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Double Dose - Tesla Deep Dives, SW to Define Legacies' Future, Ford + CATL + BYD - SAI Newsletter 48



Not much up top today. It’ll be a busy next couple of weeks likely for most of us as we prepare to ring in the new year. I don’t like too much to linger over into the new year which will mean a number of late nights till the end of the year. I was thinking about heading down to Shanghai for an overdue set of meetings and then perhaps swing by Suzhou for NIO Day but alas, the travel restrictions are likely going to scare me off. I did have the pleasure of presenting to the British Embassy commercial team last week and gave them my take on the global EV & mobility landscape. It was the first time I’d had a hybrid preso which took a minute to get used to. I just didn’t know who to look at TBH. I decided the people in the room would make for a more engaging preso. I was also recently interviewed for an article that posted this week in the Cheung Kong Graduate School of Business’s business magazine called Knowledge. The article was about digitalization in the automotive sector and I think Mark Andrews, the author does a terrific job of identifying the struggles of legacies in moving themselves over to an increasingly (read: already) digital world. It’s not analog first anymore that’s for sure. For those interested in reading the article you can get to it here. The article is in their Business Trends section and starts on page 42. EVs & More - 12/9 Thursday, 9pm EST/12/10 Friday, 10am China local time. To join the room, you can follow me at @sinoautoinsight and/or Lei at @leixing77 For those that aren’t able to join, the EVs & More podcast is available wherever you grab your podcasts from. Most of our back pods are posted and the descriptions will be able to tell you what we discussed that particular episode. TESLA NEWS - A pretty accurate depiction of the symbiotic relationship between Tesla and China. Those that haven’t heard about the Tesla China story should click the link to this WSJ article. It’s safe to say the Tesla market cap would NOT be where it’s at today without China's ENORMOUS help. Some quick figures – last year, total sales were ~499,550. This year they’ll likely be close to double with China taking a lion’s share of those 1M units sold. In order to properly incentivize Tesla, the Chinese govt rolled out the red carpet. They did this because they knew they needed Tesla to bring the level of competition from the domestic players higher. If we look at the number of brands currently & still launching, I’d say the Chinese govt. has successfully increased the overall competitiveness of the EV market in China with some domestic players like NIO & XPeng that stand out globally. - Behind the scenes at Tesla and Autopilot, now Full-Self Driving. It seems nowadays it’s tougher than ever to try and be reasonable to people who have their minds made up about anything. Tesla STANs believe everything Elon says including how his Tesla’s can effectively ‘walk on water.’ The other amazing capability of Elon is that he’s been able to convince people to risk their lives as well as those of unwitting pedestrians, in order to feed into the Tesla legend/myth (depending on how you look at it) and belief that their cars are L5 capable when they’re clearly not. I love what Elon has done for the transportation sector. It’s not just the automotive sector that he’s pushed forward, it’s every complementary sector along with it. Having said all of that, he’s also entrenched himself into this position about a camera-only system that can get to L5 today. A couple of things I’ll point out – He doesn’t dare make those bold statements here in China. The second is that the cost of these sensors/LiDAR and other components have gone down significantly and could be incorporated into future versions of Tesla vehicles pretty cost-effectively if they wanted. But they don’t. - Tesla got to 52,859 sales in November, of which 21,127 EVs were exported. Nothing surprising here. We will see if we can’t figure out the split of 3:Y. Tesla is a pretty consistent member of the 50K Club. IN THE NEWS - The legacies are openly saying it out loud now – Software will define their fate in the future. Stellantis is the latest company finally admitting what guys like me have been saying was needed for YEARS now. ALL companies will become software companies. Now, learning how to do it will be just ONE major hurdle that needs to be overcome. SW developers don’t just grow on trees and the good ones cost LOTs of money. Also, everyone inside AND outside of the transportation sector is trying to recruit to build out the SW dev teams. This is a global supply issue, SW dev talent that is, since most companies still don’t trust agencies in India, the Philippines, Vietnam, or Thailand for their development work, at least not the mission-critical projects. The other big wildcard is that EV first companies like Tesla have SW development in their DNA so they’re going to be better, faster, more thorough, and efficient at it than obvious novices. And they have an easier time attracting talent because of that. Not many coders I know want to work at Merc or Bimmer to be quite frank. The faster that legacies can get better at SW development, UX design, HW/SW integration, and stacking software the less chance that they’ll get left behind so key hires are one of the ways to reduce that risk. Key hires like ex-Amazon guy Ned Curic becoming CTO at Stellantis. Now, why Stellantis has a Chief Software guy and a Chief Technical guy, I am not sure but it only adds unnecessary layers. If a chef comes in to cook dinner you have to give them complete control of the kitchen, otherwise, why hire them? Just give them the proper tools and get out of the way! - Hycan LIVES. The electric car company that made its way using SOE GAC & NIO’s capital says it’s only just getting started and that it's well on its way to closing another big round after January’s 2B RMB raise. They’ve also launched a 2nd vehicle, an SUV, which is important if they want to get into higher volume sales. The only company that seems to be remotely successful selling one product is Li Auto, and that’s an EREV (effectively a hybrid) at that. I am torn here. Hycan was only established in 2018 so they should have a shot at raising more capital and putting more products out there. I left Faraday Future (the jury is still out on them) and Leap Motor for dead and Leap surprised a lot of folks with their move into competing with the monthly sales leaders earlier this year. Another 2B RMB still isn’t going to cut it though as more brands launch products into that mass-market smart EV (<250K RMB) segment. I’ll hang my wait and see outlook here for now and follow them closely. One thing is for certain – ‘hundreds of sales’ since the beginning of the year is just not going to cut it, not for very long anyway. - XPeng’s Brian Gu not concerned about being kicked off of the NYSE. The uncertainty is rattling the markets but Brian said they’re insulated since they’re already listed in HK and even if it were to happen it would be a few years away. - CATL joins BYD as Ford’s battery partner for China. Not unusual to dual source strategic commodities but this just shows that Ford’s isn’t screwing around since these are the two leaders in battery manufacturing in China. TRENDING ON SOCIAL MEDIA - Will BMW corner the US market …with 2-wheeled electric scooters?? The CE 04 is a beast of a moped. It’ll go 75MPH which is much faster than anything NIU has in the US markets currently so it’s blue ocean for Bimmer for a while. Can they get Americans to bite? So far it’s been electric kick scooters, pedal bicycles, and full-on motorcycles Americans have an affinity for. I believe the time is right for electric mopeds to make an impact in the US, especially in two weather cities where the threat of snow or crappy roads is much lower. If I lived in a Pittsburgh or say a nice Detroit suburb, I could definitely see that as something I could take around town for errands instead of hopping into a car each and every time I needed to go somewhere. People just want options. Preferably affordable options. GET SMARTER - The IT department is a dinosaur and needs to go that same way. This is a great article about how, in order to make IT folks feel better, the term used when dealing with other departments was to ‘partner’ with them. This is an enabling phrase that used to work and be appropriate. In the age of COVID and digital-first though, technology being reactive and provided to serve isn’t where we need it to be. I bet due to Covid, we are all better at ‘IT’ and that’s how the future should look when it comes to how ‘IT’ should help us succeed in our jobs. It’s such an essential part of everything we do now that it can’t be managed centrally. Sure there still needs to be technical folks to help manage our servers and other ‘IT’ issues but the fact of the matter is, it’s even more important to be strategic with how to handle IT since it’s not just a department we dump on because our email frozen anymore. Remember that one of Sino Auto Insights’ tenets is: All companies are becoming software companies. I guess we can also say that ALL companies are becoming IT companies. - A terrific analysis about the American EV tax credit expansion and Build Back Better plan from someone who is not. A bit of background with this. Johan Bracht, the author of this OpEd reached out to me just over a year ago interested in interning for Sino Auto Insights. He’d seen me quoted in a few articles and signed up for my newsletter and thought it was decently thoughtful analysis (I think?) of what was happening in and around the China/global EV sector. We couldn’t afford him at the time but thought it was great that he was interested enough to reach out so we’ve kept in touch checking in periodically to trade notes or just see how the other was doing. He DM’d me today with a link to the article along with a note about how I helped inspire him to move further into this sector. From HIS thoughtful analysis and commentary about the plan and its inadvertent (but perhaps not so) (potential) negative effects on our northern and southern trading partners. It looks like Biden may have a clean-up in Aisle ‘battery manufacturing.’ But at least the US has recognized it needs to get off of its ass if it’s got any chance of being a competitor in the EV space. Johan – terrific piece buddy! JUST THE NUMBERS - $10K. The price for DeepRoute-Driver 2.0, an L4 autonomous HW/SW stack stuffed with LiDAR, cameras, and other sensors developed by DeepRoute, an upstart in the China AV space. They do NOT lack in ambition and believe their system is already better than Tesla’s FSD system. As I’d mentioned in my previous newsletter, the faster cost/mile can go down so that the overall price of the robotaxi could be a manageable <$40K then we’d see all kinds of pilots launched across China. It would accelerate the push towards point to point L5 autonomous although for now, it’s still >10 years out. So it’s still a matter of time, but if this system is accurate, reliable, and consistent, not as much. - 5K. That’s the number of orders the SAIC/Cadillac Lyriq has received since its launch on November 17th. These are likely non-binding deposits that can be canceled but I can’t say for sure. Either way, that’s a pretty impressive number for a car that’s not to ship to customers until at least Q2’22. - 5M. That’s the 2022 forecast or NEV sales from Ouyang Minggao, the EVP of the China EV100, a nonprofit thinktank whose aim is to boost EV adoption in China. That’s a MASSIVE number.