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Final Week of MOBILIT/E, XPeng Gets Into AVs, NIO Gets Into Phones - SAI Newsletter 7


We are into week #2 of the MOBILIT/E Conference and so far we’ve had some amazing discussions across a number of different topics. I was able to moderate a number of them which was great and meant that I got to listen, learn, and offer my opinion and not have to catch up with the recordings later on! Turnout has been fantastic and we’ve gotten tremendous feedback from both the audience and the participants. I am not only learning more about subject matter that’s near and dear to me but I am learning so much about what it takes to successfully pull off one of these massive events. By the time Friday rolls around we’ll have had over 75 participants, 33 hours of content, and over 3K registered for the events so Paul and I believe it’ll be one of the if not THE biggest mobility event of the year. And we are looking at turning this into an annual conference, eventually, live when the world is ready. To make it easier on you all, here’s a brief list of the panels this week still to look forward to: Today 3pm GMT - Commercial Trucking & Transportation 4pm GMT – Company Spotlight: Sixt 4:30pm GMT – Shared Vehicles Thursday 3pm GMT – EU EV Policy 4pm GMT – Smart Cities 4:30pm GMT – US EV Policy Friday 2pm GMT – The Future of Mobility 4pm GMT – Stellantis Keynote 5pm GMT – Concluding Forum For those interested in joining any of these discussions, click here to register: For those that are interested, but the times are inconvenient you should register anyway in order to watch the recordings after they’ve been posted. The news cycle picked up a bit in the mobility space as you’ll see down below but it’s still a bit muted due to the Olympics having been just closed. Pretty quiet Olympics I must say for someone that is living in the city that it took place in. I didn’t get to see any of the athletes and barely watched any of the events live on TV. We are T-8 weeks from the BJ Auto show so within the next couple of weeks, watch the breaking news get dialed up pretty hot and heavy. Please join Lei and me for this week’s EVs & More Twitter Spaces room – Thursday, 02/14 – 9pm EST, Friday, 02/25 - 10am China local time. 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 - Tesla looks to offload capacity, get more vehicles on the road, and consequently feed its ML tool by leaning into fleet sales. When we hear the word ‘fleet’ in the car world, many of us think ‘rental’ car and low residual value but this was before Tesla made it cool to partner with a car rental agency like Hertz. Fleet can also mean a company’s set of vehicles – but think bigger, think a govt’s entire fleet of cars. President Biden made it a goal of his administration to convert all of the US’s govt vehicles to electric. That’s 600K cars! If Tesla got a fraction of that business, that would be a good portion of capacity that is guaranteed to be occupied which creates even more flexibility on what to do with the rest of the leftover capacity. Now, think if Tesla was able to set up fleet contracts with other countries – it could mean an entire Gigafactory’s worth of capacity would be dedicated to that segment. Come to think of it, what have I always posited? That Elon would be willing to sell his cars at cost to get more of them on the road and enable more of the Tesla revenue to come from services – this makes too much sense for them. Expect Tesla to perhaps de-content these ‘fleet’ vehicles and then price them aggressively. But knowing the Biden administration, they’ll likely require that the EVs use union labor to build the vehicles - SMH. - This isn’t just a bad month for Tesla, but Elon in general. There are accusations of animal cruelty, putting up with racism at the Fremont factory, vehicle recalls, and a few more major issues as well. The thing is and I’ve said this before, Elon and Tesla have this reality distortion field that surrounds them. Perhaps it’s because the Tesla share price ascent has made a lot of his followers rich so they only know to defend any negative press about Tesla – at ALL costs. I have a feeling he’ll get through all of this just fine, thank you. But where there MAY (notice I did NOT say it WILL) be some lingering effects - FSD seems to have more and more detractors. This makes the Tesla STANs dig in further but if more reasonable people speak out, will it burst their valuation bubble? I bet it’ll at least take some air out of it. - Tesla playing catchup in China on a feature that’s been around for other EV makers – Karaoke. Automakers that have had the function here for quite some time already: Li Auto, NIO, XPeng, BYD just to name a few. I wonder if any of the traditional automakers could just flash their software and have this feature magically appear? Yeah, I don’t think so either. - BerlinGiga challenges mean that Tesla is shipping RHD Model Y’s from ShanghaiGiga. With the official production launch of BerlinGiga still in limbo, ShanghaiGiga is stepping up by manufacturing vehicles for the UK market that will surely be handed over to BerlinGiga once that officially comes online. This isn’t as big a deal as one would think since Tesla is supplying Japan, HK, Sing, Aus with RHD versions of their vehicle as well. There’s likely a good % of their monthly production that’s committed to building RHD cars. And if you’re wondering, it’s not that BerlinGiga isn’t ready to go, it’s that the local govt is holding permits to allow building vehicles for actual customers. That’s a lot of burning cash in Berlin for a factory that’s not generating any revs. IN THE NEWS - XPeng sets up an autonomous driving subsidiary to take on the AV startups. So not only is the membership of Club - EV Inc getting much larger, it seems that AV Inc is still attracting new entrants as well. This totally makes sense for XPeng since they are obviously already building cars and have total control of the process and speed at which they commercialize. XPeng also has the necessary capital to ensure that it’ll continue to get funding (as long as the share price doesn’t fall off a cliff). DeepRoute CEO Maxwell Zhou mentioned in our last MAX podcast that they have no plans to manufacture their own vehicles and that they’d exclusively partner with OEMs to get more product on the road but he may need to rethink that strategy if only to play defense. We can assume that the traditional automakers are also working on their own versions of de-contented vehicles to use as ‘robotaxis’ so long as their HW/SW stacks are localized. - A clear theme here. Rumors. Spinoffs. Extracting value. This week we’ve heard rumors that Jim Farley is evaluating whether or not to spin the Ford EV business off. There was also a rumor about Volkswagen looking to spin off Porsche, arguably the crown jewel in its portfolio of brands. This rumor has been around for ages but this time it could be different. VW Group is under extreme pressure due to a lagging share price and weakening ICE sales in China. The squeeze is on as well since their EV sales aren’t healthy enough to make up for the losses. We will see more of these ‘rumors’ throughout 2022 as investors look to ‘extract’ value from the varying operations that big, automotive conglomerates normally THE MOST INTERESTING THING THAT HAPPENED THIS WEEK - NIO – The mobile phone maker? This has been in the works for quite some time but it’s finally out in the open and on paper, it makes total sense. But practically speaking I am not so sure. As if focusing on domestic growth, international expansion AND two new vehicles wasn’t enough, Li Bin wants to dial up the degree of difficulty by also looking at getting into an entirely new business? Where the high-end of the market is dominated by the largest fruit company in the world? Who is known for not playing nice in the sandbox? There’s no lacking of ambition from this management team which I admire but I am not sure it makes a whole lotta sense, especially if they’re just going to repackage the Android OS. Will folks outside of China want a NIO phone? I am fiercely loyal to my iPhone so to make that switch, especially to an Android environment - hard ‘NO’ for me. If they can pull it off though, it could possibly mean that they out-Apple …well Apple. - Rumors swirling that Volkswagen would acquire Huawei’s robotaxi division. Volkswagen has been the subject of a few of the juicier rumors the last couple of weeks. I think acquire may be too strong a word for what we’re hearing they’re in discussions about. A couple of things that have crossed my mind – This is clearly a China ONLY solution since they’ve invested a lot of time and effort already with Argo in Europe and the US. Add this point to GM’s investment in Momenta late last year, and it seems that the foreign automakers believe that only having local partners will allow them to launch any type of AV service, passenger or commercial. Finally, and part of this is my need to play some catchup and do the research – Do we even know if Huawei’s HW / SW stack is any good? They’ve never been that involved in the auto sector prior to starting this department as far as I know. Next, Huawei has ONLY partnered with local Chinese automakers so at least until now, they’ve not been able to convince a foreign automaker that their solution is superior which makes me wonder. I do know that Audi and Huawei have a relationship that goes back a while but this is a completely different animal – Did Volkswagen look at all of the available dance partners and think that Huawei was the ‘best’ of the rest? Huawei’s stack could be legit. Or it could be trash – let me do some digging and find out which one it is. GET SMARTER - We know that China is the 800lb gorilla when it comes to batteries. We also know (or we should know this anyway) that chips are controlled mainly by TW & the US (with the exception of a few EU firms). That should ensure that neither party would use that leverage to disrupt each other’s economies, right? You’ve heard of that analogy of the duck on the pond that looks as calm as can be above the water but under it their feet are paddling like crazy? Well, we are getting to that point. China does NOT want to do anything to the US that would cause the US to inhibit their ability to purchase and import chips from the West (or literally the East) and the US needs the rare earth metals in order to manufacture batteries. Metals that China owns most of the mining rights to along with the refining capacity. This is a race, plain and simple. A race for independence from one another. This has more implications than EVs and batteries too. Think defense & military. And to be clear here, this is where – Chips > Batteries The US has been asleep at the wheel for the last several years when it comes to EVs & batteries so the US govt. is racing to fund R&D, more capacity, and adoption but it’s still just the 1st or 2nd inning for the US. There’s a long road ahead to even be considered in the same zip code as China or Europe for that matter. So diplomacy and cooler heads need to prevail or there could be a major disruption – this is worst-case scenario but it’s a real scenario that needs to be planned for. Best guesstimates say that China is between 5-10 years behind the US in chip design, and manufacturing so can they close that lead in a shorter period of time? Maybe. The US is adding battery cell capacity domestically that’ll come online <3 years but unless there is some breakthrough, they’ll still need to rely on those rare earth metals to feed their EV growth unless an alternate technology like solid-state batteries makes a breakthrough. A lot of ways to look at this but it’s so hard to say how this plays out in the long run. But a likely scenario is at least two different chip worlds. TRENDING ON SOCIAL MEDIA - Jia Yue Ting tweets about a ‘production intent’ FF91 that will be revealed on Weds afternoon 4pm PST. If you see this in time, there’s a link to the livestream via the above link. I will be up and am curious enough to drop in. It’s not a popular opinion but I like the shape of the FF91 but it’s a BOAT! BY THE NUMBERS - 2B RMB. That’s how much Hozon Auto, parent company of EV brand NETA has raised as part of their D round of financing. Post money, this takes Hozon to a valuation of ~$4B USD. And they actually have EVs on the road. I am looking at you #FaradayFuture That war chest is getting pretty large and without question, NETA has larger global ambitions to pursue. —— 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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