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Elon's Distortion Field Weakening, CATL & Ford Battery Co-Lab, Smaller EVs WINS - SAI Newsletter 45



 

As the year winds down, we see that Elon’s and by proxy Tesla’s reality distortion field has been showing signs of weakness. He sold another block of shares and now owns just 13% of Tesla. Quite a few of the Tesla STANs are also starting to waiver a bit. It’s likely because they believe that Elon is taking money out of their pockets – Tesla shares are down >60% this year. An update on last newsletter’s Ford post about Suzy Deering leaving. As many know Ford split their company into two – the forward-looking Ford Model E division and the current ICE Ford Blue division w/ Ford Blue eventually going away. Well, I was told that Suzy was CMO of Ford Blue ONLY which is again a bit of a headscratcher since she’s the one with the Silicon Valley and digital marketing cred. Again, I am sure there were many reasons why Suzy left but to put her in charge of the side of the business that is going away would make me think it’s a pretty dead-end job. With all of that being said, I believe everyone can learn new skills during any part of their careers but to think that ALL the executives on any legacy team can get up to speed on batteries, chips, SW/HW, O2O, digital marketing, social media marketing, machine learning, data mining & analytics, charging and autonomous driving while flipping supply chains from EU/US to China during the biggest disruption in the industry’s history is a bit of a stretch. As we get into 2023, I hope to see some new blood at many of these legacies since that’s the only way they can really ‘change.’ Do I think the current group of CEOs at the global legacies can navigate the massive pivot – I am not so sure. I was always long Toyota and thought the company was a machine, but the CEO of Toyota thinks it’s too fast too soon to be making the full commitment to EVs. The dirty little secret is that he’s right, but that’s where China is going and where China goes, the companies will follow. What he also isn’t telling you is that Toyota is one of the least prepared legacies to make the pivot. Currently, I think BYD has taken over that status as a ‘machine’ that keeps on chugging along as everyone else ebbs and flows. I’d add that Akio Toyoda might be one of the few leaders that isn’t able to lead his company through the transition. Let’s see how Toyota progresses now that they’ve FINALLY made the commitment to pivot. CHINA EVs & MORE We will host our live Twitter Spaces tomorrow at 3pm EST. For those that can’t join our live Twitter Spaces room, the China 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. WHAT GOT OUR ATTENTION THIS WEEK - Tesla launching another factory in MX? Perhaps, but this seems like posturing and negotiating through the media. They’ve kicked around the idea of building another Gigafactory for some time including doubling down on Shanghai and negotiating with India and Indonesia. They’re likely leaning toward a lower cost country so that would mean the US/Germany/Canada and looking at a region where domestic sales could take up the lion’s share of capacity. The challenge with South and Southeast Asia is that vehicles sold in those regions would need to be priced well below >$30K to get any type of volume and with the Inflation Reduction Act restricting funds to North American built components and EVs, you better believe those requirements are also playing into the calculus. For now, what’s more pressing is what Tesla will do with the current capacity since demand for their products in their largest market China has softened substantially. - Western media starting to catch up? This article posted on December 19th and is all about the Baidu Apollo pilot robotaxi service in Yizhuang, a district in southeast Beijing that specializes in autonomous vehicle testing and pilot programs. Something I've covered in past newsletters. For years now I’ve been sounding the alarms about China EV & AV Inc’s readiness to take on ALL comers from the US, Europe, Japan and Korea. The western media is finally also starting to look beyond its own borders to educate themselves on this stuff. I want to be clear that my journo contacts that reside in Asia mostly know about this, but they’ve got to cover so many different topics that it’s tough for them to stay on top of the constant barrage of news for their western counterparts. But we are now seeing more coverage of Chinese companies and what they plan to do in the EU and yes, even the US in the coming years so that’s a net positive. Now the question becomes, is the legacy leadership paying attention? As for the Baidu pilot, I couldn’t download the app to call for rides myself because the app isn’t available to foreigners. Because of this, I was graciously invited by the Baidu/Apollo team multiple times to check out the depot, speak with the engineers, test out a few of the robotaxis and even get a glimpse of the RT6, it’s L4 level robotaxi that will launch in 2023 that’ll be a gamechanger due to its affordable ¥250K ~price point. Baidu plans on being a long-term player in the space so look for continued aggressive movements by Robin and the Apollo team. - Brand #3 for BYD. This in addition to their (ultra?) premium brand Yangwang they announced earlier this year. According to BYD, it’ll be a ‘professional and personal’ brand whatever that means. It sounds like they’ve not sorted out the exact positioning yet nor whether it’s China ONLY for now or if it’ll be global from the jump. I’ve been told that they’re not letting up on their ambitions even if they’ve pushed out entry to the US market. They now sell in ~35 countries since entering Norway last May. There will be growing pains, but I look forward to tracking their journey. They seem to have the ‘mass production’ thing sorted out, which has tripped up many of their counterparts but the international expansion into so many countries in such a short period of time is bound to create some fits and starts. What BYD have going for them is the EV sector is growing globally now and their products are built for the mass market and if they keep pricing outside of China as aggressive as inside, they should be able to penetrate many of those 35 markets successfully. Bold prediction: BYD Atto 3 becomes a Top 5 EV in EU by 2024. - Ford + CATL in the US. Seems like the two have been in cahoots about how to get around the Inflation Reduction Act (IRA) requirements for some time and are sending out trial balloons to see what the reaction will be like. Ford and CATL are also likely working behind the scenes to influence more of the language before the ink on the official details/requirements dries. What seems to be very clear here is that GM and Ford CAN NOT hit their production forecasts for the US without either BYD or CATL’s help. What makes this particular case even more interesting? Ford already has a relationship with BYD in China – they supply Ford with NCM batteries for the locally manufactured Ford Mach E. Why would Ford want CATL to supply them in the US? It could be price of the cells, or maybe Ford can’t or doesn’t want to use the BYD blade batteries for its vehicles? BYD did burn them a bit in China when they couldn't deliver cells to Chongqing during production launch of the China built Mach E. - Redwood Materials, the US’ (and I believe the worlds) largest EV battery recycler has announced the 2nd US factory that will build cathodes. An EV battery’s cathode is the biggest determinant in a battery’s cost, performance and environmental footprint. This is EXACTLY the reason why the US govt. pushed for the IRA to be signed into law. I think we would’ve missed out on these types of investments/commitments, in this case $3.5B, and this factory would’ve been put in Europe or Asia. - CATL is making batteries in Germany O-fficially. Specifically it’s located in Thuringia and a small factory (for now) compared to CATL’s Chinese factories – 14GWh. I think the small-ness was by design since a LARGE factory would’ve likely raised some red flags and sounded some alarm bells. This way they can enter the market without much fuss and slowly but surely invest further to build out the factory completely and add capacity. With plans for North America entry dialed down a bit, remember they are still planning to manufacture cells in a Ford owned factory in MI, they’ll lean heavily into Europe to make up for some of the production they were looking to build out in the US. QUOTED/INTERVIEWED - CNN Marketplace Middle East. I spoke with Jon Jensen of CNN in a video interview about Abu Dhabi’s Bayanat, who’ve launched an autonomous vehicle/robotaxi service there, what it means for Abu Dhabi and what it signals to the world. - Insider Business. I had a nice chat with Tim Levin for his deep dive on Foxconn’s EV ambitions and whether we should look at them as a serious player in the space. My thought is to NOT count Terry Gou and team out! TRENDING ON SOCIAL MEDIA - XPeng plans an aggressive product rollout in 2023. A refreshed P7, their flagship sedan, a coupe SUV and an MPV. The SUV looks like it’ll be the little brother to the flagship G9 that was recently launched this year to mixed reviews. If successful, this could really help pull XPeng out of the hole they dug themselves into in 2022 with a slow rollout of City NGP, soft demand of their G3, P5 & P7 and initial slow sales of the flagship G9. - NIO will build an ultra luxury sedan aimed directly at Mercedes EQS/Maybach customers in China. It’ll be >¥1M (~$144K) and will likely do all the things that the Merc is supposed to do but do them better. Remember what I said about Germany Legacy Inc needing to sharpen their pencil and get much more aggressive with pricing? This is why. Merc needs to step up their development of their flagship EQS or that $30K haircut it gave the car in China in November will be just the beginning of (bad) things to come. - HiPhi Z deliveries to begin in Jan ’23. For those who’ve not seen it yet, it’s about the size of an NIO ET7 but much more cutting edge and technology focused. This couldn’t’ come at a better time for HiPhi who’ve recently seen its 1st model, the HiPhi X SUV’s demand soften over the last few months. Sales of the Z will go a long way to determine whether this level of cutting-edge design/technology really resonates with affluent Chinese consumers, especially since Jidu Auto will be launching in 2023 as well. Since it’s in the premium segment AND it’s a coupé/sedan don’t look for it to hit 10K/month type of sales. - NIO launches its first NIO House in the heart of Germany Legacy Inc. Berlin to be exact. This is the 2nd NIO House in Europe after Oslo. It’s gotten a lot of positive press and good coverage on social, but the proof is in the pudding. Can they turn this positive momentum into sales in 2023. Let me assure you that it won’t be due to quality or design if the brand doesn’t immediately resonate. But Li Bin is looking much more long-term so look for NIO to take the ‘slow and steady wins the race’ tact. I also have this feeling that ’23 will be a year where the Germans really twist themselves into pretzels trying to re-define who they are in the German, US and China markets with China and Germany positioning being at odds with one another. GET SMARTER - How to really accelerate EV adoption in the US. And relieve the stress of supply constraints which pushes the prices of EVs even higher. The answer is smaller, more efficient vehicles with smaller battery packs (<50KWh) that need less time to charge but also working towards faster chargers so we can get wait times down closer to gas refill times. Here’s the thing. I’ve been in the US now for 4 months and ALL I see are REALLY big cars (SUVs and pickup trucks more precisely) w/ 1 person in it, normally the driver. There’s a BIG reason for this – the legacy automakers make a TON of money selling bigger and bigger cars to consumers. The profit for GM on a Chevy Tahoe is well north of $10K! the Ford F150 is ~90% of Ford’s total profits! A Jeep Grand Wagoneer starts at $88K! Remember I told you way back when that automakers are the best marketers because they convinced us that spending that $88K for one of their products, although we only use it on average about 5% of the time, was a good investment? They’ve been at it again with convincing us it’s safer, 'freer' (as in freedom not price) if we drive HUGE trucks and SUVs. There are some folks where Tahoe’s and F150s are practical and useful but that % is tiny relative to the number of owners, but for the others, assuming that we are up about 16hrs/day, we spend more time on our iPhones (~15%) each day than we do driving our cars! For this mindset change to work though, we have to change habits and how we think. I may be oversimplifying this and I believe ‘range anxiety' is real for many, but it's been pushed by the petrol lobby and automakers to push out EV adoption since both are clearly not ready to profit from the disruption. But this is our chance. HUGE investments in charging infrastructure increased products and adoption will lead to better educated, more aware consumers that don't need 300 miles of range for a car they're barely in most of the day. The Inflation Reduction Act is the largest infrastructure/clean energy investment we’ve ever made as a country. The legacy automakers are now mostly all on board to switch over as well. If we can change the narrative on big cars and believe that we can get the charging speed technology right in the next few years, this SHOULD be the way forward. Changing powertrains just isn’t enough, we need to do more. BY THE NUMBERS - 66K. That’s how many electric US Postal Service mail delivery vehicles that will be purchased by 2028. BIG number and a bit of a 180 from the original plan to still purchase a bunch of ICEs. If the Post Office is moving to clean energy, expect adoption to increase pretty significantly post 2023. Speaking of 2023… - 76%. That’s the percentage of >900 global automotive executives surveyed by KPMG that are concerned that inflation and higher interest rates will negatively affect on sales and consequently EV adoption in 2023. This is from the annual KPMG survey and is less optimistic than last year’s survey which comports well with the current fragility of the global markets. A couple of other notes that I thought were interesting/headscratchers. Of which companies will lead the EV sector in 2030 – BMW & Audi were ranked 2 & 3. I don’t know if we’re referring to the same companies but the Audi & BMW I am following can’t seem to get the EV side right in their most important market. This same list has BYD 7th. It seems to be weighted heavily to the West with >300 execs surveyed from North America or >1/3. This when China is the world’s largest passenger vehicle market? C’mon KPMG we can do better than that, right? Why automotive? That’s very backwards looking if we’re talking 2030. I also think we’re asking the wrong question. By 2030, vehicle sales isn’t going to be the most relevant KPI for health of an automaker. Who will be the most impactful perhaps? How about market cap? Perhaps next year, they can frame it ‘Most impactful mobility related company’ and include companies like Amazon, Huawei, Uber, Waymo, Cruise and a few other tech companies? I promise you they will play a LARGE role in the space by 2030. I know a few KPMG partners subscribe to this newsletter, so I hope you take this to heart? Also, if you’d like to partner on amending the survey, get in touch! - 1.5 years. That’s the current lead-time for delivery of the $300K, hand-built Cadillac Celestiq. For those wanting to learn more about the bespoke vehicle that supposedly has clients like Lenny Kravitz, friend of SAI, John McElroy interviewed the Chief Engineer for the Celestiq that you can watch here if you’re keen on learning more about the nuts and bolts behind the Celestiq. As I’d mentioned in a previous newsletter, I love the boldness and ambition of the Celestiq. I even like its awkward shape – as long as team Cadillac can execute on the halo vehicle’s promise. We’ve heard this record play before but is it different this time because German Legacy Inc is struggling to digitize their products? We will have to wait and see. INTRODUCING - Allow me to RE-INTRODUCE MYSELF. Most of you who’ve read this newsletter know very well about the Wuling Hongguang Mini EV, but you may NOT know that Wuling launched its first global car the Wuling Air EV to the Indonesian market in August before it made its China debut. It is officially a global car since it’s now available in China. For those wondering, think a higher spec’d Wuling Hongguang Mini EV. It’s about 2x the price of the Hongguang Mini EV which makes its still <$10K in China. In Indo, it starts at $15K See my above post and laugh all you want. Wuling has sold over 1M vehicles already this year and is set to become an even bigger player in the micro/mini EV space as more countries adopt clean energy policies, especially those in Southeast & South Asia. ------------ 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 Team

 

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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