Happy Lunar New Year! BYD Keeps Making Moves, Tough Roads Ahead for US & China - SAI Newsletter #4
Happy New Year everyone! In China, they’re celebrating the Year of the Rabbit while in Vietnam they celebrate the Year of the Cat. If you’re wondering why, here’s a theory for you. The biggest snowstorm of the year is upon us and basically, all you can see out my window is white. Not many cars on the road and I think it’s for the best This is the stuff I used to love as a kid since it usually meant one or two days of no school and all day playing outside in the snow. This is the Michigan I remember. I am right now trip planning for my triumphant return to China/Asia and will let everyone know when I plan to be around so we can all catch up. There could be a surprise or two in the cards as well while I am there so stay tuned. I’ve spent enough time back in the US now to give a good point/counterpoint of life in both places so I’ll take the time to do that in the next few newsletters. I also have a rant about an automotive-related experience I had that I’ll wait to coincide with another couple of announcements I’ll be making in the coming weeks. All eyes on Tesla still today with earnings to be reported at about the time I will press send on this newsletter. They also announced a $3.6B investment into their Reno facility to build more battery cells and the semi that has begun to be seen on roads here in the US. INTERVIEWED/QUOTED Les Echos. France is coming around to the notion that China EV Inc is now a serious threat to what used to be a strong market, the Chinese market, for their French brands and there just isn’t anything they can do about it because they lack the skills, speed and products to compete. I had the pleasure of speaking with Frederic Schaeffer for this article (in French) about the speed that China EV Inc is moving and what’s happening to transform the China market from a once foreign brand-dominated market to one that has gone China EV Inc crazy. For those that can read French, you can click this link for the article. CHINA EVs & MORE Lei and I are like a Chinese restaurant. We are open and doing business almost every day of the year EXCEPT the week of CNY so no CEM this week but to make up for it, we did a double drop last week of episodes #99 & 100 which you can catch here. We’ll be back next week though so this is a good time to catch up on the old episodes you missed and any MAX episodes you’ve not listened to yet. NEWS THAT GOT OUR ATTENTION THIS WEEK - BYD continues to be in expansion mode. This time, they’re kicking the tires on a Ford Motor factory in Germany that is set to close so Ford can transition over to EV production in Valencia, Spain. This is far from being a done deal but it seems strangely poetic and symbolic of the times. - Red tape threatening to delay the EV tax credit program. Senator Manchin, who’s been an EV skeptic but signed onto the Inflation Reduction Act (IRA) doesn’t want the Treasury Dept to move the goalposts now that the IRA has been signed into law. He’s authored a bill to try to freeze the restrictions but hasn’t gotten much support from others in the Senate so there isn’t a high probability this will go anywhere but it’s worth me pointing out that the person I said wouldn’t like the watering down is trying to do something about it getting watered down. I am on board with Sen. Joe about making sure that the IRA and criteria for the tax credits are still pretty strict and that it still has some teeth. If we leave that door cracked open for China EV & Battery Inc, let me assure you they will just kick it down. If you don’t believe me – go shopping at Walmart. Not the same but …same same. - ASML CEO warns that cutting China out of the chip ecosystem could raise costs for everyone. He’s right, it will and the US, Japanese and Dutch govts know this but are still moving forward with limiting China’s ability to purchase manufacturing equipment that produces the most advanced chips. Anytime you create friction in a supply chain/anytime it slows down or you reduce the supply of something, there’s a high likelihood of prices rising. Carving China out of the battery supply chain, impossible to do in the short-term unless the US is willing to effectively halt its EV adoption ambitions, will mean in the long run, prices should rise more than they would if China wasn’t part of it and that’s the entire reason China did what they did – to force reliance on them for almost EVERYTHING. That way, they have the leverage. It looks like the politicians are going to accept a bit of lift on prices to try to freeze China out. Let’s see how far this goes when it hits their constituents' pocketbooks. - The glass is half-empty way of looking at EV adoption. This National Review article is worth the read as the author points out several flaws in logic from the politicians re: EV adoption and how it plays right into the hands of the Chinese. Many of his arguments are valid concerns but his logic is displaced and not once does he mention that ICE vehicles force us to rely on the Middle East to power them. And at the end of the day, he discounts the harm petrol-fueled vehicles cause to the environment. He wants markets to dictate timing of adoption but fails to acknowledge how much China had their thumb on the scale so that also plays in China’s hands since it’ll just mean the slower the adoption the more of China’s EVs will be shipped to the US & EU to be sold to consumers. And if you think that won’t hinder the legacy automakers' ability to produce, viable yet affordable EVs to compete, I have a bridge to sell you in Brooklyn. Besides, there’s no crying over spilt milk, or in other words, that horse has already left the barn – there’s no going back to ICEs now. - If you thought the relationship between China and the US was getting better, think again. The creation of the House Select Committee on China, which was approved by a bipartisan majority will ensure that China and the US will continue to have a prickly relationship. With Republicans promising to be tougher on China during their campaigns and the House majority transitioning to them, fireworks are sure to come in the coming weeks and months. Think chips, batteries, EVs and the South China Sea. BTW – the leader of the committee, Mike Gallagher is a known China hawk. TRENDING ON SOCIAL MEDIA - Is the new and improved Polestar 2 ready to take on all comers? Longer range, better technology, and updated looks move it much more closely to being real competition for Tesla globally, mainly because Tesla hasn’t done much in the way of updating its high runners – the Model 3 & Y. With that said, it has significant challenges competing with the other EV makers outside of Europe. My intuition tells me that the design is ‘too’ Scandinavian’ for the US & China markets. Will it sell a few more here, yes definitely I think the improvements were significant and it’ll take a few buyers from the other big sellers in the US, Hyundai/Kia and likely some of the Mach E buyers. Now that Tesla has slashed prices in Europe and the US though, Polestar will need to do the same to get any attention, I think so but automakers HATE having to do that to brand new products, so look for that to happen ONLY if upon launch they see no significant bump in interest. - Electric hypercar maker Rimac invites others to ‘catch me if you can.’ One lucky YouTube influencer got invited to Rimac’s HQ in Croatia and did a walkthrough, a video of which is posted here. What was different about this video was that Rimac seemed to be very open about what they were doing, how they were doing it and basically daring others to try and copy them. This is a pretty cool sneak peek into Rimac’s operations for those interested in seeing how a modern coachbuilder practices his craft. - WeRide robobuses launched in Beijing. This robobus is the 1st that’s available for mass production so as Cruise, Waymo and others are still tweaking theirs in order to get them on the roads, this is already happening with WeRide in China. This robobus’ top speed is about 40kmh (~24mph) joins WeRide robobuses that have already been deployed in Guangzhou, Shenzhen, Nanjing, Wuxi and outside of China in Riyadh. BY THE NUMBERS - 26M. That’s how many cars as of this week the SAIC Volkswagen JV has built over the almost 40 (established in 1984) year relationship. - $49B. That’s the size of the helicopter industry that eVTOL (electric Vertical Takeoff and Landing) companies are looking to disrupt and take a major piece of. Out of the hundreds in the space, there are really only a handful of viable companies that can likely make commercialization a reality and Archer Aviation is right up there. The video in the link is worth a watch for anyone interested in the space. - $400B. McKinsey hasn’t given up on the AV sector and forecasts it could reach that amount by 2035. McKinsey does a good job of making their reports very professional sounding, as most management consultancies do, but I can assure you that they’re not any more accurate with their forecasts than we are on a lot of what we’re talking about. With that said, they do articulate a few points worth keeping mental notes. ___________________ 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.