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Ford's BALLER Move, Nickel Prices Climb, NIO ET7 Blowing Up China Twitter - SAI Newsletter 9



 

OK, this is more like it! Mobility-related news is coming out in more frequency which means we’ve O-fficially turned the corner on the Olympics and are headed straight for the auto show. With the exception of this week which is the week of the all-important Chinese Central govt. Two Sessions meeting happening as we speak. Also, the backdrop of the tragic invasion of Ukraine that is pushing raw material prices higher and a chip & battery shortage threatening to extinguish the roaring fire that is China’s EV adoption momentum while creating a challenging environment in the US before a fire can even start there. We are now about 7 weeks away from Auto Beijing 2022 which is currently scheduled for the last week of April. Covid cases are starting to climb again in China so whether or not there will be limitations to the event is still up in the air. I am hoping that it will die down by then but it doesn’t seem to be getting much better, unfortunately. One thing I wanted to highlight this week was the China EVs & More MAX (ME #4) episode that just dropped today with Dr. Stephan Wöllenstein – CEO of Volkswagen Group China – as our guest. Dr. Wöllenstein was VERY candid about the challenges VW Group had in 2021 but also VERY optimistic about the future of the Volkswagen Group here as well. He talks about how Chinese domestic players have finally ‘made it’ and can now compete toe-to-toe with the foreign brands. But rather than me describing all of the juicy details, I invite you to download the pod and have a listen for yourself. For the China followers, it’s a ‘MUST LISTEN POD.’ And you can do that here. Some OEMs are starting to leak out small details of the vehicles they’ll reveal at or just before the Beijing Auto show as you’ll see below and the last couple of days has been all about folks test driving the NIO ET7 which will begin delivery to customers starting at the end of this month. Please join Lei and me for this week’s EVs & More Twitter Spaces room – Thursday, 03/10 – 9pm EST, Friday, 03/11 - 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 delivers another 56K cars for February, bucking the CNY trend of limited sales that hit most other automakers outside of them and BYD. That makes for 2 consecutive months of over 55K in sales with exports hitting ~40K in Jan & ~33K in Feb. Will the trend of delivering most cars domestically in the 3rd period of each quarter hold in March? We will find out in early April. Remember also that BerlinGiga is about to come online but will likely take a solid 4-6 months before fully ramping which means we won’t truly know the effects of BerlinGiga on exports until much later this year. Two things stand out here - Tesla’s ability to sell strongly in a notoriously weak month AND the fact that the supply chain issues don’t seem to affect them like the other automakers. Kudos to their materials management & sourcing teams! - Tesla talking out of both sides of its mouth, at least in the US? Tesla has been taking some heat from US safety regulators who are concerned about whether Tesla should be allowing its customers to use FSD since they’re not trained safety drivers. What we know – there have been a number of Tesla vehicles involved in accidents. Accidents that haven’t been fully explained by Tesla which means we don’t know the root causes of these accidents nor whether any corrective actions, like a SW update, have taken place. If you read the fine print, Tesla for certain has CYA disclaimer language on its website, licensing agreements, and through its official channels but Elon seems to contradict some of those disclaimers via his tweets and interviews with absolutely no consequences. In addition, Tesla STANs also reinforce the myth that FSD is ready for ‘primetime’ as a point-to-point, fully autonomous driving system. I don’t see where this ends the way Tesla wants it to. As an aside, they DON’T seem to have that same issue here since Elon is MUCH less vocal about FSD’s capabilities on Chinese social (I don’t believe he has any personal accounts on Chinese social media) so if he’s so bullish on his tech in the US but is pretty quiet about it here, what gives? IN THE NEWS - Pony.ai recalls three AV testing robotaxis? This is a first! In October 2021, while driving around Fremont, CA without a safety driver, an unmanned Pony.ai robotaxi hit a divider and ran over a sign, so NHTSA issued a recall and the ensuing investigation found that the SW had a ‘defect’ that affected two more of its pilot robotaxis. This is a reminder that not only are China-fornia AV startups testing their vehicles in the US but US AV companies are NOT testing them in China. Also, it highlights that it’s important that ANY accidents should be thoroughly investigated and robotaxis suspected of any failures be taken off the roads until it can be verified that the problem was identified and a robust fix implemented. See Tesla post above. - Intel taking Mobileye public. Mobileye is one of the quietest, busiest bees in the automotive space with their various versions of the EyeQ SoC (system on a chip) running on >100M cars. Intel will still own a majority of the company but when you’re thinking about the chip companies that’ll be powering next generation’s L4-5 autonomous robotaxis, you gotta throw Mobileye in there with Qualcomm & Nvidia. THE MOST INTERESTING THING THAT HAPPENED THIS WEEK - The big news from last week was the announcement by Ford that they would separate their company into halves. One half – Ford Blue would be responsible for engineering, sales, manufacturing, and the eventual wind-down of the ICE business. The other half – Ford Model e would be in charge of R&D, sales, and manufacturing of EVs and the launch of mobility services. This is a BOLD move from Ford and not just because every legacy automaker was already trying to figure out how best to separate the two seemingly disparate businesses but because they’re leaning into it. This puts pressure on the other automakers to do something similar and/or more extreme. The beauty of this? Ford has a much cleaner balance sheet than their large, legacy competitors. First, they don’t have that many brands in their stable. Next, most of their profit comes from one product that’s sold primarily in one market, the US. If you look at VW Group, Stellantis, and GM, their sales are much more distributed by region and by brand so decoupling could prove to be MUCH more challenging. The reason of course for separating the businesses is the belief that it will ‘unlock’ value from the forward-looking EV & mobility services business. And yes, Wall Street seemed to like this idea but wanted Ford to go even further and spin Ford Model e off completely into a separate company which isn’t going to happen, at least not for the foreseeable future. One other point I’d made during our podcast last week was that Doug Field effectively has been given the keys to Ford’s EV castle. Jim Farley had poached him from Apple likely with the promise of doing just that. For those that aren’t familiar with Doug Field, he started his career at Ford and then eventually moved over to Tesla and then to Apple. So he gets it. The bottom line is that his initial decisions are likely going to be met internally with much skepticism and fear. That’s IF he’s moving fast and breaking things. Whether he can change the culture of the future looking half of the company will largely play an outsized part in whether Ford will succeed or not IMHO. That’s a lot of pressure and weight on Doug’s shoulders. And we know that pressure burst pipes so… TRENDING ON SOCIAL MEDIA - Nickel futures pricing spikes and the London Metal Exchange halts trading. High-quality nickel is used to make stainless steel as well as a key raw material for batteries. Russian company Norilsk Nickel suppliers about 17% of the world’s high-quality nickel and due to the invasion by Russia into Ukraine and the subsequent sanctions by mostly NATO countries and the US, that 17% could be taken out of the system. If that’s the case, global battery AND (E)V production is in jeopardy. That and/or pricing will need to be reconciled. There’s no telling how long this conflict will last but let me assure you, between the chip, battery supply chain issues, and the raw materials pricing volatility there’s going to be nothing predictable about this year EV wise. Globally. - Posts about the NIO ET7 have flooded Chinese Twitter as the company released the vehicles for test drives and will begin delivery to its first customers at the end of this month. Let me say that it’s a looker with very few serious complaints about it so far. BUT that’s also because these social media folks want to maintain their access too NIO as well. I am in no hurry to get behind the wheel but when I do, I promise I’ll be as objective as I can be. But one thing seems to be true – the ET7 has raised the bar for the premium segment of EV sedans. And it seemed to be aimed directly at the Model S. There seems to be a new sheriff in town – at least in China anyway – and it’s NOT coming from the company whose CEO also makes rockets. Very interested to see how it fares in Europe, the original home of the performance/premium sedan. INTRODUCING - The Arc One electric boat. I’ve posted about this company and boat in a previous newsletter but now that it’s getting closer to actual customer delivery I think it’s worth revisiting. With investors such as P. Diddy, Kevin Durant and Will Smith, this startup has no shortage of star power backing it up. The battery pack is massive! 220KWh. That is supposed to give it enough juice to power it for a 4 hr. ride around your favorite lake. It’ll cost you though - $300K for the Arc, although the founder says that they’ll try to mimic the Tesla business model and start out at the high end and work their way down to the segment that focuses on mere mortals like me. It’s sweet looking and if you don’t have to sniff on that gas fumes while you’re wakeboarding, I say – YES, please! - A sneak peek at the flagship SUV, the Li Auto L9. It’s an EREV like its brother the Li One so Li Auto is still being a bit conservative with the powertrains for now. It looks nice but my first thought on these pics – with 5 ginormous screens and that HUGE windowed roof, how’s the glare from the sun on those screens? At 500K RMB (~$71K USD) it’s picking a fight with a lot of the moneymakers for the legacy automakers but somehow, I think it’ll do just fine. BY THE NUMBERS - $8.5B. What Pony.ai says its value is after revealing that it’s begun to raise a D round of capital at the $8.5B valuation. The amount of the current raise and who the investor(s) were wasn’t revealed either. One of the China-fornia companies, Pony plans to commercialize in both the US & China. Whether that can happen or not is another question entirely. - 500K. That’s how many EVs China exported to the rest of the world in 2021. Let’s break this down even further – Europe took on ~230K of those exports with MIC Teslas accounting for over 100K of that 230K. SAIC was already exporting to markets like SEA, Oz, and the UK with their MG brand so it makes sense that their numbers would be stronger as well. To hammer this home, SAIC holds a 50% share of the Thailand EV market. That’s a hold SAIC won’t easily let go of either. I’ve said this before and it may come sooner than even I originally imagined due to all of the global disruptions but with the additional manufacturing capacity being added here in China and costs of sourcing materials & manufacturing growing in the other regions, China EV Inc could really make inroads into the European and US regions via export. Herein lies the rub – my prediction is that there will eventually be overcapacity here in China, both on the battery and finished good sides, which increases the risk that China will dump that capacity onto the other regions. If you keep up with the global EV/AV markets as I do, you know that the number of ‘new’ EV brands here is staggering and when combined with the traditional automakers and their EV products we get a really competitive market that gives buyers lots of choices. I am not seeing that in Europe and the US. So far, there are very few ‘new’ brands launching that want to go toe-to-toe with the legacy automakers. We are still in the early innings for Europe and the US though, so I do foresee some startups entering the market to take on the legacies but nowhere close to the volume of brands I’ve seen in China. That means that by sheer will and quantity, there are bound to be a handful of Chinese brands that resonate with US consumers – my assumption is that Europe is going to be a HUGE market for Chinese EV exports. What complicates things for the US is that there’s a large tariff that’s NOT going to go away anytime soon. And with the challenging relationship the US & Chinese govts. have with each other, the US market is much less friendly when compared with Europe. With that said, the US market is too large and lucrative to ignore. And EVERY EV startup CEO wants to conquer the US market. My guess is that we’ll begin to see EV exports en masse starting in 2025 and manufacturing locally beginning sometime >2026. But it could be sooner… -37%. That how much Grab shares fell last Thursday when they reported earnings for the first time since going public late last year. Their share price has lost almost 75% of its value since going public via a —— 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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