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GM's Future in China, NYC's Congestion Pricing, NIO's Battery Swap - SAI Newsletter #33



Big event to watch for this week is Xpeng’s IPO. Seems they’re bullish and are looking to raise ~$1.275B from the IPO. Of course, we’ll be watching as they join NIO and Li Auto as currently, the ONLY US-traded EV cos. They’ll likely be joined within the next 12-14 months by AV startups both in the US and China so tracking financials could be something the newsletter’s going to have to do moving forward.

We kinda do that anyway but there’s still an opaqueness for US investors with the companies based in China so I think it’s important that any further clarity we can provide to our western readers will contribute to them having a better understanding not only the individual companies but the markets and competition.

Photo by Markus Winkler on Unsplash

IN THE NEWS:

-   AI beats a real F-16 pilot in a dogfight. Yep, we’re almost there.

-   Blackberry making its bones with connected vehicles now? Xpeng has announced that Blackberry is providing the new P7 sedan with its level 3 driving domain controller. In other words, they’re providing the operating system for the P7’s autonomous driving functions. The QNX operating system is not new and has been used historically by other automakers (Audi, BMW, Ford, others) in the past specifically for some of its connectivity functionality but this is the first I’m hearing that a Chinese EV manufacturer will be using it so this tells me that the OS must be pretty stable and it’s a genuine alternative to the other solutions out there being provided by Google and Linux.

-   Vietnam finally gets the real Gojek service. Gojek, Indonesia’s largest unicorn has decided after 2 years that it can’t trust a partner to manage the Vietnam business and will take over operations for said Vietnamese partner, GoViet. Grab from Singapore, has a stranglehold on the Vietnam ride-hailing business commanding >70% share but with Vietnam being SEA’s 4th largest ride-hailing market, Gojek isn’t willing to concede anything easily to Grab.

-   Bolt rebrands as Zoomo and raises $11M in Series A funding. With this latest capital raise, looks like the folks at Bolt …I mean Zoomo is planting a flag in the US with plans to widen the reach and breadth of its brand and services. Currently running services in NYC and SF, it looks like they’ll be opening a major office in LA. These guys are really interesting because they have a pseudo-B2B model renting electric bikes to the gig economy delivery guys mainly. I’d heard of them before but didn’t really know that much about their story. Seems I’ll need to study up because I think these are the types of businesses that stand a better chance of success than the B2C last-mile transpo startups like Lime / Bird, etc.

-   An electric battery vs. hydrogen fuel cell side by side. Not too detailed although if you want to dive deeper into the specifics there are links and some references provided. With that said, what I’ve always thought that if hydrogen fuel cells were to take off, it would likely be more towards the commercial side for long-distance trips and this study comes to the same conclusion and for the same reasons.   

TRENDING ON SOCIAL MEDIA

-   The Polestar 2 looks to be a viable, if not unexciting competitor to Tesla’s Model 3/Y. I haven’t figured out if I like its design but having been years in the making, you’d think that Polestar would come up with some innovations that would put Tesla on its heels. Apparently they were just fine with offering a vehicle that matches what the Model 3 has to offer. Range is lower than the Model 3 & Y due to its weight, that alone could be the reason to lean Tesla.

-   I am a BIG fan of KFC and think it’s finger-licking good, just not during a pandemic.

-   GM, EV sales juggernaut – In China, YES! This should prove the point - OEMs can build whatever the market will bear. In this case, a $4.2K 4-seat city car with a local partner.  

-   Is Porsche being shady again? Could be, this time with petrol engines though.

-   Do you enjoy a good burger? Part II – Who knew that this post would be so popular and/or so controversial? I was asked by several people in cities I'd previously Iived in to also make some recommendations about great burgers in those cities so here are some recos for Shanghai:

Best overall: Beef & Liberty

Best fancy burger: Chophouse

Best fast-food burger: Habit

Others to try: New York Style Steak & Burger, Bull & Claw

As for Beijing and Shanghai, I’ve tried just about every reputable joint you can think of but if there’s a hidden gem that’s off the beaten path in either of these cities or anywhere in the world for that matter, please do make a reco. If you make it into my town or I make it into yours – we can head there together!

PRODUCT & SERVICE INTRODUCTIONS

-   If you were bummed because you missed out on your chance to purchase a Mustang Mach-E First Edition. Now’s your chance, don’t wait!

-   Download ‘&Charge’ to collect kilometers that can be redeemed for credits on mobility platforms. This may be surprising for some of you, but this is brought to you by Porsche Digital. And for now, this is only available in Europe.  

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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 GM’s outlines its future …in China. As a follow on event to EV day in March held in Warren, GM hosted media in Shanghai for a China EV day outlining the products that will be launched and built for the China market along with the technology that’ll be used to connect and power those products. If you’re sitting in Detroit and wondering why they would outline their China strategy, you haven’t been following GM very closely over the last few years. China is key to GM’s ability to succeed in the future. I’d go as far as saying that if GM isn’t consistently in the top 2-3 automakers in China moving forward, they will have tremendous difficulties in launching all those vehicles they intro’d back in March in Warren to the US market. I would even go a step further than that and say that GM management believes that China will eventually be a bigger, more profitable market than the US, that’s if they can design and build vehicles that the Chinese want. Here are some numbers to back me up. In 2017 & 2018, GM globally sold a total of 7.7M & 8.38M vehicles. Of that number, how many do you think were sold in China? They sold 3.6M (43% of total sales) in 2018, and that was a down year! In 2017 they sold over 4M (52%)! Compare that with 3M (39%) & 2.9M (35%) vehicles sold in the US for 2017 & 2018. GM’s largest market is now China NOT the US. The bad news is that they’ve lost significant share in China over the last few years, selling just above 3M vehicles in 2019. That’s a pretty steep decline and something that Mary and the team in Detroit/Warren are most likely losing sleep over. Getting that 1M units back isn’t going to be easy either. The market is only getting more competitive as the China market is a few years ahead of the rest of the world (ROW) in EV adoption. Reinforcements are on the way as outlined last week at GM’s Shanghai event but will GM be able to compete with Tesla when it comes to EVs? Currently, ALL automakers are struggling to put something on the road that can go toe to toe with Tesla, but that’s not going to last and Elon knows it. That’s why he’s pushing to increase his lead in technology innovation and expand his manufacturing footprint to China and soon Berlin & Texas. There will be some amazing products launching in the next 18-20 months by some of the automakers, ones that happen to have batteries and electric powertrains, but will GM’s branding be on any of them? We will have to wait and see. #GM #China #EVDay #Chinathemostimportantmarket #strategy CITY SOLUTIONS NYC is ready to implement congestion pricing, so what’s the hold-up? Following in the footsteps of London (the OG) & Singapore, NYC has decided that it will implement congestion pricing in order to reduce congestion on its streets and pollution in the air. There are proven benefits to doing this as long as it's planned well and implemented properly with the key being to take into consideration EVERY citizen that may be affected negatively and updating support services to ensure that those people’s needs are accommodated. For those that can afford to absorb the tax, their lives will not likely be impacted that negatively. Manhattan is the densest area in the US so implementing congestion pricing could be a HUGE improvement on the average speed of traffic in the congestion zone and surrounding streets, improving most people’s lives in around NYC. I believe that it’s only a matter of time before more cities around the world, including the US & China, study these types of programs that alleviate congestion and pollution. If limiting traffic into their downtown areas, and it doesn’t have to be by congestion pricing, it should make their cities MUCH more attractive to tourism, investment, and inhabitation, and isn’t that what cities hope for? Attracting the best and brightest to contribute to their local economy. NYC has its advantages just because it’s one of the coolest towns on the planet, but when you’re competing with the likes of Singapore, Shanghai, London, Tokyo, SF, & LA every little bit helps! My final comment on this is that I am running on the assumption that it's a done deal. Right now, that's highly speculative since the entire premise of the article is that the federal govt. hasn't completed its environmental review of the change which holds up implementation and has not given the local NYC govt. any timing on when that will be completed. #NYC #congestionpricing #lesspolliution #lesstrafficjams #firstintheUS EVs NIO tries it’s hand at creating a recurring revenue business, introducing BAAS (Battery as a Service). Seems they’ve realized that their cars are overpriced and this is their way of reducing the price without admitting that mistake. There are clear potential advantages and disadvantages to this. First, since NIO had this swapping business in mind from the start, ALL their products: ES8, ES6, EC6 are good to go. Second, it should help with residuals for their cars. NIO can also license this battery swapping technology to other automakers who aren’t keen to invest the time and capital necessary to develop their own platforms, opening up another revenue stream that could get into the hundreds of millions. If NIO is able to increase sales of their vehicles significantly at any point in the future, they could recoup the costs of building this swapping network out much sooner helping their balance sheet AND income statement. With the Chinese govt. chipping in, the costs are likely much less than it would be if they were going it alone. Therein lies the rub though, right now their sales volume makes them a niche player. In order to command or influence the market, they’ll need many more of their vehicles on the road increasing usage of these swapping stations substantially before others will likely sign up as partners. Will lopping 70K RMB off the price of their vehicle significantly increase demand for their cars? NIO IS surely betting that it will but I’d say it’s a solid – MAYBE. Some challenges in implementing this and this could easily be mitigated in their domestic market, not so much in the international markets is convincing other automakers, the ones that are looking at battery swapping as a part of their differentiation strategy, that NIO’s standard is better than anything they could bring to market. That’s it, creating a standard that can be used by multiple brands is the ONLY way to get a return on the swapping station investment. Is battery technology, charging stations, and/or battery management software really that far off from eliminating range anxiety for good? This type of pivot would suggest that NIO seems to think so, but I on the other hand am not so sure. #NIO #batteryswapping #youdonotpayforabattery #makesourcarscheaper #allaboard Fisker trying to contract manufacture themselves into an EV player. For those that have followed EVs since the beginning, you probably know the Fisker story pretty well. An established, well-respected car designer whose past employers include BMW, Ford, and Aston Martin. Like ambitious car guys before him, Fisker thought he’d have a go at designing and building his own car. In between his time at large OEMs and going off on his own, he did a stint at Tesla as a design consultant as well so Henrik has a pretty high profile history in the automotive space. Inspired (or envious depending on who you speak with) by what Elon was trying to do with electric cars at Tesla, Henrik’s first try at doing his own thing was a company called Fisker Automotive which launched the electric powertrain’d Fisker Karma. He was able to deliver quite a few of them (~2K) before production was shuttered because their battery supplier, A123 Systems filed for bankruptcy. A few management issues later, Fisker left the company which then also filed for bankruptcy protection. Long story short, that company was acquired by a Chinese Tier 1 called Wanxiang and renamed Karma Automotive (very original…) who was able to get on track and develop and sell electric vehicles for the North American market. Undeterred Fisker started another company – Fisker Inc. and is now looking to get an SUV called the Ocean into production. He’ll be raising funds through a reverse merger (aka SPAC) and believes that it’ll be better for the company if they outsource all operations with the exception of design, and all aspects of the customer touchpoints.   Unlike the auto traditionalists who think the only successful way to build an auto company, electric or not, is to control and own the manufacturing process I think there’s a way to be successful with being the Apple of automotive. Now, can Fisker be the one that proves my theory, I am not so sure. I think a model like that would have a better chance of being successful in Asia where contract manufacturing is not so unusual, especially now with Foxconn getting into contract manufacturing vehicles. There’s also a ton of uncertainty and danger if you’re unfamiliar with how China/Asia works, just ask Steve Saleen. There will be a company within the next 5-7 years that’s going to make it work, mark my words. Just not sure it’ll be Fisker. #Fisker #Ocean #contractmanufacturing #outsourceeverything #itwillwork Canoo joining the party via a SPAC, but do they and their business model have what it takes to succeed? A few, quick observations about Canoo. I think the vehicle looks pretty cool with a definite ‘form follows function’ aesthetic, but it’s not going to win any performance contests and that’s ok since it’s not meant to. The VAAS (Vehicle As A Service – I just made that up) model hasn’t really been tested yet, not to the level that Canoo plans to at least. Also, due to the consumer’s increasing openness to electric vehicles, the continued popularity of private vehicle use (that has much to do with COVID-19) – launching the service now (or in 2022 to be precise) may be the ‘right’ time for optimizing Canoo’s chances to succeed. One thing that’s NOT completely clear is their pricing strategy and how many different configurations will be available although its pretty clear on the B2B side, they’ll lean heavily on the last-mile delivery segment. Depending on the flexibility of options, I could really see it being a useful alternative to vehicle ownership and even taking the place of the yellow school bus, that’s normally never full, in the future. Having first mover advantage on this could be HUGE as well, especially if there’s a way to incent customers to get tied into a Canoo ecosystem that’s difficult to untangle themselves from. My prediction is that it’ll the service model and the stickiness of it that’ll be the keys though since the vehicle design will be something that can be mimicked pretty quickly by the folks in Detroit and in China. I do know that owning and servicing all those vehicles will place a heavy burden and some big, red (or black in China) numbers on the balance sheet so it’s going to be important that the recurring revenue growth is significant and sustainable. That’s why I am tracking this company pretty closely. The SPAC will give them some breathing room to get maybe a few production units out the door but other than the VAAS (how else will they generate revenue to pay for those vehicles? #Canoo #subscriptionmodel #platform #tophat #SPAC #reversemerger

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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