Happy Holidays! 2021 Year in Review - SAI Newsletter 50
So Xmas week and I’ve not gotten all of my gift shopping done yet! I am also leaning towards giving the newsletter a rest next week so this could be 2021’s last newsletter. And it’s one of the more important ones, my ‘Biggest of the Year’ list! So many things have happened this year globally that I could easily make a Top 25 list but to keep it concise and to force myself to narrow the list we’ll end it at 12.
BYD, the quietest EV juggernaut out there
Tesla’s wild ride
China EV Inc gets their passport stamps
The China NEV market hits ~ 3.5M sales …while the ICE market falls off a cliff.
No data is going to be crossing any borders
The SEC’s Holding Foreign Companies Accountable Act
Pony & Baidu driverless AV permits
Common prosperity means less prosperity for
Lucid Wins Motor Trend’s Car of the Year
Global supply chain pain
The launch of China EVs & More
I reserve the right to amend or add to this list as I think of other important happenings in 2021 that I think are notable. I think that’s a pretty good list though for now. EVs & More will be at our normal time this week – 12/23 Thursday, 9pm EST/12/24 Friday, 10am China local time. To join the room, you can follow me at: @sinoautoinsight and/or Lei at: @leixing77 For those that aren’t able to join, the 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. Finally, for those of you in BJ that are free tonight, Sino Auto Insights is hosting a Holiday Happy Hour at 京A CBD at the Kerry Center. Apologies for the short notice but most folks in BJ that read this I’ve already contacted via WeChat I believe. YEAR IN REVIEW
1. BYD, the quietest EV juggernaut out there
There’s a lot to like about BYD. They are killing their home market (better than their more glamourous counterparts) and are gonna hit 100K unit sales of NEVs, which includes hybrids & battery electric vehicles, for the month of December according to analyst/expert Lei Xing. They design and fab their own chips, and manufacture their own batteries – batteries that have been greenlit by companies like Ford Motor, and their EVs are moving into the European markets as we speak. Oh, and did I mention they’ll be launching a premium brand next year as well? Too much all at once though? The company that Warren Buffett made a $232M bet on back in 2008 (that’s now valued at >$10B!) seems to be firing on all cylinders so what could trip them up? Doing too much. Management has a ton on their plates but could push themselves ahead of their competitors since they own so much of their own supply chain – IF they can maintain focus. It’ll be a balancing act between growth of their EVs, battery business to outside customers, and expansion outside of China. Management seems battle-tested, unlike their competition which should give them a big advantage when dealing with adversity in multiple languages.
2. Tesla’s wild ride
If it wasn’t yet last year, Tesla is now a global phenomenon. It’s building in Shanghai, Berlin, Austin, and Fremont now and has entered dozens of markets. They will SMASH their 2020 sales record of 499,550 this year – they’ve already shipped ~402K just out of the Shanghai facility just through November. With GigaBerlin coming online, where will GigaShanghai export to if demand softens in China, which I predict it will for at least the MIC M3? Let’s keep a close eye on S. Korea, Japan, Singapore, Australia, and a few other SEA countries. With no new products scheduled to launch in 2022, will Elon be able to keep up that excitement for the company – I don’t think that’ll be a problem. The share price started the year at $730 dipping to as low as $563 and as high as >$1,243 before settling in at $1,009 yesterday, that’s 38% growth. Controversies have followed Tesla as well, starting and ending with its Full Self Driving (FSD) rollout in the US. Controversy will continue to follow Tesla even as it continues to mint more millionaires out of its shareholders.
3. China EV Inc gets their passport stamps
Here’s a list of Chinese EV companies that have either already shipped product to Europe/Scandinavia or plan to in 2022:
Lotus (owned by Geely)
Lynk & Co
With all of these brands entering various countries throughout Europe and Scandinavia, there shouldn’t be any issues with the lack of products to choose from. With the European legacies, the available products that would compete with China EV Inc will still be lacking, creating said opportunity to easily grab share if you’re a Chinese EV player. That’s if they can quickly understand the market, determine who their customers are, and get them excited about their products. All within a 20-30 month window. Key question is will the European consumer trust these brands and/or will there be some protectionism put in place? My guess is that it’ll take time & investment from China EV Inc to build up enough awareness and trust so they’ll move slowly until they feel really confident about their brand in the market. I could also see some protectionism being thrown up in key markets like Italy, France, and Germany which most of these guys are likely to avoid initially anyway. Game on!
4. The China NEV market hits ~ 3.3M sales …while the ICE market falls off a cliff.
Forecasts started out at the beginning of the year at around ~2M units then got revised up several times including by Lei & I throughout the year as we saw continued momentum. It’s likely to hit 3.5M units if the December numbers come in where I think they will. That’s an ASTOUNDING number that was achieved despite the battery & chip issues that many major OEMs, as well as EV startups, have reported throughout the year. In the early 2010s, the subsidies and incentives brought incremental growth to the sector but over the last few years, it was Covid & the domestic EV makers that really brought the heat with the flood of products at all price points that have led to China becoming market-driven. And none too soon either since, in 2022, the subsidies are set to expire. As for overall passenger vehicle sales, the last 7 consecutive months sales have shrunk YoY. Some of that can be blamed on the supply chain challenges but not all of that drop. And when combined with the (+) EV sales data, it has to mean that Chinese consumers are at the beginning of the full embrace of EVs. Can China keep up this momentum into 2022 and beyond? As long as there is supply I don’t see demand tapering off. That means different challenges for the legacies vs. the EV first companies. How they address their specific challenges will be the key to their success …or failure, but the best part about it is that I have a front-row seat to watch it all unfold! Even better – we may actually help a few dominate the market. 5. No data is going to be crossing any borders.
There were two new Chinese laws that came into effect in 2021 here in China, the Data Security & Personal Information Protection Laws that could have far-reaching influence on the EV/AV/mobility market here. The Data security law creates a framework for data that is collected and stored on-shore in China. At the risk of oversimplifying this detailed law, it effectively states that data collected here needs to stay here. The Personal Information Protection Law is similar to the EU’s General Data Protection Regulation and its purpose is to make sure that there was permission by the user before any data is collected and / or how it is used and where it’s sent. Both of these laws have tremendous implications for the EV/AV and mobility space and are a big reason why Didi, besides not heeding the Chinese govt’s warning of not IPO’ing, was put in their box. The one that they still sit in now. How China treats data that is collected here and what can and can’t be done with it, where it can and can’t go will without question influence future policy decisions in the rest of the world. The pendulum has swung from default ‘Opt in’ to default ‘Opt out’ and now it’s important that data is private, secure, and people know and willingly allow their ‘data’ to be used. An example is with AV companies – if they are collecting data in the US & China but that data can’t be combined in some way to bolster their algo, are they really going to be able to commercialize their business in the timeframe their investors want them to? Will they still be as valuable? Still more questions than answers on this one. As we see more ‘connected’ vehicles on the road in the US & EU, this issue will be spotlighted even further. 6. Didi smackdown
As alluded to in the last post, Didi did a few things wrong and is still paying for it. For those keeping track – that’s over 4 months now that they’ve been in the doghouse although there now seems to be a light at the end of that looong tunnel. By delisting, it seems that it should be able to get back into the good graces of the Chinese govt but it’s been a roller coaster ride for investors. The share price got up to over $16 but not stands at $5.63 and it's likely not going to get above its opening day price until perhaps 2024 as competition in China for ridehailing heats up and its international expansion plans clipped. 7. The SEC’s Holding Foreign Companies Accountable Act.
Are the disclosures that are now required by the SEC from foreign companies too onerous for the Chinese govt? Likely. What that means to the 248 Chinese companies currently listed in the US collectively worth >$2T, specifically for NIO, XPeng, and Li Auto is still really not known but in order to mitigate some risk, that’s also why they each listed alternately on the HK exchange. They have a couple of years to figure it out but my guess is that they’ll delist or be forced to by the Chinese govt. 8. Pony & Baidu AV permits that allow them to charge customers for rides.
This is a big deal. It is the first domino in commercializing the business and it's even more important that it happened in BJ, who likely didn’t want to be left out of the adoption of AVs to Shanghai, Guangzhou, or Shenzhen. There will still need to be safety drivers which should alleviate some of the uneasiness of the service. This should also greenlight Baidu – Apollo & Pony to launch even more services and robotaxis more aggressively across China. Other AV startups like Momenta, WeRide, DeepRoute, AutoX to name a few should also get their licenses in the coming months is my guess. The revenues likely won’t move the needle much but again it’s a start. China seems to be angling to take the lead over the US in the AV space and it may happen as soon as next year. 9. What common prosperity means for mobility companies.
It likely means a cap on profits and margins while costs will increase since wages will be monitored to ensure drivers can make a living wage. We should see how it plays out even more next year when the thought of robotaxis, low-speed autonomous delivery vehicles, autonomous commercial trucking, and other robots begin to take jobs from real-life people. 10. Lucid Wins Motor Trend’s Car of the Year
This didn’t exactly pop Tesla’s balloon as the dominant, global EV player but if I were a fledgling startup in the space I would draw inspiration from this. I’d look at it as the market is open to many other players and that Tesla is no longer the end-all-be-all for EVs. I have the wherewithal of living in China where the EV phenomenon didn’t start but where it has blossomed into an all-out brawl for consumers' attention and spending. It’s only going to get more competitive next year when more of the ‘anticipated’ entrants are able to launch their highly anticipated products – both EV first startups and legacy automakers. Makes me wonder who would win Car of the Year here? Perhaps I need to get that sorted… 11. Global supply chain pain
Covid, overconfident legacies that thought they could force their way in line, and absolute demand madness in China have ALL contributed to the headaches shortages in chips and batteries have caused. I’ve said this in a previous pod, shortages lasting this long are actually capacity issues. There isn’t enough capacity to supply the severe growth globally of EVs both on the chip or battery side. Price should increase in the short term. And cash upfront will be needed to secure supply. Linear supply. The manufacturers may tell you that the chip shortage shouldn’t be an issue in 2022 but mark my words. The battery and chip shortage will last well into 2022 if China is tracking at >5M unit sales. 12. The launch of China EVs & More
Since it’s my own newsletter I think it’s OK every once in a while to pat myself on the back for some things I’ve/we’ve done. This is one of those times. If you’ve dropped in on the Clubhouse room, now Twitter Space Lei Xing and I co-host, you’ve probably heard me say that there was NO content about the China EV/AV/mobility space but that it’s a global story that needs more awareness so I asked Lei earlier this year if he’d be interested in educating some folks, and lucky enough he said yes! That was 45 episodes ago. We’ve learned a lot and tried to keep up with all the madness going on in the space. What we’re seeing is that more and more people globally are interested in what’s going on here but they also want to know about those companies from here and what they’re doing there – whether that’s the EU or US (eventually). Over the last few weeks, we’ve seen a hefty increase in downloads from Germany so could it be because they’re expecting some visitors, quite a few actually, in the next 18-24 months and want to know more about them? I am also pretty confident that Lei and I are the two best folks to talk about this stuff. We live, breathe, sleep EVs, and mobility. So as more China EV & mobility companies want to make their way around the world, it’ll be even more important to listen to the OGs. It’ll be imitated but NEVER innovated on. I promise… —— 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.