Detroit Never Stops, NIO's struggles are real, T3 - Didi slayer (?) - SAI Newsletter #28
The Trump administration may be ratcheting up the tariffs in September to cover the balance of goods that have NOT been taxed yet. This may have been priced into the U.S. and Chinese stock markets already but should increase the level of uncertainty in China which likely means more even less car sales (ICE + NEV) for 2019.
A quick update on my buddy’s Audi E-Tron situation. Audi sent him over an $800 gas card to cover the fuel for his loaner Q7 and he wanted me to make sure that was mentioned in order to be fair.
Still no E-Tron though and we’re at week 8 now, although I saw an E-Tron on the road while in California so hopefully that bodes well for my buddy. Such a long wait would’ve whittled away most of my goodwill though.
I’ll be in Detroit for the next couple weeks and look forward to catching up with those that have reached out. Thanks for reading.
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 U.S. I also provide a point of view that I hope educates and sparks debate about how I look at the issues. We will mostly divide our articles into these buckets: AI, Mobility/Ridesharing/Ride-hailing/Bikesharing, OEMs, EVStartups, Investments, and Other. If you know of anyone who would like to sign up for this newsletter please have them visit: www.sinoautoinsights.com.
The Sino Auto Insights team
For those that follow U.S. politics, you probably know about the Democratic presidential debates that took place in Detroit over the last few days. Michigan will be a key state that the next president of the United States will have to win in 2020, therefore it made a lot of sense for CNN to select Detroit as the location for the debates.
It also shined a spotlight on Detroit and all the changes that’s its gone through, many of them positive, since the city filed for bankruptcy over 6 years ago. As someone who grew up close to Detroit, I felt first-hand the hardship the city and area went through, much of it due to the ups and downs of the automotive sector which culminated in GM and FCA filing for bankruptcy in 2009.
Let me admit something if you haven't noticed yet, I am a ‘HOMER’ which means that I root for Detroit’s renaissance, I love the Tigers, Lions, Pistons, and Red Wings which recently has been VERY tough to do! I am thankful for everything Michigan has provided my family starting when we arrived there as refugees from a war over 40 years ago. Most of my family still live in Michigan and many of them are employed by the OEMs or tier 1’s.
I also have hope for what it can again become. It’ll probably never get back to being the U.S.’s 4th largest city but like Pittsburgh, another American city I lived in and am also very long on, with the right leadership, commitments from a few more anchor companies, a good amount of innovation, a ton of hard work and a bunch of luck, Detroit can be a major player in the future of transportation and mobility.
As someone who’s lived in Silicon Valley and now China for over 10 years and experienced what development looks and feels like, whenever I visit Detroit I feel the same type of energy and excitement, albeit at a much smaller scale, but it’s there.
For those that have never been, I invite you to check it out. Come next summer in June when the North American International Auto show gets moved. I am certain you’ll be pleasantly surprised with what you see and how Detroit makes you feel. The city has A LOT of history and still has a bunch to make.
Jumping off my soapbox now.
Is there a quiet fire sale at struggling NIO? It was recently revealed that NIO sold its Formula E team for an undisclosed sum. On top of that, there are reports of mass layoffs to two of their most important departments, R&D and Marketing.
Will NIO become the first major casualty of the overcrowded EV market? NIO already recently received over a $1.45B bailout and if sales of their recently launched ES6 continue tracking at 413 units/month it’ll only be a matter of time before the suppliers start refusing to ship parts to them or demand cash up front in order to do it.
These challenges are occurring even before other players, startups and large OEMs alike, launch their new EVs which will happen en masse over the next 18 months. I am really not sure what gives, most folks I speak with tell me that they generally like the ES8 and don’t complain about the pricing too much. One thing that may be keeping folks away is the quality issues with NIO’s battery that’s caused a few fires and sparked a recall of about 4.5K ES8’s.
There isn’t a ton of competition right now but there is a lot of uncertainty with the Chinese economy that has to be exacerbating their predicament and that’s only been significantly increased with Trump announcing yesterday that he’s putting a 10% tariff on the rest of the $350B in goods shipped from China that hasn’t been taxed yet.
NIO is too important and has too much exposure for the Chinese govt. to let them fail so quickly so I think they’ll be allowed to survive for a bit longer and we know from Faraday Future that there’s always someone willing to fund a high risk, high reward venture although in these two cases, they may just be high risk.
Let’s not underestimate the significance of the sale and layoffs though, since their burn rate, even after these drastic moves, is likely too high and the only way to get out of this mess is something that they’ve struggled to do to date, sell more cars.
Was asked by Yu Jing from CGTN about my thoughts on T3, the ridehailing partnership between Chinese automakers Changan, Dongfeng, and FAW with technology provided by Alibaba and Tencent.
With a slightly different business model and much deeper pockets, T3 hopes to be a viable competitor to Didi which itself is struggling to become profitable. This should bode well for us folks who use ridehailing services since competition, especially in China, normally means lower prices and other incentives to promote a particular service over another.
This should get interesting since these are now Chinese companies going after other Chinese companies. With backers like Ali and Tencent, companies that aren’t used to losing at many things, this has the makings of a knockdown, drag out war for ridehailing leadership, a sector we know will grow substantially in the coming years.
As a follow up to my post last week regarding ‘the beginnings of a hardware war’ between the e-scooter and mobility companies, Bird has just introduced its newest e-scooter, the Bird Two, only 3 months after intro’ing Bird One.
Bird Two promises to improve on the Bird One in almost every way including design, durability, power and battery storage. The newest and most important feature may be Bird Two’s ability to signal to the mothership when it’s broken down so that it can quickly get swapped out for a scooter that is working, an important function since the only way for any of these scooter startups to eventually become profitable they’ll need two things, increasing their install base and eking out near triple digit utilization rates on ALL the scooters that are deployed. Now at least one of the two seems to be addressed.
I would expect over the next 18 months, several scooter companies, OEMs and mobility companies will launch major new hardware to help their customers get from point A to point B. This should push innovation of current form factors and help new ones develop.
It will also likely lead to new business models, one that may actually make these companies profitable so I am looking forward to all the different designs and new ways to have two wheels scoot us around!
I don’t want to sound like a broken record but you’ve all heard me preach the potential growth and moneymaking opportunity the e-bike sharing vertical has, but one way to push out the acceptance and increased usage of e-bikes is to have them spontaneously combust as was potentially the case with two of Lyft’s e-bikes over this past weekend in the Bay area.
This seems like a classic case of the product development team being bullied into going to market with a product that hasn’t been fully QC’d (quality control) since one explanation Lyft postulated, vandalism, should have been considered as part of the product development cycle.
Since we’re dealing with people’s safety, Lyft is doing the right thing by temporarily pausing the service so their engineering team can identify the problem and get a fix out to their entire line-up and redeploy the e-bikes quickly.
CSC, a California based company which till now was more known for their insanely low-priced City Slicker electric motorcycle, will begin delivering their recently launched Wiz electric scooter to early adopters across the U.S.
The Wiz, which is more akin to a Vespa style step-through designed moped that’s more suited to scooting around the city, will also be priced aggressively at <$3K all-in. As these types of mopeds become more affordable in the U.S., my guess is that more people will consider them as an alternative to ridehailing and/or e-bike services.
This should help companies like Niu, Gogoro and others who plan on expanding internationally with the U.S. being a MAJOR market they’re all eyeing.
With many Chinese consumers pulling up purchasing their NEV into the month of June, the last month of higher govt. subsidies for NEV purchasing, most analysts are forecasting a much slower sales cycle for both NEVs and ICEs something that is even more likely if President Trump follows through on his announcement yesterday of slapping a 10% tax on the $350B in Chinese goods to the U.S. that have NOT already been tariffed.
Will keep a close eye on the notable Chinese EVStartups like NIO, Byton, Seres, XPeng, to see how they address this slowdown. I expect that most will go into cash preservation mode, those not already there, and that there may be more layoff announcements coming from these startups in the near future.
Human Horizons (HH) just launched a premium smart EV brand called HiPhi and its first vehicle the HiPhi 1. The HiPhi 1 is being positioned as a ‘premium supercar – inspired electric SUV and is scheduled to launch in 2021, a lifetime away in EV years.
If the HiPhi 1 looks eerily similar to the Faraday Future FF91, that’s likely because Ding Lei, the CEO of Human Horizons, was the de facto ex-CEO of Faraday Future.
Will be interesting to see if HH can launch the HiPhi 1 before Faraday can launch their FF91!
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.