Didi spinoff, Demand for EVs is real at least from China, Uber/Lyft earnings - SAI Newsletter #29
I’ll be short and sweet with this week’s intro. The trade war was ratcheted up and is now also a currency war so this does not bode well for China car sales (NEV +ICE) for the rest of the year.
It also doesn't feel like it’s going to end any time soon so all the EVStartups are likely hoarding cash and hoping that they can hang on for as long as it takes, many will need to reduce their burn rates so we will keep an eye out for any further layoffs.
A couple housekeeping items.
I will be hosting a ‘Lunch and Learn’ next Tuesday, Aug 13th at the M Landing Zone / We Work - Detroit (noon - 1pm) for the folks in Michigan.
We’ll be talking about the trade war and what’s really going on between China and the U.S. as it pertains to mobility, technology and innovation and what opportunities there still are for American companies that are interested in entering or growing their business in China.
I will be a panelist on the Technode - The Road Ahead for Electric Vehicles in China, Tech after hours series on Thursday, Aug 22nd in Shanghai.
Link to event is here: https://technode.eventbank.cn/event/the-road-ahead-for-electric-vehicles-in-china-22637/
I look forward to both events so if you’re able to join either of them, stop me to say hi!
Last but NOT least, my friend still does NOT have his E-Tron back, he’s now on 9 weeks of driving the loaner from Audi.
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.
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The Sino Auto Insights team
Contrary to what some BMW executives believe, there does seem to be an appetite for electric vehicles if we’re to take at face value what Porsche says is the number of pre-orders ~30K, along with a €2.5K deposit, they’ve received for their initial entry into the EV sedan market.
The Porsche Taycan, and my Porsche friends are gonna hate me for this but …think of it as an electric Panamera, albeit likely a bit smaller. It’s aimed directly at Tesla Model S customers and it could be a worthy competitor spec and price wise (if tariffs for each are a wash). It’ll take some time for traditional automakers to get up to speed on a vehicle’s user experience and interaction design, skills not currently in most OEM’s wheelhouse, but I think a good cross section of folks still want traditionally appointed and designed interiors so this may not matter in the early innings.
Since Porsche AND Audi both fall under the VW Group umbrella, I wonder if Porsche took notes and/or pinged their colleagues in Ingolstadt to make sure they avoid some of the challenges that came with the launch of the Audi E-Tron. A good example is what’s currently going on with my buddy and his E-Tron, which still hasn’t been returned to him yet.
There’s also probably an asterisk associated with that number since those deposits are likely refundable. Most of these folks plopped those Euros down with the vehicle sight unseen as well and since they’ve only recently started leaking pics of pre-production versions, those folks may be a bit disappointed at the road ready version since it doesn’t have a great resemblance to the concept.
We also know that 20K of those pre-orders come from China, so although the global demand might need a few years to catch up, Porsche shouldn’t have ANY problem, if they can avoid major quality issues, selling out their supply in the first few years of their Taycan production to Chinese consumers. The combination of Tesla deciding not to ‘refresh' the Model S and the trade war between the U.S. and China remaining a obstacle, there could be a real opportunity here for Porsche to begin pushing out Tesla as the preferred foreign luxury EV in the China market.
Spoke with FT journalist Mercedes Ruehl about Didi and my thoughts on why they decided to spinoff their self-driving unit.
With Didi trying to raise more cash for their core business, it would be difficult to fight off increasing competition with a war chest that’s also funding a ‘potential’ business that would not likely bear fruit for the next at least 5-7 years.
This shouldn’t come as much of a surprise, especially when you consider the current economic and fundraising environment in China for EV/AV startups.
If you’ve seen the earnings reports for Uber and Lyft, you know that Uber had its worst loss as a company ever and that Lyft pleasantly surprised some analysts with their earnings. They also agreed not compete on price in some key markets so that should help with future earnings, although neither are still likely to be consistently profitable for quite a few years.
Uber was able to offload a HUGE anchor that hoovered up a lot of their cash by spinning off their Advanced Technology Group (ATG) and Didi decided to make a similar move last week as well to help them conserve their cash. The big difference between the U.S. and China ride-hailing markets is that Didi’s current competitors (Meituan Dianping, Yidao) are still VERY hungry and plan on squeezing Didi on price, even as new entrants like T3, are just entering the market.
In summary, I see a much cleaner path to profitability for Uber and Lyft, albeit a few years out, then I do currently with Didi. Didi still seems to have its challenges ahead of itself and that includes getting completely back in the good graces of the Chinese govt.
I chose this article because it highlights some of the ‘real world’ challenges, specifically for mobility startups, pimples and all, that teams in Detroit, Silicon Valley and China know all too well. The business teams help create the ‘box’ to play in but it's the engineering, quality and ops teams that launch the products or services and pilot the solution in the real world. If you’re nodding your head as you read the article because you’ve had similar experiences, you know exactly what I am talking about.
Good startups will quickly iterate by incorporating the data/feedback in order to put a better product out in the market, with the emphasis on quickly. Startups will work with their customers and try to accommodate most of the customer’s needs while also being flexible enough to course correct ‘on the fly’ if they discover a better way or if it’ll help avoid future problems.
May Mobility has a strong team so no doubt they’ll be get past these small challenges and keep pushing towards their goals and vision.
It seems Michigan has a bit more diversity among its startups than just mobility. I am long Detroit as well but its important to remember that we’re starting from a really small denominator.
Lest we forget that Detroit only 6 short years ago filed for bankruptcy and is just now starting to get past some of the problems that helped put them in bankruptcy in the first place. There are still some real challenges ahead and if Detroit is to become a new innovation ‘alley’ it's going to need to attract many more people with the ‘right’ set of skills to help it get there.
There is definitely an excitement and energy in Detroit AND Ann Arbor that I haven’t felt before and my hope is that GM, Ford and FCA can push harder, farther, faster and more innovative-ly since that’s the only way they will carve out a niche for Detroit to be a big, future player on one of the most game changing sectors in history.
I also see plenty of room for transplants with the ‘right’ experience and enough ‘guts’ to take on some of the major business, policy, and infrastructure challenges and help lay the necessary foundation so that big bold ideas & innovation when combined with risk-taking & hard work lead to new, sector dominating startups.
What is REALLY going to put Detroit back on the map? How about homegrown innovation from the startups that are mentioned in the article along with new ones that haven’t been established yet.
Organizations like Ann Arbor Spark and PlanetM are doing a great job of connecting and helping break down those traditional barriers to innovation so I look forward to seeing what Detroit evolves into in the next 10-15 years and would love to be able to say I helped in some way.
<4 WHEELED EVSTARTUPS
I’ve been predicting lately that we should begin to see a lot of innovation coming out of e-bikes and e-bike sharing due both in the product itself and ways to monetizing their use.
A case in point, the GoCycle G3. Priced at $4.5K, it's definitely not meant nor priced for the average user. What the G3 does point to is that more and more e-bikes are launching at varying price points, so we’re beginning to see more and more companies acknowledge that this is a viable market and should expect the competition $/¥ to increase significantly in the near future.
Also, as the G3 is likely GoCycle’s ‘halo’ product, we should expect more mildy priced e-bikes borrowing tech from the G3 to hit the market.
We should also see more collaborations between the traditional bike manufacturers and the mobility platforms so that they can save on R&D costs. Now the ultimate question that needs answering is, should you buy or rent??
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.