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LA & GZ Auto shows, Salon with 4 LiDARs, Plus AI - Hennessy SPAC collapses - SAI Newsletter 45



Quite a busy week as the LA & Guangzhou (GZ) Auto shows bookend the weekend. There’s already been a couple of decent-sized announcements and we’re only into Tuesday (in China). I’ll summarize one up top but then try to give more detail on some below the line as well. The big news this AM was the virtual meeting between President Biden and President Xi. I think it was as much for keeping communication channels open and don’t believe anything substantively will be decided because of it but it’s always better to have a dialogue than to not IMHO. As you can see from this week’s feature pic, XPeng has decided to ‘freshen’ its brand. The logo on the right is still just ‘rumored’ but should be made official, or at least something VERY close to it anyway, on Nov. 17th. I was told by my sources that this is ONLY for the domestic market for now and that it should be taken as a brand refresh and not a complete rebranding. I like it, the subtle differences – a bit more angular, two parts instead of four, and no more intersection separating the parts, just one line. I think it looks a bit stronger and more mature. Will talk to XPeng to get an explanation of the changes and let you all know when I do. There has been a rumor going around that Audi is purchasing McLaren but that’s been denied by McLaren, at least for now so the deal must still be in delicate negotiations. I haven’t thought through what Audi’s play here is so we will wait to see next week if they make the deal official and then I’ll unpack my thoughts. I’ve been working on a few big ideas that should present themselves over the next few months and admittedly, I’ve not had an easy go of it. A lot of what we will be trying wasn’t/isn't part of my original wheelhouse of skills (not that I have so many anyway) so I’ve had to be very curious and learn on the fly. I’ve also had to get over not wanting to make mistakes and remind myself just ‘GO FOR IT!’ I kept thinking of that saying – Perfect being the enemy of good. All the while taking on a couple of big projects and the team is stretched, but I look forward to these future challenges, some with partners some we take on our own. Speaking of new(ish) ventures, as always EVs & More will be hosted on Twitter Spaces as per the usual on Thursday – 9pm EST. This week, Lei and I will talk about his trip to the LA Auto show, news coming out of the GZ Auto show, Lucid, and AVATR so if you’re free please drop in, or better yet, come with some questions or comments. You can follow me on Twitter at: sinoautoinsight and/or Lei at: leixing77 For those that aren’t able to join, a friendly reminder that 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. TESLA NEWS - Tesla cars missing some key pieces? There have been numerous reports on social in the US about Tesla delivering cars without USB ports. Some Tesla customers were notified about this but some were NOT. Wow, really? If you are wondering whether Tesla is more worried about sales numbers than customer engagement and satisfaction, this should tell you where their priorities lie. I’ve not heard of this happening in China yet so that should also give you an indication of which market they believe to be more important. If this doesn’t end up happening in China, effectively Tesla has decided that they’d rather upset US customers than Chinese customers but we will continue to monitor. IN THE NEWS - Changan, Huawei, CATL are the first out of the gates this week to announce their mashup called AVATR. The first EV from AVATR - the AVATR 11, which will use the CHN platform (C=Changan H=Huawei, N=Nindge (CATL’s Chinese name)), was officially unveiled yesterday kicking off Guangzhou Auto show week. Since it was the first high-profile reveal, it got a lot of attention from social media in China, both good and bad. AVATR was originally formed as a JV between NIO and Changan in 2018 but has shifted ownership to now include Huawei and CATL. AVATR plans on shipping product to customers during the 3rd quarter of next year which means they’ve been pretty busy bee’s the last 2.5 years. Investors for AVATR all seem to be pretty well-capitalized and include NIO, which owns <2% of AVATR, so it shouldn’t have any problems on the money side but having less than a year to get design, engineering, and manufacturing sorted out, especially with so much uncertainty on the supply chain side seems a bit optimistic. AVATR’s current plan is to launch 4 cars within 5 years. Although I may have my doubts about timing, I’ve seen a Gigafactory go from farmland to shipping product in <1 year so anything is still possible. Finally, the factory where AVATRs will be built is in Chongqing, where Changan is HQ’d and will have a max capacity of 350K units/annum. For those that are counting Changan also happens to be Ford’s JV partner. - The XPeng G9 SUV is on its way. Or is it G7? I posted about this a bit last week but since I have more details now I thought I’d add a bit more to the story. I am disappointed that I won’t be in GZ this week but more COVID-related travel restrictions popped up. For sure THIS is one of the events I would’ve attended had I made my way down. I was able to speak with an XPeng insider and they told me both about this new vehicle and the brand refresh (see up top) so I may have even gotten a closer look at it but alas, I’ll have to wait until next year but hopefully before the Beijing Auto show. XPeng is gaining more confidence each month as its sales continue to grow. The P5 should be a big winner for them and add should push them towards the 20K/month sales goal and likely take buyers away from Tesla’s Model 3 in the process. Will they be the first of the China Big 6 to enter the 20K Club? We should find out in early 2022. Despite this confidence and new set of products, XPeng will still take a cautious approach to their European expansion. At the same time, they are closely monitoring what their competitors are doing and saying since everyone seems to be trying to one-up the other for attention & sales. The ‘G7/G9’ will launch via the same platform as the P7 so expect it to be larger than the G3, have at least 2 LiDAR, and also play into the family angle ala the P5 & Li One. - Great Wall launches a new premium EV brand Salon while pushing the 'smart EV' envelope by bolting 4 of LiDAR on Salon’s first vehicle. You read that correctly - 4 solid-state LiDAR from German company IBEO! The digital marketing doc basically says to ‘SHUT UP’ if you’re not bringing 4 LiDAR to the table. Is this overkill? For sure. Will it pay off? Only time will tell …as in the safety record for this new vehicle. For now, let’s chalk this up to more about Great Wall Motors grabbing headlines and marketing itself as the ‘First to 4’ LiDAR. We should also remember that LiDAR is just one of a suite of sensors that AVs (with the exception of Tesla for now) use to draw their digital world. How all the data is stitched together, the scenarios it decides are most likely from that world, and the decisions the AV makes based on that digital world and likely scenarios will ultimately determine for us which vehicles are the safest. Data plays a HUGE role so if these things don’t sell, don’t expect the ADAS system to be all that great. For most of us in the market for vehicles that come with LiDAR though, it won’t matter until we can get to ‘safest’ AND ‘most affordable’ which according to the QCraft CEO, could be very soon. - Plus AI and Hennessy call off their SPAC merger. This important announcement fell below most media outlets’ radars but it's pretty important IMHO so I am covering it. It’s the 2nd time a Chinese/US straddling AV startup has scrapped its plans to IPO via US SPAC. The first one was Pony AI walking away from Vecto IQ back in August after Pony couldn’t get assurances from the Chinese govt that it would be ‘clean’ if it went through with going public in the US. There are still PLENTY of Chinese companies AND US investment firms looking to make deals, the SPACs have made it too easy for both parties to quickly make a bunch of money with little to no scrutiny. I know this because I’ve been asked to help be a matchmaker. Of all of the SPAC mergers in the mobility space, there were just more than a handful that I thought made a ton of sense and quite a few that I thought sucked A LOT. Let me also assure you that there would be many more Chinese companies (both legit and suspect) wanting to go this route if the Chinese govt wouldn’t have dropped the hammer on Didi. Remember that Didi went ahead with their IPO even after the Chinese govt put the kibosh on the Ant IPO so lessons were NOT learned in Didi’s case and they’re still in the box because of it although there are rumors it could be getting off punishment soon. These US investment firms & Chinese companies are clearly NOT afraid of (if) anything happens to them on the US side. It’s the threat from the Chinese govt that’s causing major concern with many Chinese startups ultimately deciding to walk away or not move any further with their discussions. They know that the Chinese govt will NOT take kindly to lessons from Didi and Ant being ignored AGAIN. I’ve jumped on my soapbox before about these AV startups that are trying to straddle the ‘We’re a US company/Chinese company’ depending on who their audience is but the key here is just to follow the money. They can say they’re American all they want, but who’s funded them up until they’ve gone public? The companies that went public just before Didi should and do consider themselves VERY lucky. But those companies aren't out of the woods yet and there will likely be a cloud that hangs over their heads as long as they have substantial operations in both countries. - AV Newcomer QCraft announces a deal with Nvidia while also unveiling its Gen3 AV system which consists of 9 cameras, 5 LiDAR, and 4 wave radar units. CEO Yu Qian said that the cost of these HW stacks will be reduced to <150K RMB (<$24K) within the next two years which would put A LOT more companies in play for competing to be everyone’s robotaxi. TRENDING ON SOCIAL MEDIA - Hyundai’s retro EV is SWEET. It’s called the Heritage Series Grandeur EV and was designed to celebrate the anniversary of Hyundai’s flagship sedan that dropped in the ’80s. This certainly seems like an homage to cars of that vintage. It’s a concept unfortunately so no mere mortal will be able to drive this piece of art home. - China Evergrande sells another piece of their NEV startup. This time it’s e-Traction to Saietta Group. So again, will they license back this technology in order to produce their Hengchi 7? Should Hengchi be taken seriously?? - Australian Zoomo wants to disrupt Rivian. Two wheels at a time. This startup just raised $60M in Series B and wants to sell subscriptions for electric bicycles and mopeds to delivery drivers and couriers. The premise is simple, you don’t need a 2 ton EV to deliver a sandwich to someone. They’d be right. It sounds like CEO Mina Nada has visited Asia sometime in his life because that’s exactly what is delivering most goods (food, and groceries) here, people on mopeds. The two challenges I see that CAN be overcome but will take time and a lot of help are: 1. Passenger vehicles still rule the roads in the US and unless local govts put limitations on where private vehicles can go or allow electric bicycles/mopeds the right of way, it’ll be hard to get fleets launched in major US cities. The next is a cost issue: 2. Asia wages are much lower than Australian & US wages so can companies like Zoomo get the economics to work? How low does the cost have to be in order to make this (profitable/delivery) a viable business? If they can sort out the numbers, I could see the OEMs really take a shine to them as acquisition targets, say in the next 5-7 years. I’ve spent an extra amount of time over the last several newsletters primarily talking about China and EVs, specifically China EVs. That’s OK because there has been a lot of interesting and important news coming out of the space. BUT I originally kicked off this newsletter because I think mobility means more than vehicles with 4 wheels so the plan is to get back to that a bit in the coming newsletters. Will dig a bit deeper to find interesting and more importantly, needle-moving stories about general mobility topics. With the US FINALLY transforming the infrastructure bill into law, I think there should be a lot of interesting news coming out of the US in the near future as well so the newsletter will evolve but will NEVER be dedicated to just the Tesla’s, NIO’s, GM’s, or Rivian’s of the world. GET SMARTER - What, me worry? If it seems like China’s economic growth is endless and that it’s only a matter of time before they surpass the US on every economic measure, you might be right. China has been growing at close to 10% for >30 years. None of these fits and starts that democracies have whenever there is a leadership change. It’s also important to remember that there are 1.4B Chinese vs. 350M Americans, so if you’re at all into data, you know that it’s just a numbers game. But as the economy grows here in China, the denominator for all of these economic measures gets bigger and the growth of ‘A, B, C’ economic measure gets much harder to maintain let alone grow at >5% consistently. We are starting to see some of the challenges of trying to maintain that growth. It starts and ends with the real estate sector here. Since the capital markets are still pretty young, and with restrictions on where Chinese citizens can invest, many Chinese have put their savings into real estate. It’s because until recently, the value of said property kept increasing. If we can recall back to 2008 in the US, more and more people were purchasing real estate and stretching their finances thin in order to do so (see a book called ‘The Big Short’ by Michael Lewis). That’s because Americans (and Wall Street) thought that home prices would increase in value in perpetuity. They do not. And when housing prices started to fall, the music stopped and people couldn’t afford their homes anymore. In many cases, the values of their homes < what they owed on them. A retired University of Chicago professor is predicting that that’s what’s happening to China now. There are way too many empty apartments with fewer and fewer people to buy them. This, he posits, should lead to home prices collapsing and the Chinese economy taking a big hit. The major indicator he points to is China Evergrande’s (CE) recent debt challenges. For those not familiar with CE, they are China’s largest and most notorious real estate developer with currently well over $300B in debt. The interest payments on that debt are enormous, so much so that CE has been struggling to service it. They’ve recently been able to make a couple of the payments and hence kicked the can down the road a bit. With that said, China watchers are looking for signs that the Chinese govt. will bail them out in order to avoid a ripple effect through the domestic Chinese economy and ultimately the global financial markets. I don’t think the Chinese govt will do that though. Bail CE out I mean. What I will say is that I’ve lived here for close to 12 years. There hasn’t been one year where I’ve not been amazed at the messiness, craziness, and most importantly the speed at which change occurs here. But economic development has always been one way. And I’ve been to cities where I’ve seen entire apartment complexes empty so that’s not a myth either. But we’ve never experienced a country this large develop so quickly before our eyes and for the economists, maybe their models aren’t built for economic markets this large or govts that have till now been able to manage growth this well for so long. I am no economist but I do have my doubts about how long this is sustainable. That’s not to say there won’t be some challenges for China in the future, there will be some major challenges. For now though, I won’t be the one to predict where, when, or how those challenges might occur. BFD OF THE WEEK - Lucid Motors wins the 2022 Motor Trend Car of the Year (COTY) award for its Lucid Air. This is 10 years after Tesla won COTY for the Model S, which was consequently the first EV to take that crown. The only other EV to win COTY was the Chevy Bolt in 2016, so this is rarified ‘AIR’ for Lucid Motors and it’s now the 2nd car that Peter Rawlinson has been a major part of to win COTY as well so kudos to Peter for that distinction. And let me say, in pictures at least the car looks great! The interior, exterior, and smooth lines seem to all fit, nothing forced. The performance numbers and MSRP take it over the top! What a great accomplishment for a team that, in the mid-2010s was in hibernation as they were looking for funding. Luckily, they found investors with some of the deepest pockets in the world. Further investment from the Public Investment Fund of Saudi Arabia (ironic that much of the investment comes from oil money) will likely not be necessary since the Lucid share price has steadily appreciated since they started delivering vehicles to customers on October 30th. Lucid’s market cap as of today stands at close to ~$73B, about the same as Ford’s, so they shouldn’t have any problems borrowing against their market cap or perhaps issuing more shares to raise money for their next vehicle – an SUV they’ve called the Gravity. Can’t wait to check it out! JUST THE NUMBERS - 220K sqm, 54 global debuts, 28 concepts, 241 NEVs out of >1K vehicles, 91 press conferences. Those are the numbers associated with this year’s Guangzhou Auto show. For what it’s worth, Lei also counted 6 – 7 new models to be introduced at the LA Auto show. Lei had summarized these mindboggling numbers during last week’s China EVs & More podcast. He also mentioned that the 2022 Beijing Auto show next April will likely dwarf this GZ Auto show so it goes back to SH & BJ becoming THE premiere global auto show with the Detroit, Geneva, Tokyo, and Frankfurt Auto shows coming in a very distant 2nd. - 100K. Li Auto delivered its 100K vehicle today. Congrats to the Li Auto team. Quite an accomplishment! - $70M. That’s how much investment Hesai, the Chinese LiDAR company started by a Velodyne alum, has raised from Xiaomi. This increases the total take for their D round to $370M from notable investors Xiaomi, Meituan, and GL Ventures. That’s a significant number for a LiDAR company. —— 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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