Ford Re-orgs, Chinese AV Startups Stay Aggressive, Dealers Evolve - SAI Newsletter #15
First off, a couple of housekeeping notes. Am pretty fired up this week so it’s likely reflected in some of this newsletter. Next, I’ll be participating in an EV panel titled ‘China’s Electric Vehicle Revolution’ brought to you by ‘View From the Peak’ & ‘SupChina.’ It’ll be May 6th 7AM EST / 7PM China local time. The panel is part of an entire conference of online panels across various hot topics between the US and China and has a long list of great panelists. If interested in hearing a bit more about my perspective on China’s EV sector, you can sign up here. I’m definitely keen to listen in on a few of the panels myself. Now onto the newsletter. I received A LOT of positive feedback regarding the inclusion of my experiences returning to China and re-entering daily life so as we are likely ALL dealing with similar issues globally, just in different phases, I’ll keep updating you all here since it could very well be your experience, in the near future. This week Beijing had alerts up, specifically in Chaoyang District (朝阳区) because of a few new, related cases that popped up last week from someone returning from abroad. Initially testing negative after completing their 14 day quarantine period, they began exhibiting symptoms and tested positive for the virus a few days after their quarantine ended. Between the time they completed quarantine till they began showing symptoms, they’d made their way around Beijing and unknowingly infected a few others. Make no mistake, if someone is infected - ANYWHERE they go - the people they come in contact at those locations should really self-quarantine in order to prevent any flare-ups. That’s why it’s SO important to contact trace and test! Having been able to experience a country that seems to be trying to get past containment towards prevention a few (sobering) observations, if for no other reason than to put it out there so we can see how other countries may deal with these issues differently / similarly as they also move towards prevention, likely still 2-3 months away for many Western countries. Important to note: What may be considered ‘intrusive’ and / or in conflict with an individual’s civil liberties in the West may need to be amended, at least temporarily, for the safety of ‘society as a whole.’ - Traveling freely (with open borders and no restrictions) internationally may not ever return to the way it was and will likely be limited for quite some time slowly opening back up over the next 12 – 18 months. There are currently no universal criteria for screening passengers prior to getting on or off an airplane or crossing a border. Foreigners traveling to China is at least 2.5 months away because of (lack thereof) flights, ticket prices and border controls. Companies will re-prioritize why their employees need to travel. - Conferences will NEVER be the same – Zoom has proven that in a pinch things CAN get done remotely so major events like an auto show will be rethought. Has to be. Think about it, the folks that attend auto shows come from ALL parts of the world so the city / country would need to be ready and able to manage screening everyone and develop worst case scenario protocols. As more and more companies, transition to conference calls in lieu of face-to-face (F2F) meetings, the traditional roles and responsibilities for certain positions will likely be re-evaluated as well. - Manufacturing will change dramatically as we’d outlined in the Economist article from last week. Here is another good ‘EU version’ outlining how auto manufacturing has changed. I anticipate that many of these safety measures will remain in place for the foreseeable future. Due to the slower pace of manufacture you could possibly see car prices increase as sales slowly grow putting upward pressure on pricing. - Major sporting events will also never be the same. Attendance was already in a downward trend due to the increasing quality of TVs and ticket / refreshment prices and like almost everything else I’ve outlined; the coronavirus is just accelerating that drop. - Auto dealerships and the sales experience will change dramatically. See my deep dive below. - We should see an uptick in vehicle, e-bike sales as people remain uncomfortable with car-sharing, ride-hailing and public transport as the preferred modes of transport. AR / VR will become an even more important tool for ‘experiencing’ a product. For example - with Apple’s rumored addition of an AR camera to the new iPad, iPhone 12, expect digital agencies to experiment with new ways to reach consumers utilizing this tool to develop creative ways to engage with the consumer. The TikTok model of advertisement will become an even more important marketing channel due to the lack of F2F interaction with a traditional salesperson. For those focused squarely on the future, all these issues I’ve just outlined were going to be or were already getting disrupted, coronavirus pulls the timeline in and opens the field to startups that can be more nimble and risk embracing. Generally the coronavirus has created opportunities for re-inventing how to engage people, how to develop the right products and services, how to present your product or service, and how to move the sector forward, how to push yourself (your company) into a leadership position. It’s all there to be redefined if you want it bad enough. There’s a lot of lost revenue so expect a pretty nasty fight for those dollars. I have spoken with a few startups about their products or services that I thought weren’t yet ready for the bright lights but with the changing landscape, this could be their chance to shine with a bit of pivoting and cross selling. Time to get really creative – there’s A LOT of money being left on the table and it’s somebody’s for the taking! IN THE NEWS THIS WEEK: - Hydrogen fuel cells not dead, at least not in the EU for now as Daimler Truck AG and Volvo Group both specializing in heavy-duty, commercial vehicles agree to jointly develop commercial fuel cell systems. Goes back to past newsletters where I’d predicted that there would be a fork in the NEV road with commercial trucks pushing fuel systems and passenger vehicles sticking with PHEV and BEVs. - Texas crude future pricing went into negative territory this week. Too much oil and not anywhere to put it. - GM officially pulling the plug on its car-sharing service Maven. Again. This time it’s for real though …I think. The one service offering that GM had that points to the future and they decide to pull the plug because of the challenges in the market and difficulty in generating profits. Name me one mobility service right now that doesn’t have an issue with making money? No seriously, and I mean globally. - Voyage joins a growing list of autonomous vehicles (AV) startups testing their services on public roads in California. This list includes US and Chinese AV startups: Aurora, AutoX, Cruise, Pony.ai, Zoox, and Waymo. Bay area roads are starting to get pretty crowded with computer driven cars! - Didi raises $1 Billion USD from China’s Legend Capital and Softbank for their bike-sharing service called Qingju. Didi is looking to pivot into a mobility ‘platform’ and being the #1 ride-hailing service along with a strong (#1 or 2) position in bike-sharing would put them well on their way. Seems they’ve hugged it out with the Chinese govt. and are now playing offense. - VW is rumored to take a huge 30% stake in the #3 Chinese battery maker Guoxuan High-tech. If this deal goes through, it just reinforces VW Group’s ALL-IN bet on NEVs for the China market. As the #1 automaker in China, they’ll have to get affordable EVs online quickly or risk losing much of that share. That’s why it’s so important for them to secure a linear supply of batteries for their locally made EVs. TRENDING ON SOCIAL MEDIA: - You may have read in past newsletters that I am a ‘sneaker head.’ For those that aren’t familiar with the term, check this definition on Urban Dictionary. In honor of Michael Jordan’s ESPN series ‘The Last Dance’ that launched this week, a lot of media is reminiscing about Jordan’s run to 6 NBA Championships with the Chicago Bulls. Since I grew up in Michigan, I watched MANY of Jordan’s games and watched ALL of the Eastern Conference playoff games between Jordan’s Bulls and MY Pistons. As a sneaker head, I had to share this list that GQ published that ranks all of Mike’s Air Jordan’s. They did a decent job, but there are a few rankings that are suspect IMHO. Oh and I own about 7 pairs of them as well. - Byton is alive and doing well, thank you. At least they’ve built a few mules in their Nanjing facility. Whether they get them out the door and delivered to their first customers this year remains to be seen but this would seem to indicate that they’re going to try. 2021 selling in the EU and US, that timeline seems a bit more tenuous. Someone also whispered in my ear that we should check the dates on those photos to make sure they’re from the recent (read: last week or so) past. - The Triton Model H from Triton Solar with an estimated (by the company) 700 mile range. Triton Solar just needs $140K for the deposit. This is highly likely vaporware but I bring this to your attention so that you can avoid taking this seriously until you see it in real life. Not a likely occurrence if you’re not going to throw down that large capital outlay. PRODUCT / SERVICE INTRODUCTIONS: - Introducing the VanMoof S3 / X3. I’d seen their previous e-bike launches but at ~$3.4K, they seemed a bit pricey even if I thought the bike looked pretty cool. This time around they were able to sharpen their pencil to get the S3 / X3 down to a still pricey but not shockingly so ~$2K. I still think there’s plenty of room here for a sub-$1K bike that still checks the quality, reliability, range, weight and fun boxes. Do I have any takers? - This is NOT a product introduction. But it IS the first, decent, broad list I’ve seen for e-bikes that highlight each’s features but I haven’t seen that many all-encompassing lists either. As I gain a better understanding of what’s out there, I’ll do a better job of filtering these lists to make sure we get the best, utmost objective opinion without any known biases. Insider gets a kickback from the vendor if you link from their site and purchase one of their reco’d bikes. That’s called a conflict of interest. I think generally though that Business Insider does good work. That said, with prices ranging from $2.2K - $13.5K there’s a HUGE price range for e-bikes and until we get a quorum of e-bikes <$1K price range, I’ll just say this subsegment still hasn’t made it to mass market. — This weekly newsletter is a collection of articles I 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, I also provide a point of view that I hope educates and sparks debate. The Sino Auto Insights team
Ford offers up another reorg, reshuffling the same Ford ‘lifers’ that THIS time, will come up with a better way. A better way to address the future, a better way to consistent profitability, a better way to develop products and services. A better way to beat the competition. A better way to innovate. A better way to move faster. A better way.
Give or take, ~90% of Ford’s annual profits come from the F150. They sell >25 different models globally. That’s an issue and has been one for quite some time. More and more, Ford is becoming a regional automaker. Props to Ford’s for going outside the company to grab a CEO in Jim Hackett almost three years ago but isn’t it about time to also hand some of the strategy and ops decisions over to folks other than ones that only know how the business works one way? I am talking handing the reigns over to people that haven’t worked in the auto sector. EVER. Not everyone needs to be replaced but where’s the risk here? CEOs are paid ALL that money to make tough decisions and manage.
Maybe new blood couldn’t find a better way but at this point could they do any worse? It’s painful for me to sit here and watch this slow erosion of these once, glorious companies. I still think, if tough decisions are made now, there are still quite a few glory days ahead of these OEMs. This goes for ALL the OEMs, globally. Einstein is credited with saying ‘Insanity is doing the same thing over and over and expecting a different result…’ and isn’t that precisely what they’re doing?
When I was growing up in Pontiac, MI we lived across the street from a GM building. In the 18 years my family lived there, that building changed from Pontiac (brand) HQ > CPC (Chevrolet, Pontiac, GM of Canada) HQ > Powertrain HQ. There were at least one or two more that I can’t think of off the top of my head and it’s not worth me googling. All these changes were due to reorgs. There’s a joke in Detroit that reorgs happen every 3-5 years and that folks that can’t get the job done just get promoted so they’re not in the way of people that can. This may seem like a harsh criticism of these companies but I lived it and was a part of it so this is me just offering up some tough love.
Stepping off of my soapbox now.
As the US govt. provides monies to small businesses as they struggle to keep their doors open, some larger companies that you might not think of as ‘small business’ have also decided that they’d like a piece of that pie. In the age of social media, reality TV and the fact that anything that’s posted on the interweb lives FOREVER - some of the larger companies that do accept loans meant for the mom & pop businesses may be remembered for all the wrong reasons after the world gets past the coronavirus.
As Mark Cuban opined in an interview on CNBC – ‘That the companies that are taking the cash but shouldn’t are eroding their brand.’ I’ll take it a step further, the brands that aren’t ‘doing the right thing’ whether that’s building ventilators or delivering food to frontline workers and offering them free rides, people will remember.
They’ll remember enough that when this is all said and done, they’ll use their wallet to decide who was and wasn’t on the on the right side of this coronavirus. P.S. Shake Shack did indeed return their portion of the bailout. After they were social media shamed of course.
All quiet on the homefront until it’s not. Starting late last year with the launch of WeRide’s robotaxi service in Guangzhou, and Chinese New Year notwithstanding, there has been a consistent hum coming from China’s AV startups. WeRide’s announcement was quickly followed by Pony.ai’s $400M capital raise led by Toyota in February.
Not to be outdone, AutoX announces this week that they’re opening a tech center in Shanghai to manage and maintain their fleet of robotaxi’s after they launch their service later this year. One thing in common is that they all believe that China makes the most sense for them to focus on.
My insights are captured in this article written by CK Tan of the Asian Nikkei Review. Bottom line is that the US seems farther away than China from allowing the sector to monetize robotaxis and it may be easier for the Chinese players to compete with one another here than to do battle with the likes of Waymo, Argo, and Aurora on their home turf.
That said, I am excited to try out these services once they’re up and running. I was pretty impressed with WeRide’s service and that’s really created a set of pretty high expectations that I hope the other services can live up to.
Being in Asia, working with VCs, startups and SMEs here, we can identify trends, consumer engagement strategies and ‘potential’ new business models that have a decent to high likelihood of moving west. My general belief - By living in Asia I am able to ‘see around corners’ in turn helping my western clients develop products and services for their local markets, albeit likely packaged and positioned slightly differently. The auto dealer / vehicle sales experience is one prime example of this. To be specific, the evolution to the sales process and the dealer’s role in it that’s currently happening in China will also happen in the US and EU. And sooner rather than later thanks to the coronavirus.
China’s auto sector and dealer network don’t have the same strong ties that are common in the EU and US. Until recently in China, there’s not really been a market for used cars and outside of the Tier 1 cities, there may only be one dealer / brand that services an entire city.
Here, technology has really helped transform the ‘sales’ experience for the automakers, who now commonly engage their customers and ‘sell’ their cars through apps and / or microsites (aka T-Mall stores). It’s not unusual for customers, vehicle sight unseen, to sort out the particulars of the vehicle sale, including payment and delivery, through their mobile, in particular using WeChat.
In the west, dealerships have historically been a net positive for automakers as they’ve been the touch point to customers on an OEM’s behalf. But as consumer’s habits changed and the sales process went from exciting to a pain – the dealer’s role in the sales process has become a bit more muddled. Most people nowadays use the interweb and already know what features they want and how much the car they like should cost them.
IMHO, dealers now do more to stifle innovation than nurture it. You could even question where they really add value? One big reason for this is that outcomes and incentives aren’t aligned. Blame can be placed squarely on the dealers and automakers.
Now, I say this to try and motivate the dealer owners. This WILL BE your last chance to pivot all your assets, employees, facilities and land into something that can actually extend and communicate an OEMs brand and messaging, re-creating ‘an exciting’ experience - one that should come along with anyone willing to spend $30,40,60,80K. If you want to know exactly how the sales experience is changing in China, set up some time to chat with me – I can give you all the details you need. Chances are, with an open mind, some hustle and my help you could quickly incorporate some new ways to engage with the customer that’ll put you ahead of your competition.
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.