are blocking the DTC sales models utilized by Tesla and preferred by Rivian and Lucid. I mean, really?? Get over yourselves because this doesn’t at ALL help the Michigan car buyers.

TRENDING ON SOCIAL MEDIA

-   Getting a smoking deal on a Chevy Bolt! GM and the dealers that carry the Chevy Bolt are blowing these things out! For those that are leaning towards driving themselves for the foreseeable future or at least until COVID-19 has been contained in the US, this could be the deal for you.

-   Alibaba may be making a BIG bet on one of the Southeast Asia (SEA) unicorns. We are talking a $3B bet on Grab, SEA’s Uber, and largest unicorn. As the Chinese tech scene matures, BAT (Baidu, Ali, & Tencent) are looking to continue their growth by entering international markets with India and SEA being two heavily contested regions currently.

-   Take that Porsche Taycan! The 2022(?) Plaid Tesla Model S – >520 mile range, >1,100 ponies, 200MPH top speed, <2.0 sec. 0-to-60MPH time,

PRODUCT & SERVICE INTRODUCTIONS:

-   For my American readers, REI is getting into e-bike sales. Rolling out two new products – The Co-op Cycles CTY e2.1 & e2.2. Before we know it there will be plenty of ‘test’ rides so will update you all to figure out who the best of the best is. Bikes that have integrated battery systems will, for certain, have better build quality and ride dynamics when compared to the bikes with batteries just bolted onto an existing design.  

-   A carbon fibered, folding bike that comes in at <$2K, you bet! Meet the French designed Morfuns Éole. Cleverly, the battery works double duty as the seat post and they come in two flavors: the cheaper, less spec Éole C - $999, and the higher-spec Éole S - $1,259. These aren’t meant to be long-distance haulers and can be folded into your trunk to help take you that ‘last’ mile.

-   VinFast continues to stay busy with plans to be global by 2021. They’ve just intro’d the President, a limited run, petrol-powered, 420HP, Pininfarina-designed SUV that’ll set you back >$140K. On top of that, they’ve announced that they’re working on an EV that they plan to sell to the US by 2021. We will be watching for that!

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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

OEMs The Detroit Auto Show rescheduled …again. This time we are looking at a Fall 2021 timeframe (think late September). Challenge for the sponsors is that the show was losing relevancy due to all the other shows globally as well as many automakers in recent years have pivoted towards hosting their own events ala Apple so that their products and announcement shine isn’t stolen by a competitor’s.   With the time that’s transpired since the last show held on January 2019, SO MUCH has changed. With the current (un)Welcome mat being laid out by the Michigan dealership lobby towards the newest EV makers Lucid & Rivian (see above post) who even calls Michigan home, why would they want to participate? From the time I was about 4-5 yrs. old until about 23, I went EVERY year. But like the dealers who are the main sponsors, the show hasn’t really been innovated on and although moving it to summer promised a fresh take, the delays have given it an out of sight out of mind vibe.   As I make my way, in-person, to the Beijing Auto show later next week, I’ll have to see for myself whether or not online events like Tesla’s ‘Battery day’ will suffice moving forward or whether auto shows still have a place, especially if large crowds aren’t encouraged. I know traditionally there was a lot of spontaneous networking going on and it’s ALWAYS better to see a brand new car in-person but it’s been all about EV, connectivity, AVs, and tech the last several years and between CES, the LA, Chicago, New York, Beijing/Shanghai, Tokyo, and all the others I can’t even remember, the auto show game changed which begs the question – Can Detroit compete? #NAIAS #rescheduled #Iwillbethere #needafreshtake #whatisinstore #Detroitcomingoutparty EVs EVs adoption is coming at us – FAST. Are the OEMs ready? A couple of observations about entering a market late regardless of which. Let’s start with the good news. You get to see ALL the mistakes that have been made by the first movers (FM), can save money by avoiding those same mistakes, and even potentially turn the FM’s early mistakes into opportunities for your company. Also, you have better data to evaluate the needs of the market that can again help you avoid costly design, R&D & engineering mistakes. The bad news is that coming ‘late to the party,’ in the case of EVs years late, makes it really tough to position your product in the market, caps pricing (since the FMs have established what products in the sector ‘should’ cost), and forces you to play catch up on cost, expertise, and technology. This is the dilemma that each of the OEMs faces currently as COVID-19 has really energized EV adoption in China and the EU and most importantly, I think this adoption and growth is going to stick, for certain it will in China. Let’s be clear about one major reason for that though – The subsidies in place in China & the EU make them very attractive purchases. In some cases, the subsidies in the EU creates pricing parity with ICEs. This energized EV adoption has led to a BUNCH of investment capital heading into the sector creating this virtuous cycle. Think: More money > More infrastructure > more R&D (by the brands) > better tech > > more products > more marketing > more awareness > more education > more competition > lower prices > more sales. Even after the subsidies are taken away, the battery densities will have improved enough ( Most traditional OEMs I’ve spoken with prior to COVID-19, both German and American, thought that China was clearly leading the world in EVs - True. The OEMs also thought they had a 5-7 year window to make that transition with their ICE products outside of China – False. What they won’t tell you is that they still underestimate Tesla’s and these Chinese EV brand's abilities to be competitive with not only their yet to launch EVs but their current crop of ICE vehicles. Currently, in the EU, BEVs account for 5% of new vehicle sales, if we include hybrids that number jumps to 9% so according to car buyers, the limited # of products in the market has still attracted quite a bit of sales. And with the UK considering outright bans on petrol-powered cars by 2030, the future could very well be NOW. These Chinese EV makers ALL have ambitions to be China’s first global brand and have backers, state-owned, and otherwise, with plenty of money to help them achieve this till now elusive goal. This will only make the OEMs jobs that much more difficult. Remember I’d talked about coming to market late in the beginning of this post? Well, that’s what the OEMs are having to deal with now, even earlier than they had planned and if governments around the world decide they’d like to see an NEV future themselves sooner rather than later, this likely blows up their 5-7 business plans. Their size, volume, and scale will help them a bit but ultimately, product will rule the day, are they ready? #acceleratedadoption #EVsarecoming #aretheOEMsreallyready #laststand What’s old is now new again. Tesla learns from the best, then bring it in-house and do it yourself. Pulled from the article - “Elon doesn’t want any part of his business to be dependent on someone else,” Henry Ford had a similar way of thinking hence Ford Motor’s vertically integrating in order build their own engines, sheetmetal, even their own tires. Let’s call these two really what they are, control freaks. It worked for Henry Ford and it appears to be working for Elon so far. This is the attitude that the OEMs need to have if they’re going to be able to keep up with Tesla, the US & China EVStartups, and the tech cos. that are all trying to ‘eat their lunch’ and push them out of the sector, the sector they’ve owned for the last 100 or so years. If you don’t believe me, ask Nokia, Blackberry, and Sony. Vertically integrating is HARD and although it is something that Henry Ford did in developing the mass production process and millions of Model T’s, it’s not what most good managers nowadays would recommend doing since costs could balloon and there’s no guarantee that you’ll be able to do it better in-house than an external supplier would but Tesla has never been managed like a car company. We watched for the last 17 years as Tesla went through each and every growing pain that got them to where they are now. From buying Lotus kits to make the first roadsters, buying a plant in Fremont at pennies on the dollar but not really knowing how to mass-produce cars, building a Gigafactory in Shanghai, to growing into the highest-selling EV maker in the world while recently becoming the world’s most valuable automaker (and briefly) an almost half a trillion-dollar company.   In the ’50s & ’60s, the automotive sector was arguably one of THE most innovative sectors in the world and Detroit to a lesser degree the sector’s Silicon Valley. Over the last few decades though, automakers all over the world have struggled to innovate, and I mean with new revenue models and thinking differently about how to get people and things moving around. They were more concerned with chasing quarterly profits, keeping their plants open, developing mass-market vehicles that are serviceable but not loved than they were on moving the sector forward. Think evolution not revolution. Now, thanks to Uber, Tesla, Lime, Niu, WM, Lucid, Canoo, Amazon, Postmates, etc. the choice is not theirs, although OEMs had 17 years to see it coming. It doesn’t seem like they’re able to keep up, at least not yet. Shortcuts like the GM/Nikola tie-up that seems like it’s about to blow up in GM’s face are the types of partnerships that the OEM’s management, in Germany, the US, and Japan are hoping will allow them to keep up with where the market is headed as they get their houses in order. With a vehicle’s HW/SW stack determining what most of its features will be its quickly become the most important commodity in the vehicle. You’d think the OEMs would want to build that expertise in-house. I know they currently don’t have it and like Tesla, they can learn from their partners and eventually pull everything in-house but with how fast the market is moving, it’s going to get more and more difficult to do that. It’s not car guys competing against car guys anymore. Innovation & adoption are moving faster, not slower. There is a lot of Tesla envy from the automakers, no doubt, and whether they will admit it publicly or not, there are some really good reasons for it. #Tesla #verticalintegration #TheMuskMethod #learnthendo #trytokeepup

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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