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Frank Wu JIDU Auto on MAX, Tesla US Investigations, Stellantis Bails on GAC - SAI Newsletter 28


It seems to be all quiet on the production front which indicates to me that companies are working their butts off to produce batteries and cars here. The Chinese agencies that oversee the automotive sector seem to have some confidence that we can still hit the sales numbers that were originally forecasted way back in Dec 2021/Jan 2022 of >5.5M NEVs for 2022. Lei Xing, my partner in crime for the podcast even went as far as predicting we’d get to 6M units in last week’s China EVs & More! A reminder that China bought about ~3.3M NEVs in 2021 so it would be another >50% YoY increase in NEV sales despite the supply chain and COVID-19 challenges. One thing I’ve recently noticed on social is many more tweets/posts about EVs that are or will be rolling out in the US this and next year. Case in point: the Chevy Blazer was unveiled yesterday. It’s encouraging to see excitement building with new products but I have to wonder if the proper amount of attention & investment to the support structure for EV adoption is being paid to chargers, battery manufacturing, chips, etc. - because it still seems pretty lumpy. I am not just talking money either. This is the US’s chance to press reset on really inefficient/ineffective policies, norms and habits that hold us back from becoming a global leader in the EV & mobility space. With all due respect to Tesla, we are currently getting lapped by China EV Inc and I gotta tell you, politics aside, some of the product that’s coming out of here is great (read: globally competitive). Do these companies still have a tough road ahead of them? Of course they do – but they can look to Tesla and others that struggled in their early years (Apple, Amazon) to draw inspiration from. And notice that I used tech companies as examples (including Tesla). Because that’s where the value is going to be in 5-7 years for these companies. Further, the top contenders coming out of China EV Inc are going to receive all of the support they need from the Chinese central and local govts in order to be successful. See NIO & the Hefei govt as an example. And before you say – Well, that’s not fair! Volkswagen, GM and Chrysler have all received help from their respective govts & municipalities too. Tesla did through the credit system that California put in place as well as the tax credits for EV purchase the US govt currently has in place. They ALL have in one form or another. Besides, I’ve never known USA Inc to be complainers – we are GSDs – We just get shit done. Next, are the US and Europe ready for the most technology forward features some of these Chinese smart EVs currently tout as difference makers for the China market? No, but we will be and guess who’ll be on Version 3 or 4.0 4-5 years from now when we are ready, while the US & European legacies are still learning how to fully integrate their HW/SW stacks. It really is about the software. 10-12 years from now manufacturing is going to be commoditized – See Foxconn & Magna as just the tip of the iceberg. Oh and I could be off by a few years on some of this timing but I am not off on what I am seeing and what I think will happen. We just need to get in front of this tidal wave - STAT. And this isn’t some grave prediction I am making – it’s a RALLY cry! OK, I’ve just stepped off of my soapbox. This week we are launching the latest episode of our China EVs & More MAX series where we chat with people that are doing great things in the EV & mobility sectors. This episode’s guest is none other than Frank Wu, who heads the award winning design team at Jidu Auto. Lei and I had such a great time chatting with Frank that we ran over by an hour so we’ve split it into two parts. So far, we’ve been really good about finding eclectic, yet interesting guests that have compelling stories and are doing amazing things and Frank is no exception. For those of you, and I know there’s many, that want to get an inside look at the design process considerations, who the design team works with, tradeoffs, how technology dictates whether some features can and can’t be included, and differences between working at a US legacy vs. a Chinese SOE vs. a startup then this is THE episode you have to listen to. Click on this link to do that. Besides that, Frank was a Detroit transplant for 11 years which automatically makes for a good story! Trust me, you’ll get something out of listening to Frank speak. China EVs & More is scheduled this week for Thursday, 07.21 – 9pm EST, Friday, 07.22 – 9am China local time so meet us in our Twitter Spaces room then to get a download on all that’s happening in the space. Those that can’t join, the China 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 - The NHTSA special investigations are starting to pile up for Tesla. The count is now at 38 with the latest involving a 2021 Model X and a motorcyclist earlier this month in SoCal. The motorcyclist was killed in the accident and a staggering 18 of the 38 crashes resulted in a fatality. I’ve no frame of reference here but that’s seems to be a pretty gnarly ratio of accidents to deaths. Still unclear how many have involved the use of FSD either. IN THE NEWS - The US crosses the ‘5% of overall sales’ tipping point for EV adoption. According to a Bloomberg analysis, this is the point at which EV adoption begins to really accelerate. The US joins Europe and China as the other regions/countries to do so. China, Europe and the US also happen to be the three largest passenger vehicle markets in the world. If the theory holds, it would mean that >25% of all cars sold in the US would be electric by 2025. If we are looking at last year’s car sales of ~15M units, that equates to ~4M EVs sold from just ~630K last year. The big assumptions here are the EVs become more affordable over time, there are no major supply related issues that would impede speed of adoption, support networks are in place for charging and battery manufacturing in the local markets. - Stellantis decides to walk away from 12 year joint venture with GAC that builds Jeeps in China. Stellantis actually wanted more control of the JV and tried to raise their ownership of the JV from 50 to 75% but GAC wasn’t biting so they decided to terminate. Jeep had been struggling already and the GAC Fiat Chrysler JV sold only 20K units in 2021 or about 6% of their production capacity. The challenges were no secret and with the new CEO in Tavares who didn’t have any emotional ties to the partner or the market, the decision seems kinda easy. The Stellantis asset light philosophy has already been communicated so they'll try to import their way to a leadership positioning for Jeep in China. An impossible task. Tavares is too smart to not know that so is this Stellantis putting the China market in its rear view mirror? That's a BOLD move if so. Either way, this is likely the O-fficial death knell for the brand in China as Great Wall and others have used Jeep’s positioning to out-Jeep Jeep. An easy thing to do if no new product or major investments to the country are being made. - XPeng going the Tesla and Polestar route and partnering with a Chinese car rental agency. This seems like bizarro world since back in the day, the reason you’d sell fleets to rental agencies is because you needed a boost in sales numbers. These things usually brought residual values down on the private passenger side though. Whether this becomes a feature and not a bug will depend on how its marketed and priced. I’d consider Tesla & Polestar a bit more premium than an XPeng in the China market but is this a way for XPeng to fill up their new, additional capacity and take some pressure off of the private sales a bit? I would not doubt it. Will it backfire? We will know very shortly. I don’t know much about eHi, the partner rental agency since I rarely rent cars in China but have to believe their reputation is solid for XPeng to be making this partnership a big deal. TRENDING ON SOCIAL MEDIA - eVTOL getting closer to real according to XPeng founder. He Xiaopeng shared a video of the latest version of the HT Aero Voyager X2 flying car doing tests for acceleration and stopping. They'll begin taking orders in 2023 with deliveries to special customers in 2024. Once eVTOL hits, it’s gonna be CRAZY. Too bad many of the eVTOL startups here looking to make it happen will be hard pressed to get approvals for flying in many cities in China. - The shortest lead times decide who gets my money. That’s how a few Chinese consumers are deciding which EV to ultimately purchase since most EVs nowadays can take more than 3-4 months after ordering to arrive at your doorstep. Consumers will order multiple brands and once each has communicated lead times for delivery, the customers will cancel the longest lead time vehicles. This is all caused by the lack of inventory of finished vehicles caused by supply chain and Covid related challenges that tripped up MANY of China EV Inc. Some companies like Tesla and BYD, despite their significant sales vs. their competitors, are handling it better than their more inexperienced, smaller players. I am sure the internal sales departments at these companies know the exact lead time at which a potential customer will abandon a sale so they’re likely working VERY closely with their manufacturing and sourcing teams to sort out delivering orders just ahead of that ‘unacceptable’ delivery lead time. - An engineering build, electric pre-production Lotus Eletre has just rolled off the Wuhan factory floor. Geely, which owns 51% of Lotus plans to transform Lotus into a volume premium, performance brand and invested in its own factory and 3 more products over the next few years in order to do it. This particular factory will have an annual capacity of 150K units so it looks like they’ll take it slowly for now. I see a good demand in China for this Eletre even if most Chinese consumers have never heard of Lotus before. There are two particular segments that I think Lotus has with this vehicle. First, the folks that think that the Porsche Cayenne & Macan are becoming too commonplace (mostly in tier 1 cities), and the folks that want a Lambo Urus but have only a bank account for the Eletre. A quick boost in sales will take immediate pressure off of the sales and marketing teams but they really need to make it desirable, which could take many months if not years outside of the very niche, mostly male audience that already knows the Lotus brand. BTW, I see more Eletre sales going to professional women too so branding is NOT going to be the same as before – it’ll be evolved and much less masculine. Don’t ask me how I know this but I kinda know... - A German passport stamp is on it’s way for the NIO ET7. It’ll touch down in Q4’22 according to Hui Zhang, VP of Europe for NIO. NIO aims to launch it in the major cities first including Berlin and Munich, Bimmer’s backyard, and consequently establish swapping stations there to support. Then the European tour should go as follows -> The Netherlands -> Sweden -> Denmark. But make no mistake – Germany is the prize. If they aim to become a major player in the European market, the ET7 and then the ET5 both need to perform well against ABB’s premium sedans. A tall task for NIO when competing with ABB in their own backyard. The people I’ve spoken with contend that NIO is not looking for any quick wins, just to establish themselves as a credible brand with a compelling product that matches the quality and performance of the best of what Germany has on offer. No pricing has been disclosed for Germany yet but I’ll bet it hits around just between the price of a 3 and 5 Series. - Alert. The Virgil Abloh (RIP) designed Louie Vuitton x Nike Air Force 1s. They’ve just released, (and are now sold out) and they'll run you $2,750 for the AF1 Lows and $3,450 for the AF1 Mids. That’s the retail price but deadstock and other online marketplace/resell sites are already selling them for ~$10K for a pair. Wifey would kill me if I got them but… INTRODUCING - The 2024 Chevy Blazer EV. This continues GM’s evolution to becoming a serious EV manufacturer with it’s most competitively priced and likely highest volume product. This thing defines what a mass market, midsize SUV crossover is and with a starting price of $45K, they’re hoping that it’ll attract consumers that don’t necessarily want to switch to an EV but can’t help but be curious about this newest kid on the block. Friend of Sino Auto Insights, John Voelcker does a terrific job of not only describing the car but the logic behind GM’s launch of this Blazer. This is a reco’d click for those of you that are also curious to know more. I don’t mind it BTW. Very aggressive looking with the right screen : knobs/buttons ratio but the proof is in the pudding, when I am sitting inside do they ALL work together and make sense? And more importantly does it distract me less than if I’d have ALL physical knobs and buttions? - The latest design for Boom Supersonic’s jet, the Overture. It now has 4 engines rather than 3 and a few more seats but will still be able to run on 100% sustainable aviation fuels and mostly fly international flights where it won't have to fly over actual people since the supersonic boom can loosen things on houses during flyover. Ambitious yes. Likely to be successful? Maybe not but I can’t stop rooting for them! GET SMARTER - The tech sector gray market. Brokers are making it rain. THIS is what tech companies have been used to dealing with for some time when managing their supply chains. Automakers are finally getting a taste of the challenges that Apple, Sony, Dell, HP and others have known since the 90’s. This is also why it is/was important for the automakers to not use the normal supply chain/materials/sourcing teams to manage it – they wouldn’t know where to begin because many don't even source chips, they normally source chips as part of a module that ships from the tier 1. Their focus was on functionality, compatibility, availability and cost. This is all about babysitting suppliers which automotive sourcing and materials teams have a ton of experience with, just not from 8K miles away. Now that the entire automotive sector globally has moved to EVs along with the pandemic playing havoc on production, it’s left a huge delta between the demand for and the supply of these simple controller chips. That’s why there’s a gray market and it’s brokers like these that play an important role in keeping the machine running, while taking a bit off of the top for themselves. In this case, they may be exacerbating the problem by holding onto ASICs longer in order to drive up pricing, straining the system even further. For the automakers who are remaking their ops teams, I hope you’re wiling to set up shop in the same time zone as your fabs, otherwise it’s middle of the night calls 3-4x’s/week including Sunday nights (Asia's Monday AM). I remember vividly working with the materials teams, product teams, suppliers and the CM on chasing down parts - it wasn’t fun. And the only way you jump ahead of someone in line is if you’re willing to pay more. Apple wasn’t, so instead we pestered suppliers, fabs, brokers, or anyone else we thought was a decision-maker or decision-influencer. If a supplier missed a shipment our first question was ALWAYS 'Who did you ship MY parts to??' But we got it done. BY THE NUMBERS - $1B. This is how much Didi is being fined after a year long, some call it an investigation, I would call it a punishment for ignoring warnings from the Chinese govt against IPO’ing in the US just less than a year ago. This opens the door up for Didi to IPO in HK later this year to raise capital to partially pay for that fine! US IPO’s for Chinese tech companies are basically off limits and depending on how the SEC decides, the US markets could be off-limits entirely as well unless the current 180+ Chinese companies listed on the US exchanges decide to completely open their books to US auditors. But it's not up to them. Gensler seems to really be holding firm keeping that line drawn in the same place, likely to China’s surprise. In the past, the US would negotiate against itself in any staredowns vs. China. —— 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 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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