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FSD beta 10 Controversy, China Power Shortages, Huawei Selling Cars - SAI Newsletter 38



Some admin stuff up top today since I’d forgotten to mention them in the last couple of newsletters. It’s a chance for me to tell you about some events that I will be participating in over the next several weeks. First off is the China Institute Executive Summit 2021 – ‘The View from China’ online conference. It’s a terrific organization that’s based in NYC that has very informative programs for folks looking to better understand and learn more about China, its culture, food, people, and of course commerce. This will be a 2-day online conference on October 13-14 from 8-10:30am EST with an in-person reception scheduled for October 14, 5:30pm EST in NYC. I will be a panelist specifically for the ‘On Investing in China: Who will be the next tech Unicorns?’ panel on October 14th, 9:30am EST but I encourage all of you who are curious about China to virtually attend any other panel that seems interesting, and there are quite a few IMHO. For those interested in checking out the agenda or signing up for the event, you can click here. One thing that I thought was pretty cool that I’d like to share: - My interview on CNBC. I was asked about a number of different topics but they decided only to post my response about the chip shortage and China EV Inc.’s global ambitions. It’s a couple of weeks old now since I forgot to link it last week. Lei and I are also looking to try some different things out with our pod that I think will be pretty exciting. I am really looking forward to what the future holds with the pod and a few other projects we have in the works here as well. EVs & More will be hosted on Twitter Spaces as per the usual on Thursday – 9pm EST. We will post the topics later this week on Twitter so if you’re free please drop in or better yet, come with some questions or comments. TESLA NEWS - No defiant tones from Elon as he speaks at the World Internet Conference this week. As a matter of fact, he sounds downright conciliatory. I’d also mentioned in a note earlier this week that Elon isn’t very likely to boast about FSD’s capabilities here on social media either. He doesn’t want his customers doing anything crazy and/or knows that any crazy videos or worse yet, semi-serious accidents wouldn’t play to the audience here. Not the ones he needs on his side anyway. Also, the all-important September sales numbers will come out in a couple of weeks for Tesla so we shall see if they are really backloading domestic demand as they say they are or if it’s a smokescreen for weak demand. One thing seems certain, there does seem to be weakness in demand for the MIC Model 3, and Tesla’s going to need both the Model Y & 3 (saying selling at a 2:1 ratio) to be strong since there aren’t any new products scheduled to be launched in 2022 globally while their competitors will seemingly launch new products every other week in 2022. - A deep dive on Tesla FSD beta that should explain to you why it needs more monitoring. The thing I think about most when I read this is how things are when I am walking around in China. As a pedestrian, things are coming at me in ALL directions. They could be delivery people, cars, bicycles, mopeds, buses, whatever. Now, if those people aren’t attentive no matter what defensive maneuver I make, I could still get hit. But this isn’t about me. This is about the two kids I have and how I ALWAYS have to remind them to look both ways, keep their heads on a swivel, and yield to anything that looks like it wants to run them over. Now, let’s assume that most beta testers are very diligent which is VERY likely. Unfortunately, it only takes one of them to be careless or as the article states, to trust FSD to make the right move. This isn’t a social media app that limits the number of users artificially to build up excitement about it, it’s a car that could do a lot of damage to things and people if pointed in the wrong direction. I think where the article states that we as bystanders don’t opt-in to being beta testers like the drivers do hits home for me. I have no idea why the NHTSA isn’t more proactive on regulating this. I am all for more pilots and more testing so that more data can be collected making these vehicles generally better at driving themselves but we are still clearly a ways from any vehicle that can navigate US roads (let alone Chinese) without any type of active participation. BTW, I think it’s absolutely hilarious (but not surprising) that friend of Sino Auto Insights Taylor Ogan is cited in the article and (maybe?) inadvertently got the Tesla STANs all fired up!. He does yeoman’s work going back and forth with them and does NOT back down. I too think it’s important to call stuff out, good or bad so that there are still some objective voices in between all the loud voices divided among the STANs and the FUDsters. Taylor – you keep doing you brah. IN THE NEWS - China power shortages. BIG F’N DEAL. Analysts are still chasing quarter to quarter numbers. In my opinion, it could be these power shortages that knock the EV sector off stride. Let’s not forget that it’s starting to get cold in Dongbei (aka the Northeast) so electricity will be needed to heat those homes there. Next, the BJ Winter Olympics are right around the corner so you better believe that BJ will want to control the pollution so that there aren’t too many shots of the country blanketed in smog. A tough spot to be in with no real end in sight yet. Also, this isn’t just a worry for the auto sector since it could cause a slowdown in the entire economy. And we know it’ll take some effort and time to get it back into >5-6% growth mode. - Bytedance, the maker of TikTok (Douyin in China) has decided they’re getting into vehicle cloud services. In phase one of their strategy, Bytedance will try to launch and expand its cloud service portfolio into V2X & autonomous driving. This is a pretty intriguing development since Bytedance obviously doesn’t think it’s enough to be one of the largest, badass social media platforms on the planet, they have grander ambitions and want to compete with the Chinese tech giants for the title of largest in China and likely a bit later, the world. Their capabilities and ability to raise capital automatically make them formidable which should intimidate some of the more traditional players. Their capabilities could also raise red flags should they decide to use those superpowers outside of China. In any case, if it wasn’t already a seller’s market, the hunt for developer talent in China that has automotive experience must be pretty cutthroat. - Huawei is leaning into car sales to make up for declining mobile handset sales. The first brand they partnered with, Seres got a boost in YoY sales due to Huawei’s cooperation selling through its online and offline retail channels. Arcfox is looking for a similar boost but as of this week hasn’t finalized the cooperation structure just YET. My take is that it’s imminent. Arcfox and Seres also happen to be two OEMs that are using Huawei’s HW/SW Smart Car solution so there’s something in it for Huawei as well. I am not so sure I’d feel very comfortable selling cars alongside a major competitor especially if Huawei salespeople are emphasizing their system rather than my vehicle’s virtues but if either of these companies were able to sell their vehicles on their own, they wouldn’t have to explore alternate sales channels with Huawei now would they? - Neta headed to the EU in early 2022 with a smart sedan. Originally previewed at Auto Shanghai 2021 in April and re-visited at the World Internet Conference going on as we speak, the Neta S is also equipped with Huawei smart, connected tech and will include LiDAR. No pricing has been announced but we can expect it in the EU likely by late 2022 after its domestic launch. - Autonomous vehicles need to be zero emissions in California by 2030. If we are keeping score, Governor Newsom has banned the sale of petrol & diesel-fueled commercial vehicles by 2045, passenger vehicles by 2035, and now autonomous vehicles by 2030. Since he banned the sale of ICE passenger vehicles, 15 other states have passed similar laws. As California goes as the US goes. In the past, automakers would typically adopt whatever policies California enacts, normally the most stringent in the US, for all of the cars they manufacture since it doesn’t make much sense to build a set of vehicles for California and another for the rest of the US. Autonomous vehicles are a rounding error sales-wise currently but as I’d mentioned in the post just above. If pricing can get <$40K, I see a boom in the sale in order to get more vehicles hoovering up more data and pulling in the timeframe on the commercial viability of L4 robotaxis. GET SMARTER - Promising startups raising the stakes for radar, one of the oldest perception technologies, on autonomous vehicles by improving resolution. Unless we are firmly placed in the Tesla camp of vision ONLY autonomous systems then we can all agree that most other autonomous systems will consist of radar, LiDAR, and cameras, with the quantities and combinations of each differing depending on quality along with each AV company’s specific philosophy on redundancy. Radar has been around for almost 100 years and it's used because it’s cheap and good at seeing ‘things’ just not quite good enough to identify specifically what those ‘things’ are. There are startups that are looking to change that as evidenced in the article. When combined with the constantly improving capabilities of cameras due to their ubiquity in mobile phones & LiDAR pricing finally on the downward slope, we could begin to see the prices of robotaxis shrink sooner than later. Currently, the cheapest robotaxi comes from the Baidu + Arcfox mashup which they’ve priced at $75K for the China market ONLY. That likely means that we could get to <$40K within 5 years. This in turn would probably mean more robotaxis being deployed via pilots creating a virtuous cycle that would get closer and closer to robotaxis being real. TRENDING ON SOCIAL MEDIA - Geely is getting into the mobile handset business. This has actually been a pretty busy week for Geely since they’ve also announced the SPAC IPO of Polestar, a target of 5K battery swapping stations globally by 2025, and launched some satellites into orbit. As if that wasn’t enough, Li Shufu wants to design and manufacture mobile phones now! In previous newsletters, I’d already alluded to my concern that Geely was trying to do too much and that the outcome of all of it may not be what they were thinking, well they’ve added another business venture to their already crowded portfolio. Li Shufu or as western media know him as – Eric Li, seems quite envious about the amount of press (and valuations) that his tech counterparts and their companies receive so perhaps this is his way to get more attention? Maybe Geely will find it easier going from cars -> mobile phones than Apple has moving from mobile phones -> cars? - A closer look at the Three Main Chinese smart EV startups – Li Auto, NIO, and XPeng. I had a chance to answer a few questions for Mark Andrews for his article that highlights China’s current Big Three. These also happen to be the same three companies whose ADRs trade on US exchanges so they get a disproportionate amount of global attention each month and quarter which isn’t likely to change much in the near term, especially now that the foreign IPO route is seemingly shuttered for any Chinese EV started that hasn’t gone public yet. Mark does a good job of articulating the differences in market positioning for each of them and how they plan to tackle the future and European expansion. For those not familiar with these three companies, I invite you to spend a few minutes educating yourselves. JUST THE NUMBERS - 5,000. That’s how many battery swapping stations Geely plans to have worldwide by 2025. These are targeted at fleet vehicles, which makes a ton of sense as long as they can get enough vehicles sold and/or OEMs signed up to their platform to keep utilization rates high. With this announcement, it seems that GEELY is quite confident keeping utilization rates high at these stations will be quite easy. - 11K. That’s how many jobs the just announced campuses being built in Tennessee & Kentucky will create. The combined investment from Ford & SK Innovation will be $11.4B. One factory will build the batteries that will supply the other factory that will build the F-150 Lightning. Ford’s share of the investment is about $7B which is the largest check that Ford has ever written for a manufacturing facility. This facility is going to be HUGE too taking up an estimated 6 miles. This is a completely baller move by Ford and apes anything that GM has announced. How’s that for Ford & CEO Jim Farley making a splash!

—— 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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