Global (one sided) Battery Wars, VW Kickin tires on Huawei, Vinfast VF8 Not Good - SAI Newsletter 19
Each week since #AutoShanghai2023 we’ve been getting more and more articles trying to tell the China EV Inc story. And it’s not just more articles and reports. We’ve been also getting quite a bit more attention on all platforms and inquiries about our services. It’s great to see and it’s about time. The China EV Inc story isn’t complete of course without telling the China Battery Inc story. A few articles this week really highlight the uphill battles that are being waged in the US and Europe. Links to them below, a couple of which yours truly was interviewed for. One other thing – there’s a lot of truth telling coming out of Jim Farley lately and its really refreshing. Ford has a completely different situation in China compared to a VW Group and GM but what he says rings true for all the foreign legacy automakers. If you don’t want to believe me, since what he said in the FT piece I’ve effectively written about in this newsletter the last several years, listen to Jim kick his truth. I have NOT been able to watch Elon’s CNBC interview so I will push any commentary I have about it in next week’s newsletter. Outside of that, let’s get to it. CHINA EVs & MORE The China EVs & More live show will be hosted on Twitter Spaces at 3pm EST on Thursday. For those that can’t join the live show, I invite you to listen to our recorded China EVs & More episodes at this site. And as always, we appreciate any feedback that will make the show better. Also, if there are any companies you want our thoughts on, let me know. I’ve just posted episode #110 and we’ll get #111 posted this week as well if not #112. Apologies for getting behind but we’ll make up for it. INTERVEWED - Business Insider: I had a good conversation with old friend Linette Lopez for her piece on China Battery Inc. She does a very good job of boiling down the history and roots of the sector to where we are today and how the US is trying to fight its way into becoming a player (not even significant just a player). - Business Insider: A double dose of Tu Le for Business Insider readers this week as Tim Levin writes about how China EV Inc is primed to take on and (more often than not) win, against its foreign competitors on their turf, specifically in the lower price point segments. The combination of features, quality and pricing pushes the Chinese brands with ambitions beyond the Chinese borders to the forefront. We know they can beat them on home turf, but if it’s an away game how will they do? Read the article to find out what I think. - Financial Times: Ed White and team got this scoop about VW engaging with Huawei to discuss putting some or all of Huawei’s stack in VW vehicles. VW Group is woefully behind on the technology side vs. their China EV Inc competitors and have taken an ‘ALL HANDS ON DECK’ approach to try to remedy it, including gutting the Cariad leadership team, but their moves till now haven’t helped close the gap and likely widened it. Huawei’s stack is already in a number of vehicles, mostly Chinese branded so recruiting VW would be a HUGE win for them. For VW brand, there’s no guarantee that using Huawei’s system will increase their anemic 2% sales (currently) and long-term it could be difficult to switch over once their in-house system is ready to launch. Not to mention that it’s also fraught with potential diplomatic complexity. Finally, it’s not unusual for OEMs to have convos with tech companies on partnerships but I’m being told these are much more than initial chats and ‘kicking the tires’ on Huawei’s stack. - CNBC Video interview. I was able to chat with CNBC last night to talk about outcomes of the price war and who to keep an eye out for the rest of the year, so I invite you to have a quick watch. I’d done this for the first time on Zoom so admittedly it was a bit clunky. A couple of things to work on for next time but let me know your feedback as well. TESLA - Even Tesla’s new approach to auto manufacturing has polarized its followers. A good get from the Reuters team re: Tesla’s radical new way of manufacturing its vehicles. I am not sure what’s so controversial here because if it works, it’ll be a game-changer for them, and a raft of copycats will jump on board. Companies like XPeng are already exploring their own versions of this method referring to the single piece front and rear chassis and cell to pack middle that connects the two pieces. Now the question remains – Will it work? Maybe. But if it does it will reduce costs significantly. It’ll do that through – Eliminating the need for large factories. Reducing the number of parts / vehicle. Less parts / vehicle = less engineers needed to develop them & less factory workers needed to assemble them. Reduce inbound logistics costs because less parts to deliver less deliveries. The questions I have are about the customer – does this reduce the total cost of ownership for them? That’ll depend on how much of the cost savings Tesla passes on to the customer since we know a single front and rear chassis may make manufacturing cheaper but for maintenance & repair it’s all but assured to increase those costs not to mention insurance costs for these vehicles. I’ve said in the past that I could see Tesla selling cars at or near cost in order to get millions of them on the roads. Tesla will test my theory with MexicoGiga, since selling into Latin / South America, South and Southeast Asia, the Middle East and Africa will need vehicles closer to $15K than to $25K. Oh, and circling back to will it work – that is a BIG maybe. - Tesla’s refresh of the MIC Model 3 ready for its debut? Despite all the disagreements between the Tesla STANs and FUDsters, one thing they can likely agree on (perhaps) is that the Model 3 & Y are in need of a refresh. That’s no truer than in the China market where Tesla has manipulated pricing, (mostly down BTW) in order to keep demand stable while back in the lab, they are working on said refresh. It looks like Tesla is ready to roll out some pilots now and if that is indeed the case, we may see these refreshed M3’s in customers hands as early as before the end of September (would be my guess) but definitely in the October timeframe. Will a slight redesign and update on feature set be enough to goose demand back to double digit monthly growth rates? Likely for a few months, but it’ll take a faster consistent cadence of updates from Tesla for both the M3 & MY in China if they’re to redirect most of that 1.2M units of capacity towards domestic demand. NEWS THAT GOT OUR ATTENTION THIS WEEK - The Head of Autonomous Driving accused of stealing trade secrets. There’s now a third person that has been accused of stealing IP from Apple and he’s currently the head of Jidu Auto’s Autonomous Driving department. This seems to be a bit of a headscratcher since Jidu’s largest investor is Baidu and its widely known that they’ll be using Baidu’s Apollo system for its vehicle’s ADAS and autonomous driving systems. Either way, this could mean that Jidu Auto may be a China ONLY product for the foreseeable future since Apple could try to block the sale of the vehicles outside of China. TRENDING ON SOCIAL MEDIA - The Vinfast VF8 is not so good. And that seems to be putting it mildly for most reviewers. The car was rushed to market and it shows after reading the numerous reviews that hammer it. One of the consistent complaints by the car rags – its bouncy ride. I’d imagine fit and finish would be another area of concern, but part of the fit and finish question needs to be answered after about 6 months of ownership. This complicates their recent announced SPAC public offering. Surprisingly, there are a few auto analysts that are still bullish on Vinfast even after all these reviews have been posted. But they may have other reasons for this. - The Detroit Pistons had a 14% chance at the #1 pick in the 2023 NBA Draft. They ended up with the 5th pick. I am not a big fan of the word ‘potential’ – for example, the Pistons have a nucleus of future potential stars on its roster. That and $5 gets me a grande latte at Starbucks. Victor Wenbanyama seems like the closest to a sure thing in the NBA in quite some time and he likely would’ve helped turn our potential into actual wins. SMH – Now that I am back in MI, definitely not looking forward to another year of rooting for Deee-troit basketball’s ‘potential’ to turn into something more. - Uber is officially opening the app to another customer segment. The app has unofficially been used by minors to hail rides for a long time, but Uber has now put in place formal requirements and safety measures like mandatory recording of audio, a pin in order for the driver to proceed with the ride to name two - in an attempt make the ride as safe as possible for minors. There’s a huge opportunity for Uber and other ridehailing firms with this segment and if there are no major challenges or major accidents, I could see this becoming a supplement to public school bussing for group rides to and from school and / or after-school activities. Fingers crossed that they’ve really been diligent and thorough with their research on how to ensure safety for this segment of customers. GET SMARTER - A lesson in de-risking. For those wondering if de-coupling or de-risking from China is a real thing, take a look at Samsung Electronics. Some quick stats. # of employees in China in:
2013 – 60K
2021 – 18K
There are several things that are driving this but for Samsung, it was more personal. South Korea had a major diplomatic conflict with China in 2016 that for those of you that aren’t familiar with can google or click on the article to find out. It caused a huge across the board backlash in China for Korean companies doing business there. Many of them have not gotten over it, see Hyundai / Kia. Other countries and companies were paying attention. Most companies knew that they were likely relying too much on China for not only sales but for their operations as well so this was just another indicator that putting all the eggs in one basket could be quite risky long-term. It also helps that from a business standpoint the cost of doing business in China in 2010 vs. today is much more expensive, not only operationally but also as domestic Chinese companies have learned and improved and are now able to connect with Chinese consumers in a way that many foreign brands have not and they can design and build products that more directly meet the needs of the Chinese consumer and many times at a lower price. EVs is the perfect example of this. Foreign companies still see tremendous sales opportunity with China but as the calculus on operational and customer acquisition costs continue to climb, the risk / reward equation also changes and some companies have now transitioned their business strategies from growing their market there to maintaining a certain share and looking at South (SA) and Southeast Asia (SEA) for higher sales growth at a lower cost. Due to the size of their markets combined (~2B people in those regions), building locally in SA / SEA makes a ton of sense long-term, especially as China’s relationship with a few of the countries situated there also becomes more challenging. So in totality, de-risking for many foreign companies in China makes much more business sense in a few different, but equally important ways. - Battery tech 101. This starts with understanding the rare earth metals used to fabricate the batteries and the different chemistries OEMs use to power your EV. This is a great read with a great accompanying interactive visual from Keith Bradsher and the NY Times team. This is what we meant by more articles that are really trying to educate folks on the real deal with how China is sucking ALL the air out of the room and will dominate the discussion as foreign automakers inside and outside of China try to launch affordable EVs all over the world. Definitely click of the link for those that aren’t familiar with the details of battery tech. BY THE NUMBERS - $27B. That’s what Vinfast is targeting as a valuation when it announced it is going public in the US via a HK based SPAC. Thought those were dead? Well apparently not. Let’s get right to what everyone wants to know. NO – Vinfast will NOT get that valuation. I don’t know how old the SPAC is, but this is an obvious money grab and the entities involved are hoping that they can find enough suckers on the retail side to push up the valuation as much as possible but without the institutionals on board, the SPAC may never actually get off the ground. CAVEAT EMPTOR. - >3M. The number of EVs on European roads at the end of 2022 not counting new registrations. The ratio of EVs to total # of cars went from 2 / 10K in 2013 to 76 / 10K in 2021. Still lots of room for growth but good progress nonetheless. 4 European countries: France, Germany, Norway and the UK all exceeded 500K BEVs on the road in 2022. The EU in 2022 had an BEV take rate of 12.1% and should be significantly higher as we barrel towards 2035 with a disproportionate share of those being manufactured in 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.