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In Shanghai for the Show, EPA Gets Much Stricter, Gotion in MI Problems - SAI Newsletter 15



 

Arrived Shanghai and am pretty beat up. Spent most of today working (and resting) so that I can push through the jetlag and get moving starting tomorrow. Yes I am sending this out at 1:30am China local time.

Tomorrow begin the adventures as I’ll head off to meet up with a few executives at their facilities to check out their products. I’ll try to share the who’s and what’s later (if I can).

This is the first time I’ve been back to SH and am anxious to see how everything is. Initial impressions are that there aren’t many remnants of Zero Covid strategy with the exception of some people still wearing masks. No QR codes to scan and you can come and go as you please.

Shanghai, a normally bustling and energetic city does seem a bit quiet, but perhaps that more to do with the economy than anything else. Will have more to report after I’ve spent about a week here. Also, my cab ride from PVG cost a whopping ¥250! I don't recall it being that much ever. So far, most of the apps still work and my wechat pay is in good working order too. Without WeChat pay, you're pretty much helpless so it's good to know that my technology is still ok.

It’s going to be a busy few weeks and I am looking forward to it. Will need to stay organized if I am going to get everything I want to done.

It may be me and just a few others you’ll have to rely on to get the lowdown on the ground though. Quite a few journos I know that planned to attend haven’t been able to get their visas in time so I am bummed for them. Others already in Shanghai or China are having difficulties getting their passes.

This is a bit of a headscratcher. The Beijing / Shanghai auto shows are really the only auto shows in the world that matter now and it’s an opportunity for China to show off so to limit access is just weird. I’ve been told that the visa system is terrible (which it is) but there’s more to it than that for sure. And that’s unfortunate.

CHINA EVs & MORE

We are scheduled for Thursday, April 14th, 9pm ET this week. Lei will be broadcasting from HK and me from Shanghai. Let’s see if there are any technical issues we’ll have to deal with. I haven’t had to think about that for about 7 months! We are looking forward to it and hope you all can join.

We will be talking about March EV sales and preview the AutoShanghai 2023. Join us if you want to ask questions and / or interact with us.

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.

TESLA

- Despite the tensions with the US, Tesla doubles down on China by announcing its building a factory in Shanghai to manufacture its Megapacks for energy storage. In the process, it ingratiates itself with the largest car market in the world and the people that largely controls its fate …if they’re to become a 20M unit sales OEM by 2030.

Tesla will do NOTHING to upset the Chinese govt. Not now and not in the future. China is too key to its core strategy, whether it’s being an export hub, (eventually) the largest market for their vehicles, their battery ground zero, you name it. For now, they’ll play both sides to get to the middle because their two largest markets let them. There will come a time when they won’t. That’s when Tesla could run into some issues.,


NEWS THAT GOT OUR ATTENTION THIS WEEK

- GM making another bet on a mining company. This is different from their $650M investment in a US mine on the Nevada and Oregon border. This investment in EnergyX who is developing direct lithium extraction technologies is much smaller, GM will be investing a portion of the total $50M B round and this investment is being led by GM Ventures, GM’s VC arm rather than the Corporate Development team that led the mine investment transaction (along with a bunch of bankers) and are able to write the much larger checks.

- Toyota FINALLY mashing on the (ahem) gas pedal to move on EVs. That plan includes 10 new EV models by 2026 while selling 1.5M EVs / year (out of about 10M total). They’ll also be carbon neutral by 2050 – which is a lifetime away and basically a throwaway pledge.

Still not fully committed to EVs but a move in the right direction. Not sure what the problem is with Toyota. Their current lineup of EVs are forgettable. The IRA should provide them the incentive they need to move much faster and more aggressively while the Chinese market is basically EV first now. What’re you waiting on? Car guys doing car things.

- Stricter climate regulations for cars means faster EV adoption for the US. New EPA rules limiting vehicle emissions substantially. So much so that for automakers to meet the targets they’d need to sell many EVs.

The new rules have a goal of ensuring that 2/3 of all vehicles sold are EVs as well as ¼ of all heavy trucks are all-electric by 2032. Very aggressive.

Of course, these new regs have gotten substantial pushback from all of the lobbyists whose companies will lose out but this is the right thing to do. No reason to slow roll this. Get it done and while we’re at it, build out those mines, refineries and cell manufacturing capacity so there’s no chance of getting cut out of the supply chain.

There will be pain and job losses but would you rather that last over a few years or over several?

TRENDING ON SOCIAL MEDIA

- Nothing is set in stone. I am referring to none other than all of the announced transactions/investments that have been announced the last several months including the Gotion investment in MI to build a battery cell component factory in southwest Michigan. According to the linked article, the deal is supposed to provide Gotion $715M worth of state incentives! There isn’t a ton of visibility into this transaction but it’s too late now to just pass everything while people aren’t paying attention – they are.

There’s been a tremendous amount of pushback, some of which can be attributed to politics and partisanship but what’s being provided to Gotion to put the factory in MI should raise some eyebrows. It’s the exact reason why the IRA was drafted the way it was.

This likely means that the Ford / CATL & Tesla / CATL deals where they both ‘license’ the big dog’s IP will garner further scrutiny. I’ve been told that the current transactions as is would NOT elicit CFIUS scrutiny but that could all change, depending on how much further US China relations deteriorate.

- If you were wondering when BYD was going to put a horse in the ADAS race, wonder no more. Via a partnership with DJI, BYD will launch a vehicle – the Sea Lion that will have DJI Automotive ADAS system bolted on. Another system I am going to have to check out for myself!

- The VW ID.7 is coming to China. No surprises there but I think it’ll struggle just like the other ID series vehicles have had a difficult time finding a significant audience. It’s also positioning itself as a premium EV sedan which would out it up against its own brother Audi and the rest of ABB, We’ll get to O-fficially see it on the 17th. Looking forward to it.

GET SMARTER

- Are sodium ion batteries almost ready to be the next battery innovation? There are some companies like NIO & CATL that have talked about using sodium ion batteries in future products so are we that close to commercialization of the new battery chemistry?

Not to oversimplify, but sodium theoretically can replace the lithium in batteries, reducing the cost of them while also being able to hold a charge in cold weather better. A few of the challenges for sodium ion batteries is that they carry less range via their lithium-ion battery counterparts at the same size so not yet practical completely, many companies are looking at dual chemistries so that the combined advantages from sodium and lithium-ion batteries can be realized.

China is also positioned to dominate this subsector of battery cells. According to the article, “of the 20 sodium battery factories now planned or already under construction around the world, 16 are in China.’

Lithium-ion batteries will still dominate this decade in EVs, but after 2030, all bets are off. Will the US become a major player in sodium ion, or will solid state step up to be a real, affordable alternative?

INTRODUCING

- The Didi Neuron. Didi unveiled their version of an L4 robotaxi today and boy is it ugly! That’s kinda beside the point but if you’re trying to build trust among potential customers wouldn’t you want to design it so that it’s not so intimidating looking?

Anyway, the important thing here is that this is Didi’s O-fficial announcement that they BACK! For the better part of two years, they’ve been deafly silent as they made their way out of the Chinese govt’s doghouse. Are they as internationally ambitious as they were pre-IPO? No, but the Neuron along with their Kargobot autonomous freight business shows that they still consider themselves a formidable player in the space.

- The Zeekr X. If ABB weren’t too worried yet, they should be now. Zeekr yesterday debuted their small SUV / crossover EV called the Zeekr X. Key feature, starting price :¥190K (~$27K). Deliveries start in June and this should sell well.

They target selling ~40K of them in 2023. This should help with their sales volumes which should help pump up the valuation before their impending US IPO.

BY THE NUMBERS

- 54,937. That’s how units of the MIC Model Y were sold in China in March, making it the best-selling SUV for that month. It took and will continue to take a lot of effort, but Tesla is …Still the CHAMP.

- 5K. GM offered packages to most of its 58K US based white collar workers (and some non-US workers) and that’s how many took it. My sister last year retired from GM after 35 years but is still in touch with many of her ex-colleagues who said that it was the most attractive package that GM offered in quite some time.

So GM got lighter by almost 10% on the salaried side but the heavy lifting comes this summer when they have to renegotiate their 4 year contract with the UAW, who fresh with new leadership seem to be wanting to start a fight. High probability that there will be some sort of strike at the US factories later this year.

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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 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.

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