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Fairness Pledge, BYD & Tesla Setting the Pace, US / China Tightening More Screws - SAI Newsletter 26

Updated: Jul 8, 2023



 

Happy birthday America! I am currently in Seattle right now after having spent a few days in Vancouver, CA visiting some friends so this newsletter will be short and sweet. I wanted to still highlight a few things that happened this week that caught my sunsoaked eyes. There was a pledge from some 16 automakers to not intensify the price war in China. The language they used was not clear and there are no consequences for breaking the pledge so for those wondering whether or not it’s meaningful, it’s not. Not a day after that big pledge we see VW slash pricing on its ID series vehicles. Tesla didn’t reduce pricing so perhaps it still believe its ‘honoring’ its pledge, but it did increase referral incentives to promote the sale of its products. Pledge = meaningless. Cutting prices isn’t the only tool in the toolbox, there are other ways to make your product ‘cheaper’ or more attractive than your competitors.’ From a financial perspective, think same pants but different pockets. CHINA EVs & MORE We had our show yesterday so it’ll be posted for your listening pleasure next week. We will be back on it next Friday AM for those wanting to join the live show. For those that can’t join the live show, I invite you to listen to our recorded China EVs & More episodes at this site. And as always, we appreciate any feedback that will make the show better. Also, if there are any companies you want our thoughts on, let me know. QUOTED / INTERVIEWED CNBC. Friend of Sino Auto Insights and journo Evelyn Cheng wrote a great piece on Denza and the launch of its new N7 premium crossover / SUV. Recall that Denza is a BYD brand that is partly owned by Merc. It’s been slightly under the radar but with the N7 is having its coming out party. BYD fully expects the N7 to do some damage in the segment that the Tesla Model Y and NIO ES6 play in. It’s worth a read for those wanting to see how Model Y sales could be weakened and how BYD is moving in other ways outside of its signature brand. NIKKEI ASIA. CATL will be launching mass production of cells out of its Arnstadt, Germany factory that it began operations in late 2022. It’s CATL’s first battery plant outside of China and it’ll be a quite strategic factory that will supply a few of the notable European OEMs. I spoke with Jens Kastner for his spotlight on the factory that was built with an almost $2B investment. It will initially supply 14GWh of batteries each year. The article highlights its partnership with a German battery research firm to study how to prolong a battery’s useful life. Jens also points out a few of the challenges associated with manufacturing in Germany including having a difficult time recruiting for the job openings. That means that this factory won’t be running at 100% for quite some time. DR. A special treat for my Danish friends, an article about Chinese EVs. I spoke with Philip Róin for his piece on EVs and how they’ve ‘shocked’ the German automakers. A bit of context, Denmark doesn’t have any real automotive history so effectively all of their vehicles are imported from Europe. This creates a dilemma for those brands that have historically been dominant and gives the Danish many more choices when they do decide to transition to an EV. Philip does a great job of capturing the current environment for those interested in clicking and can reach Danish. BYD BYD is setting the pace for the rest of China EV Inc in June. With total NEV sales of 251,685 BYD continues to smash its own records. To break it down: BEVs = 128,186 PHEVs = 123,489. So for the purists, BYD outsold Tesla on BEVs alone in June. Yep, not counting PHEVs. TESLA - Tesla price cuts achieving what was intended. Tesla crushed June sales and Q2’23 sales. 93.7K in June and 247K in Q2’23, it’s best quarter EVER in China. The only asterisk on that would be that BYD is doing just as well. Together they are dominating the China market leaving at least a dozen other brands across the mass market and premium segments to battle for much smaller pieces of the pie. Also important to remember is that not only is there demand, but that Tesla and BYD are breaking records on the production side in order to supply that demand. That’s a killer combo that not many other would be able to do – even if they could get ~94K people interested in their products. NEWS THAT GOT OUR ATTENTION THIS WEEK - The US govt is considering restricting cloud usage or access by Chinese tech & AI firms. It takes the most advanced silicon from companies like Nvidia and Qualcomm to train AI & ML models, chips that Chinese companies do not have the capabilities to design and fab on their own yet. The US had restricted the sale of those most advanced chips to China but want to close any loopholes that would still allow China to utilize those chip’s capabilities without having to purchase them. One of those ways is to utilize a western cloud service that uses that silicon in their servers. This would be another escalation on the US side that China will definitely NOT like. And a small retaliation may have already been announced (see next post). - What seems like a response to rumors of the US further restricting AI chips for sale to Chinese companies, China restricts the export of two metals that are used in fab’ing semiconductors. The initial read from several companies including TSMC and Intel is that it’s not going to materially affect their current operations but they’ll ‘continue’ to monitor the situation. I just don’t see any off ramps that would allow China and the US to de-escalate the current dispute. This at a time where it’s essential for China to attract further investment by foreign entities. This seems more warning shot than anything else. TRENDING ON SOCIAL MEDIA - The recently launched G6 to help get XPeng to 20K sales / month by the end of this year? That’s what Brian Gu is hoping for based on the initial sales and interest XPeng is seeing from consumers. This would be quite the turnaround for XPeng who’ve struggled with boosting sales with a few of their ‘most’ important vehicle launches in the past. The China market so far still has no let up on competition and or aggressive pricing and I don’t really see that changing as a number of companies are fighting for their existence and will pull out all the stops to keep their factories running even if just a little. BY THE NUMBERS - 400K.That’s how many Li Auto vehicles have been delivered to customers to date. Quite an amazing accomplishment and they’re only gaining momentum. _________________ 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 global automotive and mobility sectors. 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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