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Didi Saga Continues, Tesla FSD 9.0 Beta, Vehicle Sales -> Service Fees - SAI Newsletter 27



As proof that the Didi fiasco isn’t just a hiccup, it’s still being covered by most media outlets almost three weeks out with updates on all of the ‘behind the scenes’ takes on both sides of the pond, including all the post screwup finger-pointing you’d expect from the bankers and investors about how they ‘didn’t know’ that anything was awry. Let me assure you that if Softbank, Morgan Stanley, Goldman, and JP Morgan had ‘wanted’ to know ANYTHING, then they’d need only tap their China networks to find out what the latest rumors here as the transaction was moving forward in the US. They just chose to turn a blind’s eye – I am guessing because of the huge fees and payouts that were headed their way once Didi went public. One other note, if it seems that Cheng Wei & Jean Liu are coming off clean, my guess is that there’s a PR battle to keep them out of the news but that there will be some long reads in the near future about their roles in pushing for the IPO, at least that’s what I’ve been told over the last couple of days. The bottom line is that the Didi team did a risk/reward assessment and thought it was better to ask for forgiveness than it was to ask for permission. It was likely the best play too since there’s no telling what the investigation will uncover. This isn’t to say that Didi isn’t going to be a very viable and powerful company after all of this is over, likely within the next 6 months, but that all of this could’ve been avoided and that it’s going to take a herculean effort on the Didi management’s part to re-ingratiate themselves with the Chinese regulators and govt. writ large of course assuming that there’s no ‘there’ there. Let’s not forget that Didi already had multiple strikes on them for the tragedies that occurred on their platform years ago, so my thought was that they were already on a fairly short leash. Not to mention the HUGE door that they likely helped close (for the time being anyway) for companies like Bytedance, and other mobility / AV-related China-fornia companies that aspired to large valuations accompanied by large capital raises & big payouts via the US capital markets. Those are ALL on hold indefinitely across sectors. Finally, who is curious to know what Didi’s competitors, all 230 of them here in China, have been up to since their smackdown? Funny you ask, I spoke with Christian Shepherd of the FT to discuss. It’s a new take and one that I think makes the near-term prospects for Didi quite challenging. You can read that piece here. Finally, Lei and I will be hosting our China EVs & More Clubhouse room again this Thursday, 8:30pm EST, and our topics of discussion will be the VW & Stellantis press conferences for sure. We will pick up other topics in the next day or so and of course, we will take questions and comments from the folks that drop-in so please join us. The link to join us is here. For those that can’t join us on Thursday, you can always download our podcast here. We’ve gotten a lot of traction on the podcast of late so, on behalf of Lei, we both appreciate all your support. TESLA NEWS - FSD V9.0 finally launches after a multiple-year delay and with a warning from Elon. After it launched Elon sent out a tweet that said ‘Beta 9 addresses most issues, but there will be unknown issues so please be paranoid.’ This effectively means Tesla drivers should still pay attention and that the system will have flaws and bugs that need to be ID’d, logged, and then patched. Also, for now, FSD V9.0 Beta is only for Tesla drivers in their Early Access Program which numbers ~2K (mainly employees) without any indication as to when the beta would be widely available to all owners. At least this time Elon acknowledges that there are still some bugs to get fixed. Unfortunately, there will still be people that want to push the limits of the system’s capabilities so expect a lot of videos & livestreams floating around the interwebs soon enough. IN THE NEWS - The switch: From vehicle sales to service fees, is the revenue really there? The short answer, not for everyone. Conceptually, people are starting to come around to the fact that vehicle sales aren’t going to be as important long-term for mobility providers. In fact, the physical vehicle may not be that important at all, not if you can carry your mobility preferences with you via the cloud wherever you go. Then a basic box with four wheels that you can upload those preferences to would do. What’ll be important ultimately is what platform you plan to subscribe to, the robustness, reliability, safety, availability, flexibility, and security of that platform, the cost of being a part of it, and whether there will be ‘family plans’ that encourage you to sign up multiple family members for additional discounts. What’s also clear to me is that ‘Well done, will always be better than well said’ with regard to the legacy OEMs. Regardless of size, how many brands they own, or what their current sales volume or footprint is. Which companies are around to compete with the Tesla’s, Apple’s, and NIOs in the next 10 years depends on how good and the speed at which the legacies are at the transforming or optimizing their companies from the one-time sale to recurring revenue business models. There are distinct advantages in selling ICEs if your manufacturing footprint is large but that will go away as the sales, customer engagement, and revenue models all change before our eyes which is happening now in China. China will be a key market for EVERYONE. The US will be the other key market. The OEMs are still moving too slowly and still don’t get software. Just because you’re having regular launch events to pat yourselves on the backs for how little you’ve actually moved the needle, doesn’t mean your words will translate into deeds and more importantly, products and services that help you pay for your futures. Charlie Munger said, ‘Show me the incentives, and I will show you the outcome’ and we know what the outcome is going to be, can the automakers change their incentives to match? - The EU is making a push to on-shore battery cell manufacturing so it doesn’t have to import them from China. They will still rely on Chinese manufacturers though and therein lies the rub. Companies like CATL, Guoxuan, and others will likely build beachheads to compete against one another for the right to supply batteries to vehicles from the VW Group, Stellantis, BMW, and Daimler. VW Group is also betting that Northvolt will be a major contributor eventually to local capacity in the EU. This is going to be repeated in the US as well, although Tesla / Panasonic, LG already have factories there. There needs to be a lot of additional capacity so look for additional capacity announcements to be made in the coming months. - GM is betting that its Ultium battery technology will be a gamechanger and help it drive down cost, increase range, and be everything current Li-ion batteries cannot be. But will it work? According to this article, GM is approaching the magic $100 /KWh pricepoint that’s supposed to make EVs profitable. There are other differences to GM’s battery tech including the fact that it uses a pouch form factor and not a cylinder which Tesla uses. The Ultium battery is also supposed to use 70% less cobalt, reducing cost and the supply volatility. GM’s batteries are also supposed to be more versatile than competitors’ although LG is able to sell their cells to other manufacturers so this advantage could be fleeting unless GM’s BMS and system create a proprietary advantage. If GM’s claims are true, this could be a major advantage that catapults GM into the global leader in mobility within the next 10 years. We will be watching. - Chinese AI company SenseTime has officially launched SenseAuto, their smart car solutions brand. At a high level, this brand’s product offerings seem similar and in direct competition with those from Huawei & Baidu although I am just seeing this and will know more likely around the time of this week’s China EVs & More. SenseTime makes for a formidable challenger to Huawei and Baidu but they’re also the least known commodity, especially to the west so getting out front with a new brand and some PR could be their way of exploding onto the scene. TRENDING ON SOCIAL MEDIA - IM Motor’s concept car is also an air purifier, no really. For those not familiar with IM Motors, it’s the JV created by SAIC & Alibaba that plans to have a product on the market within the next 30 months. They commissioned a designer who had no experience in designing cars to come up with a concept and the ‘Airo’ is what Thomas Heatherwick came up with. It looks …futuristic. I wouldn’t call it ‘great’ looking, just futuristic. It’s also supposed to suck air into its front grill in order to purify it with the idea being with millions of these vehicles on the road, there would be very little pollution. - What will Lincoln’s look like in 2040? That question was answered by ArtCenter College of Design students in a school exercise and their answers were straight out of the Jetsons / Blade Runner. There’s a short video in the link so check them out! GET SMARTER - If your BS detector is rusty because of Covid-19, you should sharpen it. Lots of people BS others. A lot of times, it’s just to poke fun or be sarcastic and people can see right through it. That’s when most people just let it slide, but recently the BS has started getting pretty ‘deep’ when talking about a number of different topics, so why do people do it? The first reason is to have an opinion about something they likely know very little about. People also BS you because they care about you and want to save your feelings. And finally, people BS others to make themselves look better. Now that we know people BS us, a good way to push back on it is to call them out for it. Next, you should see what their logic is, if they have any, for what they’ve just said or claimed. Also, verify where they got this information. This is especially true now that we are all waiting for L5 autonomous capabilities for our vehicles. What many claimed would be just right around the corner, is still years away from becoming a daily reality. Make sure you drill down on ‘how’ they know what they are saying is true. JUST THE NUMBERS - 279,000. Or the equivalent of ~$43,142 at yesterday’s FX rate. That’s the new starting price of the short-range LFP powered MIC Model Y. It’s been reduced by >70K RMB, or ~$10K and there’s been a BIG jump in foot traffic at Tesla retail locations because of it. The fact is, at that price-point, be it ICE or EV, there’s not much out there that can touch it. That’s a problem …for everyone else. - 4,000. That’s the number of battery swapping stations that NIO plans on having globally by 2025. That includes about 1K of them likely being in the EU. For the last two posts …the best defense is a good offense? NIO and Tesla are NOT making it easy on anyone else, that’s for sure. - $35.5B. That’s what CEO Tavares committed to investing into Stellantis to transform the mega-OEM, which has 14 brands in multiple countries, into a clean energy mobility company. During the event, Stellantis introduced new mottos for each of the brands, and let’s just say that some of them ooze cheese whiz. The 4th largest automaker in the world will be spending a pretty penny. For comparison’s sake, Ford Motor has pledged $25B by 20205, GM $35B, while Daimler and VW went over the top with their commitments at &$85B & $86B by 2025 as well. - 3B RMB. That’s how much Banma, a Chinese smart car solutions provider, raised in the current fundraising round that included existing investors Alibaba, SAIC, and Yunfeng Capital, and others. Banma specializes in leveraging AliOS to build intelligent operating & cockpit systems on top of. —— 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

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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