Ford's Leadship Change, Li Auto's Impressive IPO, Norway's Cute Little EV Obsession - SAI #30
Last week we saw another China EVStartup take a big step towards maturity as Lixiang aka Li Auto IPO’d on the Nasdaq opening at $11.50 and closing up on the first day of trading at $16 where it hovers around today. Li Auto was able to raise over $1B which puts them well on their way to funding a 2nd product in the next 18 months. One detail that should be noted the makes Li different from Tesla, NIO, WM, XPeng are that they build a PHEV, not a BEV. That means their powertrain combines a small petrol-powered engine with an electric one in order to alleviate any range anxiety. At this point in time, I am not really sure if people are buying the Li One because it’s a PHEV vs. the others but they did well and got in when the going is still good in the sector. The other companies on deck immediately are XPeng and WM Motor who are more than likely to IPO as well later this year, likely sooner rather than later to try and take advantage of the hot market. My guess is that XPeng IPO’s in the US and WM does not, but we will see whether I am right within the next few months. Between the Chinese and US EV companies, this promises to be an active year or so since Rivian, although they’ve raised $2.5B recently and can now afford to stay private, will likely want to reward it’s early investors with some type of exit within the next 12-18 months as well. When you combine this with all the recent activity and investments in the battery sector, we’re likely close to reaching a tipping point in EV readiness just before they begin the flood the market and become major disruptors in the traditional ICE passenger vehicle sector. With all that said, this is a marathon and not a sprint – just ask 17 yr. old Tesla about what it’s taken for them to make it to the top of the global EV sector. IN THE NEWS: - A level 5 autonomous vehicle is ready NOW. It’ll just be going to Mars. This is cool and inspiring stuff and it seems that Elon has brought sexy back to being a rocket scientist! - Saleen’s bumpy ride in China. I would love for one of my journo contacts to do a deeper dive on this. From what I know about this, there’s plenty of blame to go around for both sides. Also, this is NOT just a China phenomenon so those that see opportunity in South & Southeast Asia. Caveat Emptor. And make sure your agent/partner has been vetted properly and thoroughly. - Grab adds to its ample reserves with another $200M in raised capital from South Korean Stic Investments. This cements Grabs place as one of the most well-funded tech startups in SEA and a worthy competitor to Didi and Uber in the still emerged SEA markets. - Google Maps making life easier for those folks that use bikesharing as their main mode of transport. In China, where I live and the areas I frequent most, bike shares are all over the place so 1. It makes it easier to find a bike that’s close when I need one and 2. I can normally park it pretty close to whatever my final destination is so that I wouldn’t need any walking directions. Further, the bikes are geofenced so that you can only park them in designated bike or moped parking ‘zones.’ They simply won’t lock if you decide to just messily park it wherever a common problem in China before the bikes were regulated. With that said, I’ve also been on trips where I am NOT familiar with the city and/or any shortcuts that would save time and add convenience so this is a feature I would definitely get a lot of mileage out of when traveling. Whenever it’s ok to really start traveling again… TRENDING ON SOCIAL MEDIA - Uber Asia staying put in Singapore and will not be moving to HK after all. - Lordstown Motor is going the SPAC route in order to raise funding for its first E-Pickup the Endurance that’s scheduled to launch before the summer of 2021. They follow in the footsteps of Nikola who also SPAC merger’d their way to temporarily being almost as valuable as Ford without ever selling a vehicle. - Tesla's quality is last in the US but first in China? You read that correctly. You could infer a lot from the results of this survey, and I have some initial thoughts about this like – Could the overall quality of domestic Chinese made vehicles be lower than in the US? Will try to learn more about this survey to see if it should even be compared side by side with JD Powers for the US. - Autonomous Vehicle - tech bro Anthony Levandowski gets hard time for stealing Waymo IP. This is a pretty tangled, weaved, web that still needs a bit more untangling that could lead to a $4B payout. - A customer’s initial impressions of their brand spanking new Tesla Model Y. See the above post. So Chinese customers don’t see these types of issues on their locally made Model 3’s? What is management doing right here that they’re not doing in Fremont because some of the noticeable issues are pretty bush league for a company that’s made over 1M cars now. PRODUCT & SERVICE INTRODUCTIONS: - Low-priced China EVs headed to the States. Chinese automaker Kandi will be launching two models by the end of 2020 in the Dallas/Fort Worth area. The K23 & K27 are aimed at budget-conscious consumers so the range and power on them is pretty limited. Quality and reliability will be an open question with them as well. Think electric Yugo for the Gen Z & Millennial crowd. - Is Honda finally coming out with an electric version of its legendary Super Cub motor scooter? This patent may point to ‘YES!’’ —— 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
OEMs What will Jim Hackett’s legacy ultimately be at Ford? Ford has announced that Jim Hackett will step down from Ford after 3 years as CEO. Ford is promoting current COO Jim Farley to the top job on October 1. Most people I know that follow Ford closely thought that this was definitely going to happen but thought it would’ve happened closer to the end of this year/beginning of next so the timing was off. Jim Hackett has been a controversial hire from day 1 with no prior experience in the auto sector being most critics' biggest issue with him. He didn’t seem all that keen to communicate with the media which likely alienated him even further. The was some internal heartburn as well since Hackett wanted to re-wire the ENTIRE structure of the company. The folks at Ford that didn’t think that needed to happen were or are dead wrong. It’s been long overdue. Ford in Shanghai was my last corporate role prior to going off to do my own thing so I still have an affinity towards the company and its employees. With that said, I also got to experience much of the disfunction personally albeit very briefly. If you’ve followed this newsletter you know that I haven’t shied away from being critical about some of their (non) moves so this post is just a bit of advice for Ford. If I were to be CEO agnostic, meaning regardless of whoever were taking the reins from Hackett, these are the main areas I believe Ford needs to address quickly. - Culture: Ford needs to move faster, you need to be smaller and you need to take more risk. The tough decisions aren’t being made. You’ve seen the recent articles about the upheavals with VW Group mgt., if that’s not happening in Dearborn, you’re not pushing those tough debates forward. All those processes and procedures you’ve has accumulated over the last 100 years, throw them away and start over. It’s the software that’s going to help you win. Those policies and procedures are meant for a hardware-focused company. - Leadership: More external leadership needs to be recruited since it seems groupthink has set in. Specifically, tech-focused mgt. should be added and given a large voice on product, design, and service decisions. All the managers that each have 15-20 years with the company, some of them need to go. Maybe many of them. Give them their walking papers, they’re not going to help you win. They’re the ones that helped put you in this difficult spot in the first place. - Financials: A set of profitable products need to be developed and launched in the US & China so that your sole reliance on the F150 to fund your future is mitigated, you should also give the F150 team less leverage when big decisions are being discussed, especially the ones that don’t go the F150’s way. BTW, this isn’t about your financials as the Fortune article points out. It’s about product (and services), always was and always will be. SEE F150. Design and build other products that are as popular as the F150 - It’s that simple! I promise if you do that, the ‘financials’ questions will answer themselves. The product guys need to win out, not the bean counters. All the bean counters care about is making sure that products that are greenlighted bring in revenue, enough so that they pay for themselves and help fund others, right? - China: In or Out? If in, give China leadership a plan and funding to win. That means first-rate products designed specifically for the China market. China is farther ahead with regards to connectivity & technology, so what works in the US is behind when it gets to China. If not, get out STAT. - People: There aren’t enough software developers in metro Detroit so what now? Go acquihiring, then gut your engineering teams and give the software guys a seat at the decision-making table. And I mean at the head of the table. Here’s a simple test, if the PD leadership team can’t name the coding languages being used for which products, they probably need to go. This is all easier said than done and I could easily get into the weeds about more detailed changes that need to be made but we will leave it here for now. Also, these are just simple examples of what I am not seeing and haven’t seen at the OEMs since forever. That window of opportunity is closing, accelerated by COVID-19 so get moving or you won’t have enough runway to make the changes and catch up to your competitors in China & Silicon Valley. Now substitute Ford with GM, FCA, VW Group, etc. and I bet all those suggestions still mostly work. For any company leaders reading this and thinking your company is in a similar funk, it’s about time you realized that. Now, if you want help getting your team prepared to take on and beat the 21st-century competition, we should talk. #Ford #JimHackett #JimFarley #newsheriff #samechallenges #handover EVs Li Auto kills its Nasdaq debut. Now how do they live up to the hype? Had a nice conversation with Christian Shepherd of the FT as we were tracking the IPO of Li Auto last week. Let me tell you that I was COMPLETELY wrong with my predictions. I thought with the Nikola SPAC merger and all the money heading into Tesla, the market would have some EV fatigue. Li Auto was able to raise over $1.1B and they closed >40% above their opening price of $11.50. An impressive debut any way you cut it. First though, let me make a couple of distinctions for my western readers who aren’t following the China EV sector as closely as I do. Li Auto’s Li One is a PHEV, not a BEV, so it does use petrol unlike the offerings from NIO, WM Motor, and Xiaopeng these 4 being the top China EVStartups in terms of fundraising and sales volume. Li has also only really been selling the Li One since December 2019 so their track record is pretty short if promising. XPeng, WM Motor, and NIO had quite a head start on Li Auto since they began delivery of their products in 2018 & 19. They ALL stand out as the ‘Survivors’ of tough market conditions in addition to the recent COVID-19 pandemic that’s tested the financial viability of many of their lesser competitors, think Bordrin, Byton to name just two. This handful of survivors will be the flagbearers for China in their quest to become a leader in EV and battery technology and manufacturing. That’s quite a burden for them to bear while competition from the traditional OEMs promises to test their mettle even further as each fights with each other to try to dethrone Tesla, and its seemingly bottomless pockets, as the #1 EV automaker in the world. There’s been quite a bit of action in and outside of China when it comes to EVs if we look at what Nikola was able to do with their SPAC merger. Other US EV makers such as Lordstown, Fisker, Bollinger, Rivian (perhaps the most promising EV Startup) are also looking to. It feels like what was going to probably happen 12-18 months from now was pulled in because of COVID-19. Recent announcements from the traditional OEMs outlining their EV strategies and products being developed for launch over the next few years, along with all that glimmer heading towards the EV IPOs and SPAC mergers has really placed the spotlight directly on the sector. It’s enough to force a few of them to wilt and we’re not just talking to startups. COVID-19 has put everyone in a bad place financially which helps level the playing field a bit. The challenge for the traditional OEMs is going to be educating consumers and getting them excited about EVs while weaning those same customers off the ICE’s that make the OEMs all that money. That’s on top of battling with these hungry Chinese and US EVstartups that are becoming battle-tested. As I stated in my prior post, this boils down to product, the right product for the right time for the right price. Sounds easy right? Well, it isn’t. In the 17 years Tesla’s been in business, last quarter was the first time in their history of 4 consecutive quarters of profitability. Finally, handicappers ultimately believe it’s the OEMs share to lose. I don’t agree with that. The OEMs are complacent and by the time they get their act together, the horses will already be out of the barn. They already need to play catch up but their speed of decision-making hasn’t sped up enough for them to do that. Back to the Chinese EVStartups and restating what was outlined in the intro. XPeng is on deck with a US IPO likely within the next 3 months. Then I’d say WM Motor will follow right on their tail but their IPO will likely be headed to Shanghai. #LiAuto #Nasdaq #IPO #EVmarket #bubble #whoisnext Norway’s EV adoption story is cute, but not likely that relevant to the US or China. 68% NEV market share is an impressive number for July sales in Norway. But if we peel back the layers on this onion we see that total sales was about 10K vehicles total for July so being a feel-good story is about it. In 2019, Norway sold about 142K vehicles all year. I am pretty confident in saying that Beijing or Shanghai probably buy >140K in a year. I think these stories are cute, but I don’t think there’s much to extrapolate from Norway’s model that would work without some major retrofitting for any of the Asian countries or the US. I am open-minded though so if there’s something to be gleaned from Norway’s runaway embrace of EVs and how this might help the US or China, I am ALL EARS. Please reach out to educate me. #Norway #EVlove #cutestory #ETron #samebutnotsame
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.