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Elon - Person of the Year, Toyota 'All-In' On EVs Now, Daimler + BAIC + Geely - SAI Newsletter 49


We are about 2.5 weeks away from 2022 - What a year it’s been! China has been smashing sales records and a handful of EV makers around the world have set themselves apart from the rest – market cap wise anyway. Then there’s Tesla which in just a few years has become one of the most important companies in the world. FULL STOP. Will next year be the ‘Legacies Strike Back?’ I thought I was going to do my end of year newsletter this week but I will push it out another week when I’ll highlight the Most Notable News in EVs for 2021. There will probably be a few things on the list that’ll surprise you so stay tuned for that! I also wanted to plant a seed about an event that Sino Auto Insights will be co-organizing in Feb 2022. For my early, loyal readers you may recall that we sponsored an event back in July 2020 called ‘Mobility 2.0’ so you could say that this event is a follow on to that but much bigger and better. This one is called Mobilit/e. It’s quite ambitious but so far we’ve gotten a lot of folks excited AND a bunch of great people that have already committed to participate. More details will trickle out in the coming weeks so if you are an individual or company that wants to get involved, please reach out! Cash is king. Securing battery supply is currently a pretty nasty challenge many automakers are dealing with, specifically in China where we’re about to hit 3.4M NEVs sold in 2021 including Xpeng which recently admitted that it’s having some challenges with battery supply for its P7 sedan. In order to secure linear supply, automakers are having to make pretty substantial upfront payments to guarantee their parts I am being told. This favors the cash rich companies and/or the companies with large credit lines at the banks. With the exception of a few EV first startups, that describes the legacies. It’s also the legacies that need more of the supply as well so this could be putting a squeeze on the smaller players. Look for battery pricing to perhaps increase in the short-term. The smaller players will have to beg, borrow, and steal to make sure their orders are shipped. Remember in the western world, we’re getting full into the holiday season when people’s focus tends to wander so supply chain teams need to keep bugging their suppliers for updates or until whole orders are shipped. NO assumptions should be made otherwise key shipments could get lost ‘in the mail’ and you’ll be chasing parts on Xmas Day into NYE. I was interviewed by Le Monde, one of the largest news sites in France about how China Battery Inc came to dominate the global market. A great piece by Simon Leplâtre that unfortunately for my non-French speakers is only in French. I google translated it and thought it went into great detail about timing, catalysts, and highlighting CATL & BYD as the two beneficiaries from the Chinese govt’s focus on building out the sector. You can have at the article here. Yesterday I had the chance to visit a company called Geek Plus who is located in northern Beijing just outside of city center. This is a tech startup (founded in 2015) that uses advanced robotics and AI to create solutions for warehouse and factory operations. Effectively they make smart, sorting robots. With Covid and the rise of e-commerce globally, they seem to be in the right business. The founding team is a bunch of Tsinghua University alums, China’s equivalent to MIT and a notable, early backer is Warburg Pincus. What their products can do is pretty amazing and if you’ve ever seen a video of an Amazon DC (distribution center), they make similar types of robots. Geek Plus builds all of its robots in Nanjing which is a couple of hour high-speed rail ride away from Shanghai. That factory has robots building robots and I was told it’s quite a site. I plan on having a look sometime early next year. The management I met with said that there are currently about ~40K of their Geek Plus robots in Toyota, Nike, Disney, Walmart, Mattel, Siemens and many other customer facilities around the world . Still lots of news coming out of the EV sector this week with the highlight of the week being NIO Day on Saturday, December 18th. The threw a teaser out on social media hinting at another car unveil and if that’s the case, they must’ve been co-developing two vehicles side by side à la XPeng with the P5 & G9. The event is being held in Suzhou just outside of Shanghai but alas, I’ll be streaming it from home. We (the Sino Auto Insights team) have too much going on and we need to finish the year off strong so I’ll sacrifice attending some of those events for the time being. EVs & More this week – 12/16 Thursday, 9pm EST/12/17 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 - Elon is Time’s Person of the Year. It’s hard to argue that he hasn’t had the most impact across multiple sectors over the last few years even. Elon is such a polarizing figure to many people. But’s that’s also his brilliance. Let’s forget for a second that his company Tesla pushed an entire sector towards clean energy. Elon privatized space travel - with reusable rockets! If I sold rockets to NASA, I’d probably have a decent-sized ego as well. Scratch that, I know I’d have an ego as your biggest room. It’s the STANs that believe he’s infallible that are annoying. His hubris, stubbornness, and ‘get it done’ attitude are his charm and really annoying at times. Also, many people don’t know that Elon isn’t a founding member of Tesla. He was an early investor who thought the management team or one of them at least was incompetent so he replaced them. And built on their idea. Now, I don’t think it’s right that Biden is favoring companies that support unions over non-union shops but let’s be clear here - Tesla has also been the recipient of plenty of money from the govt. Without it, Tesla would’ve likely have pushed itself into bankruptcy. But we’re here now. They’re still in growth mode. They have two new factories coming online next year. Tesla is worth more than the entire car industry combined. Think about that. Congrats, Elon. Keep doing you. IN THE NEWS - Rivian’s and consequently founder RJ Scaringe’s story. It’s an inspiring one. For those that aren’t familiar with Rivian yet, do NOT sleep on them. They’ve just started delivering their first product – the R1T to customers and so far it’s received some really good feedback. They’ll also deliver an SUV version called the R1S and a delivery van which Amazon has ordered 100K of. As of today, Rivian is ~$100B company, making them more valuable than GM & Ford, their US contemporaries. The ones they’re trying to steal customers from. Based on the product, the feedback I’ve heard from folks that have driven the truck and people I trust, they’ll likely succeed in moving some people over from the General and the Blue Oval. With that said, they’ve not even reached the point of manufacturing hell as Elon put it so there are still lots of challenges ahead for RJ & Rivian. But hurdle #1 & 2 seems to have been cleared easily 1. Designing a product that people will want 2. Getting it to Job #1. There will be headaches and growing pains ahead for the team – There always is. But for now, they and Lucid are the great American hopes (although Lucid is more Saudi than American) for China EV Inc. not leaving us in the dust. - Toyota is finally jumping into the EV pool headfirst after dipping its toe for the last couple of years. Some of the big numbers coming out of their President Akio Toyoda – 100% of Lexus brand products will be EVs by 2035. Toyota will invest $17.6B in battery technology. 30 EV models by 2030, the previous commitment was 15 by 2025. Much of these moves are going to be on the back of BYD technology too. This automatically makes them a formidable player in the space. Toyota’s attention to detail, their global footprint, buying power, leadership in hybrid technology all means that they’ll affect every part of the EV business. - get its driverless testing permit suspended by the California DMV after a small accident. It’s funny, at least one Chinese media outlet says that Pony ‘voluntarily pauses driverless autonomous testing in California…’ but the Reuters article makes it sound not so voluntary. The bottom line for now, Pony can NOT do any driverless testing in CA. It can still do testing with a safety driver though. Are Chinese regulators paying attention? Should what’s happening in CA have any effect on the testing status in China? - Yet another EV company is unveiled. The brand is called Niutron and this one is from NIU founder Li Yinan. This one was one of the worst kept secrets and everyone knew that he was developing an EV in stealth for the last year or so. He doesn’t have any day-to-day responsibility with NIU, the electric moped company he founded but is still their largest shareholder. The company is HQ’d in Beijing, yet another EV company that’s HQ’d here making BJ a formidable place globally for the EV space. Niutron will build its first product, a midsized SUV in Changzhou, where consequently NIU electric scooters and the Li One are manufactured. TRENDING ON SOCIAL MEDIA - The Detroit Auto show is back on the calendar for 2022. It’s scheduled for September 14-25th, 2022 and I’d love to be back for this but who can make that kind of commitment this far out? If there’s any way for me to make it, I’ll be there. I am anxious to see if it’s still relevant globally. I lean towards maybe not. Not unless there are some Chinese automakers that plan to have booths there. - A loss of 500K jobs because of the 2035 deadline that bans combustion engine'd vehicles in the EU. Now, alarming as that may be, PwC has forecasted that 226K new jobs would be created due to the move to EVs in the EU. So the net number isn’t as bad although ¼ of a million people losing jobs would still likely shock the system. 2035 is a lifetime away though so there’s still time to plan, fund, then implement a soft landing. The move to EVs is coming whether they like it or not so they can get on the train or wait at the station complaining about how you didn’t have time to get on because it was moving too fast. - ET5 to be unveiled at NIO Day on Saturday? Likely – and there will probably be at least one more surprise as well. NIO & XPeng haven’t seemed to have rested in its laurels and were back in the labs #GSD with seemingly back-to-back product announcements. For XPeng P5 -> G9. For NIO ET7 -> ET5(?) GET SMARTER - The pros & cons of hydrogen vs. battery-electric. Those that are unfamiliar with why countries (like China) and companies (like Toyota & Hyundai) are still trying to commercialize hydrogen, this Wired article spells out the advantages/disadvantages of the yes/no debate on hydrogen. The battery-electric horse has already left the barn. I totally see hydrogen generally being an alternate path for commercial vehicles since their size, where they normally go, how they’re used all play into hydrogen’s advantages. But like battery-electric, hydrogen is going to need a lot of help from the public sector in order to gain any significant traction in the marketplace. Since China is betting on hydrogen, that means it’s going to be viable. But viable ONLY in China? Maybe… JUST THE NUMBERS - $174M. That’s the investment that Vingroup is making to build a (eventually) 1M unit battery pack facility ~360km from Hanoi. They’ll use this capacity for their EVs and buses. The ones they plan on shipping to the US market. According to reports, it should be up towards full capacity by 2025. This is part of their ‘Three Pillar’ strategy of buying from battery cell manufacturers, partnering with established battery suppliers, and also investing in R&D to develop their own battery technology. These guys are serious and are worth keeping an eye on. I think they could be a formidable competitor on the low end of the market for Americans. - 47%. This is how much Volkswagen China owns of Gotion High-Tech from a transaction that was completed this week after it was announced last May. This should help VW with supply and diversify its battery supply. This could also scare off other customers to Gotion since VW holds a dominant position in the company. - 9.98% - That’s how much SOE BAIC owns of Daimler – parent to Mercedes Benz. Previously, it was only known that BAIC had a 5% stake in Daimler. Combined with Geely’s 9.69% stake in Daimler, China Auto Inc seems to have some pretty substantial sway over Daimler. This has to worry A LOT of people in Germany since Mercedes is one of Germany’s Big Three and a crown jewel of German industry. —— 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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