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LA Auto show, Driven by Cruise, BYD's 3 Millionth - SAI Newsletter 42



 

This newsletter is long because I held back last week's in order to get back to Weds delivery. Things didn't feel right with me sending this at the end of the week so think of this as like a double dose of the newsletter! And we will get back to our normal weekly every Wednesday till at least the end of the year. I am currently in Los Angeles and will attend the LA Auto show tomorrow. I’ve never been so I am looking forward to it. This should also give me a good sense of whether the concept of an ‘auto show’ has reached its prime since I’ll have attended both the Detroit and now LA auto shows this year. Right now, IMHO the only auto shows in the entire world that matter are the China ones and only two of those – Beijing and Shanghai. Beijing was O-FFicially cancelled last week (although most knew it was never going to happen at all) and now my hope is that I’ll be able to attend the Shanghai Auto show next year but right now with the Zero COVID policy still in place and flights still throttled back, my odds of it happening next April - 50:50. I am hoping that LA will have some surprises in store for us and am looking forward to seeing what EVs are ready to make their US debuts. As for the trip – I arrived in LA last Saturday and went to the LA Rams game on Sunday. Sofi stadium is the REAL DEAL. Its right across the street from the old LA Forum and down the block from where the new LA Clippers stadium is being built not too far from LAX. I had amazing seats thanks to a good friend of mine, and I was really impressed with the stadium, it was beautiful. I guess when you have LA weather it makes for a lot of possibilities that may not be available to you in say a Detroit, Chicago or New England. As for the game, both backup quarterbacks played so that was a bit lackluster and the Rams lost so the crowd didn’t have much to cheer for most of the game unfortunately. After the game I took a quick hit again trip over to SF for a Venture Capital conference and pitch contest. I was of course interested in the mobility startups and seeing what they’re innovating on and trying to improve. I am completely bullish on some of them emerging now that the Inflation Reduction Act has legacies here trying to accelerate their pivots to EVs. There were at least a handful of pretty scrappy startups with good/great ideas that should get some funding, likely from the corporates who are desperate to get their redefine who they are whether OEM or tier 1. Lei and I also recorded our next MAX episode with Zack Anderson, CTO and Cofounder of ClearMotion, a mobility company that is innovating on active suspension to enhance the ride comfort of passenger vehicles. The company has been about 13 years and are now ready to show off their tech and recently got a few significant wins that of course you’ll have to tune into the podcast to learn more about. We recorded the episode sitting outside of a café in Noe Valley in SF so it’ll test the skill of my podcast editor to see if we can’t get the sound quality right. There were lots of (sometimes loud) ambient noises that you tune out completely most of the time, unless of course you’re recording a podcast. Lei and I had the pleasure of meeting with Ganesh Iyer - NIO US CEO yesterday at NIO’s San Jose office. Most of what we talked about was off the record but what I can say is that his team is busy, real busy. And excited. Ganesh is an interesting guy too – a Tesla alum who has an insider’s view of what’s happening over there, but we’ll leave it at that. Lei and I had the opportunity to ride in a safety driver-less Cruise Automation robotaxi! Absolute craziness and my mind goes back to riding in the robotaxis in China and trying to compare and contrast with my experience last night. First, I never got to ride in a safety driver-less robotaxi in China but plan to when I head back but I want to take a some time to think about it and watch all of the videos before I put out a write up so for those interested in my experience, and Lei pointed this out to me last night, of being one of the few folks on the planet who have ridden in both US and Chinese robotaxis in the US & China, you’ll have to wait till next week



Finally a few observations as we hit the 2022 home stretch. Mobility/EV stocks have taken a bath this year and I mean almost across the board (when I say mobility I mean in the broadest sense, they could be EV, battery, tier 1s, retail, etc.). A few examples as I randomly google share prices of companies and their fall YTD (as of last week): TuSimple: -94% w/ a current valuation of $510M Tesla: -55% w/ a current valuation of $564M XPeng: -87% w/ current valuation of $5.75B Carvana: -97% w/ current valuation of $1.44B Lucid: -73% w/ current valuation of $18.6B Quantumscape: -71% w/ current valuation of $2.96B (decided that $40M was meaningful so I didn’t round up) Arrival: -96% w/ current valuation of $231M Aurora: -86% w/ current valuation of $1.86B Rivian: -73% w/ current valuation of $25.6B Uber: -39% w/ current valuation of $53B EVgo: -39% w/ current valuation of $1.73B You get the idea. It seems investors were overly enthusiastic and the current market conditions and (un)certainty about a global recession and inflation fears have taken most of the gains back. TBH, there’s a slight chance a few of those companies I’ve listed may not survive, they’ll either get eaten up by the market or get acquired on the cheap. What got our attention this week. - The EU cries foul on the US Inflation Reduction Act (IRA). Looks like there will be formal pushback on President Biden’s Inflation Reduction Act by the European Commission due to what they see as the new law unleveling the playing field. I need to dig into this one a bit more but I believe they’re referring to the future EV imports from Europe wouldn’t be eligible for the subsidies due to content not meeting the local requirements? Not sure how that’ll work since that horse has already left the barn. - S&P reiterates what we knew to be true all along. When Lei and I spoke with Steve Levine for our MAX a while back – we wondered aloud – how the delta between EV supply causing a major spike in demand of rare earth metals causing a shortfall which would lead to prices increasing would work if the OEMs planned to be profitable. Well, it seems the S&P is wondering the same thing. There will be a number of things that affect and create volatility in rare earth metals commodities pricing, and it won’t go away quietly. Which makes GM’s planned profitability by 2025 difficult to reconcile but more on that below. - Germany pops into Beijing to kiss the ring. As I’ve mentioned in previous newsletters re: Volkswagen’s outsize dependence on the China market for survival – if we blow this out it seems the entire country is in a similar bind. How this will affect Germany’s relationship with the rest of the EU and the US remains to be seen but it’s a tightrope they’ll likely walk on for the foreseeable future and is EXACTLY where the Chinese govt wants Germany to be – a buffer and perhaps (unofficial) messenger for them. CHINA EVs & MORE We dropped our latest MAX Episode (#11) with guest Henry Sanderson. Short rant – We had a great chat with Henry a couple of months ago but it took a very long time for the platform we use, Riverside to sort out some technical challenges with the recording. We did go from losing a good portion of the recording to just a few minutes so complete disaster averted!


About the podcast, we talk Henry’s new book Volt Rush – a must read for anyone covering the EV sector – and how the Inflation Reduction Act could affect the pricing/demand of rare earth metals. Another great convo with another amazing guest. Lei and I invite you to have a listen and to grab Henry’s book! For those that can’t join our live Twitter Spaces room (shame on you!), the China 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. TESLA - Tesla built 87,706 MIC Model Y & 3s but only delivered 71,704 leaving a delta of 16,002. In other words, that’s the largest inventory pile that ShanghaiGiga has ever sat on in a month since it’s been producing cars. Does this point to a demand problem for China – absolutely. But how bad is that demand problem and how long will it last? What we should concern ourselves with is how much of this problem is a Tesla problem and how much of this is being caused by the overall market? We will know much, much more when Q4 numbers roll in starting in January 2024 so for now, I will hold judgement. Let’s see what they do with that 16K and the ~90K or so cars they’ll likely build in November. IN THE NEWS - $12B + $12B coming from TSMC? According to the WSJ, TSMC is going to announce another mega investment in Arizona to fab ASICs that boast 3nm transistors - some of the tiniest out there. Ones that China isn’t able fabricate them because they lack the expertise and even if they had it, they’re barred from purchasing the capital equipment (from companies like ASML who make the specialized lithography machines) that are necessary to produce at such a tiny size. The US is very behind China, Taiwan, Japan and Korea with regard to chip fabrication capacity but hopes to double its global capacity to 20% by 2030. It takes 3-5 years to get a fab up and running completely so investments made today won’t bear substantial fruit until 2027 at the earliest. Most of TSMC’s capacity is concentrated in Taiwan but, in addition to the US, TSMC also has plans to fan its production capabilities out to Singapore and Japan. And what TSMC is doing is what we call mitigating risk. Every global leader knows they need a functioning TSMC for any chance of having a productive economy, but there might be a country out there who doesn’t care about those economies. - Caught in the middle of the US China chip conflict. There are a lot of similar stories like this, albeit on a much smaller scale, that are affecting ethnically Chinese US citizens living and working in China. What I’ve been told is that most do not want to renounce their US citizenship and would rather quit their job but in this highlighted case its much, much more complicated. The subject of this article, Gerald Yin - founder of AMEC - is stuck between a rock and a hard place with difficult paths forward either way. TRENDING ON SOCIAL MEDIA - Renault leans into its partnership with Google. Let’s be clear about something. OTA updates aren’t a differentiating feature that should be highlighted. Unless you’re a legacy. Another legacy, in this case Renault, that wants to work more ‘closely’ to its tech partner. Google already gets data from its ‘other’ partners so their ability to analyze and monetize it via features and services derived from that data is going to be a gamechanger. Each legacy has their own specific situation, but does Luca and Renault believe they’ll be able to decouple, or more appropriately their customers, from Google’s ecosystem after they’ve developed their own OS/App store/platform/firmware etc.? Once they’re on a certain platform, getting them to switch is going to be about impossible, - Merc cuts prices in China of its EVs including the flagship EQS. Notably, the EQS luxury edition which is the top trim level was slashed by a whopping $33K!! I wonder how much they paid their management consultants to help them figure out that their EVs were priced waaay too high. They must not read this newsletter since I’d mentioned at least a year ago that Bimmer & Merc had overpriced their products. The market is too competitive for a $175K electric S-Class that is a bit out there with its interior design. Who’s next? - Mary: GM to be profitable with EVs by 2025. In a talk with investors tomorrow, that’s what she is rumored to tell them. I think that seems pretty optimistic BUT the Inflation Reduction Act could allow them to keep their EV prices higher for the foreseeable future. GET SMARTER - Renault’s BIG moves. Let me summarize. It’s going to spinoff it’s ICE business into a 50/50 JV with Geely. So if we’re keeping score, this is yet another business partnership that Geely has entered into with a foreign brand. So many that it’s hard to keep track TBH. Next, it’s hoping that Nissan will invest in its EV business Ampere but to make Nissan feel better, it wants Renault to divest its commanding 43% stake in Nissan into a much smaller %age. The headscratcher here is that Nissan seems to own or co-own a lion’s share of the EV IP and doesn’t want Renault to share that with Geely. I am either reading this incorrectly or am missing something because it seems that Nissan has the leverage here. If Renault wants Nissan to play with its ball (the IP), then it needs to be somewhat accommodating to Nissan, right? Let’s also remember that Renault has invested in BeyonCa, the recently un-stealthed EV startup from Weiming Soh and team. Would Renault share Nissan’s IP with BeyonCa, likely I’d think but would that be part of the negotiation or is that a showstopper like the IP sharing with Geely? This could also be both Renault and Nissan negotiating in the public to make sure that the French and Japanese believe that neither of ‘their’ companies is giving too much to the other, at least not without being compensated commensurately for it. - Battery 101. For those wondering how bolting thousands of battery cells like Duracell batteries to make a battery pack is done, this is the article for you. It actually explains the cell > module > pack, but Mark also gets into new-ish cell-to-pack and newest cell-to-chassis packs that save weight & space allowing for more cells which increases range while keeping weight gain at bay. Guess which companies are leading the way in these new battery cell arrangements? China EV & Battery Inc of course. QUOTED/INTERVIEWED Forbes: I had the pleasure of speaking with Michael Schuman for his latest piece about Tesla in China. Michael takes a deep dive into how much Tesla and China need each other, at least until China doesn’t need Tesla anymore, which won’t be anytime soon, especially if 2023 turns into a challenging year for the EV automakers there. You can find the article here and it’s worth the click. INTRODUCING - The BMW i7. Bimmer decided that it would be better to not upset the apple cart and leave the electric version of its flagship 7 Series be an exact clone of the ICE version, kinda sorta. The designers and management or the management made the designers indecisive on how to tackle this challenge and it looks like no one won. Bimmer lost its way with the MEGA meme worthy kidney grilles and rather than pull back, they leaned in. Starting at $120K, I’d just go with the Lucid TBH. - The new Toyota Prius. It’s hard to believe the Prius has been on the roads since 1997. It is THE #OG when it comes to hybrids and should be applauded for its longevity. It’s longevity and the fact that manufacturers are now starting to build EVs that don’t look like spaceships is likely what pushed Toyota to redesign the Prius. Its striking and reminds me a bit of the Chevy Volt. I’ll get a sneak peek of it tomorrow and look forward to seeing it up close. BY THE NUMBERS - -11K. That’s how many employees that Mark Zuckerberg announced that Meta will be laying off or about 13% of its staff, the first ever mass employee reduction in its 18-year history. - 3M. BYD produced its 3 millionth NEV this week. It took them 13 years to get to 1 million and just 1.5 years to get to 3 million. BYD is the ONLY Chinese OEM to produce that many NEVs. ---------- 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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