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Hydrogen's Long Journey, Porsche 'Gets It,' Rivian's 7-day No Quibble Policy - SAI Newsletter 16



Let’s all take a moment to exhale. Now that all of the announcements and surprises from the Shanghai auto show have had a chance to marinate in everyone’s minds, there seems to be a bit of a lull in the news cycle as the rest of the public gets their chance to feast their eyes on the latest and greatest that’s coming to China’s roads. One item of note that I hadn’t mentioned in last week’s newsletter. EVERYONE and their mother, if you hadn’t surmised this yet, will try to have you download their app. I am specifically referring to each and every auto brand. Every booth that I went to, when I saw a tchotchke I wanted to purchase for myself or my boys, I was 100% of the time directed to a QR code that would help me download their app. This is of course to try to force you to ‘play’ exclusively on their app, whether you have purchased their vehicle or not. As more users download the app, a community is created that in theory should have like-minded folks that help make the app sticky. NIO has been good at this even if their vehicle sales don’t reflect this …yet. NIO transforms itself from EV brand to lifestyle brand while users are on the app by encouraging NIO customers and fans to all interact and be part of their NIO ‘community.’ This is ONLY the beginning though. As OEMs experiment with new services to try and kickstart that recurring revenue they’d like to grow in the future, they’ll use these apps to introduce them and manage them. This app will quickly evolve into a platform, not unlike Uber’s, Apple’s, WeChat’s, Google’s, and others that many of you are currently a part of. It will also be a self-fulfilling prophesy. The more users on the app, the more data collected from the app, the more insights gleaned from the data, the more services developed from the insights that can be customized to each individual that can be offered on the app which has now transformed into a platform. Stickiness. This platform in the future will include food delivery, micro-mobility services, charging, ride-hailing, parking, concierge services, vehicle subscriptions, dog grooming, yoga, livestreaming, chat and / or other lifestyle services just to name a few. There could be specialized services depending on the brand. Jeep could set up a partnership with all of the off-road parks in the US so that as Jeep owners pass into town, they could take their Jeep to meet up with other Jeep owners to go off-roading. The possibilities are truly endless. The OEMs will likely take the lead on any mobility-related services and partner with other service providers on the parts of the platform they don’t own and run themselves but they get to keep their partner’s data too. This platformed based world is much closer than you think. As we hit the tipping point in China on EVs, it’ll help accelerate adoption around the world and before you know it, oversaturation of apps, platforms, and customized experiences. Unfortunately, most brands will never get to that point because they won’t be able to sell enough vehicles or get enough interest from people to download the app. That’s why the big players like Toyota, GM, VW Group currently have the advantage although it seems they’re doing their very best to squander it. Again, in a future that’s closer than most people think, vehicle sales will become a fraction of the total revenue pie compared to today where it’s virtually 100% and in that world, if we were to look 10 years out, who do you believe will have created the best platforms and communities? Who will be best at monetizing these platforms and communities? VW Group? BMW? Apple? Google? Uber? Didi? Xiaomi? Grab? IMHO, it’s still too early to tell but the roots of this reset were planted last week at the Shanghai auto show. Guys like me always knew it was headed this way, but now most of you can clearly see it. TESLA IN THE NEWS - Tesla beat earnings again with a good part of it coming from bitcoin and regulatory credits. Some concerning statistics especially with what has been happening in China. Vehicle sales grew >100% while service centers grew by ~28%, mobile fleet by ~22%. Even the most ardent Tesla fanboys would get upset at the long service repair lead times because of this service center shortfall, right? IN THE NEWS - France is putting its money where its mouth is with regards to e-bike adoption. France will pay their citizens ~$3K to turn in older, pollution-spewing vehicles in order to purchase an electric bike. As I said, e-bikes WILL be a thing. - Some hope for hydrogen fuel cell vehicles in China? Beijing is forecasting that it will have 10K hydrogen fuel cell vehicles on the road and build 74 filling stations by 2025. A seemingly quite modest number if we’re to compare them to forecasts on EVs and charging stations. With that said, it took the Chinese govt, a few initial steps over 10 years ago to spark the EV market which is just now starting to mature with the private sector taking over in lieu of govt. subsidies and other incentives being reduced. Hydrogen fuel cells could take a good 10 years to catch on in China in any significant way but as we know, they play the long game and if the Chinese govt makes a priority of something, they usually have the patience and determination to see it through. - Hydrogen is a great fuel source if you can find it. A great article about hydrogen, or any new technology for that matter, and the amount of effort early adopters have to endure to just fill up. Here are a few numbers that tell you the current situation and struggle in the US with FCEV (Fuel Cell Electric Vehicles). There are ~9K FCEVs currently in California, a state that’s 163K square miles with currently only 45 hydrogen stations. That is PATHETIC. On top of that, if you’re able to plan your day around going to a fuel station, there’s still a chance that when you get there, there’s no fuel for you! - If one EV startup has its way, the way vehicles are made will never be the same. Will EVs do away with the traditional assembly line manufacturing that’s been happening in about every auto plant since Henry Ford developed the process over 100 years ago while building the Model T? It sure seems like it could be a possibility. With Arrival’s thinking, volumes are MUCH lower and it sounds like parts of vehicles will be shipped as modules so that there aren’t many manual ‘jobs’ for actual people outside of final assembly. With advancements in manufacturing & robotics this could work, but you’d likely still need suppliers to be close by. And what if volumes crept up? Would this still be cost-effective or would it create a manufacturing queue? - VW still standing in the shadow of diesel-gate. More VW management charged in diesel-gate. This is going to hang over the company’s head for quite some time, as it should since it sold over 9M vehicles with the so-called defeat device. Yes, I could see how installing something on that many of anything could’ve been hidden and kept secret from all the top dawgs at VW Group. - Are GM & Ford trying to trick US buyers into being environmentally friendly? It sure does seem that way especially in GM’s case with the 1K HP electric GMC Hummer. With GM’s initial offerings, the Chevy Volt & Bolt receiving lukewarm greetings and even more anemic sales, GM looks like they decided that going BIG and convert what Americans love, their beloved pickups and SUVs into EVs. That seems to be the only way to lure their customers away from gas-guzzling versions. - Does the Porsche North America CEO, Kjell Gruner, ‘get it? Marrying the digital world with the physical world is the key for automakers to creating the ultimate user experience that will keep current customers loyal to the brand while attracting new ones. But it’s NOT easy, just ask Jony Ive. But this interview makes me believe Gruner seems to know what he’s talking about, at least at a 50K’ level. The key here is to keep pushing Porsche forward and into the future even though sales are growing. Most folks internal to Porsche would think ‘why mess with what’s working’ and there’s merit to that, specifically if the team isn’t capable of upping their design game in a digital world. His hardest work will be to evolve Porsche’s culture and bring in designers and software developers that are able to pay homage to Porsche’s storied past while blazing an amazing road to their future. TRENDING ON SOCIAL MEDIA - The US with ambitions to overtake China in EVs. You gotta love Biden’s ambition but is it grounded in reality? Most folks would say no, but I have faith that the US can get their shit together and eventually become a viable competitor to China in EV/AVs. There is little room for error and the market is actually starting to move faster so I am even close to being right, buckle up! - A Gogoro + Hero mashup in the works. I want more time to unpack this but at first glance, this seemed like a strange partnership. GGR scooters play in the high end of the market but as it starts to marinate I can see why they would want to work together. GGR will be licensing its technology to be bolted onto Hero mopeds which allows GGR to not drag their brand down market. Let’s hope Horace and team have vetted how they’d work together on the engineering side of things since I know Horace to be a perfectionist. This also gives GGR two things, access to a large manufacturer in the world’s second-largest city and access to their international markets which currently are numbered at 40. How well battery swapping travels to India or other countries where GGR will have a lot less control with govt. relations remains to be seen but I hope they’re able to succeed and that Hero is able to introduce and get their version of an electric, battery swapping moped on the roads very soon! - GAC + Tencent like how they play together and want to continue their formal relationship to further develop digital products and a new mobility ecosystem. Effectively GAC is going to work with Tencent to develop its backend architecture and take advantage of Tencent’s ecosystem including WeChat and QQ to try and attract customers to its vehicles. - Chinese regulators moving from Alibaba to Meituan to investigate whether or not they’re violating anti-monopoly practices (they likely are). This should scare any and ALL of Meituan’s partners and anyone they’ve significant investments in, including EV & mobility companies meaning Li Auto. Each of the Big Four (NIO, XPeng, WM Motor, Li Auto) have tech backers with deep pockets so they sit above most other EV startups that don’t or that haven’t been able to break through themselves. I don’t think this will change much for Li but we will continue to monitor. - Rivian will offer a 7-day no quibble return policy for any unsatisfied customers. I am not sure if this is confidence or hubris coming from RJ, likely a bit of both. Will Lucid or Fisker match in kind? JUST THE NUMBERS - 2040. When Honda commits to selling ONLY EVs. - 100K. As mentioned before, Ola and their founder Bhavish Aggarwal, do NOT lack for ambition. Ola has announced that they will build >Hyperchargers in over 400 cities across India but left the ‘by when’ open-ended. Now, will he sell enough electric scooters to make investing in that many Hypercharging stations profitable – That remains to be seen. I was told that current utilization rates at certain charging stations are at <5% though, while electric mopeds still have a ways to go towards wide adoption. Right now, with annual sales at <150K / annum, there’s still a steep hill to climb and the pandemic that is devastating the country right now is pushing any type of traction on EV adoption that much further out. - $7.7B – That’s what Jidu Auto, the JV between Baidu & Geely plans to invest into building smart cars over the next 5 years. Money will come from a combination of Baidu and external investors and the first vehicle should be launched within the next three years. —— 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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