Leap & XPeng need more money, China's first self-driving report published - SAI Newsletter #13
It’ll be a slower than normal news cycle this week for China because of the tomb sweeping holiday with many folks having a 3 day weekend. I just arrived in the Bay area for some meetings and will then head to Detroit for the tail end of next week so if anyone’s interested in grabbing a coffee, please do reach out.
Since Tesla is pretty much a part of every weekly news cycle I decided not to highlight any Tesla-related article although they did announce that their sales fell down quite significantly when compared with the previous quarter, something that Wall Street did expect.
Ford also had a small event in Shanghai this week, where most media got the first extended look at the newish Ford China CEO, Anning Chen. I’ve grabbed an article that gives more detail on what he and Ford had to say.
Finally, although Lyft’s IPO seemed to go well it’s been underperforming since so maybe the IPO frenzy was a bit of FOMO. It's only been a few days so if I were a buyer of the stock I wouldn't be worried at all at this time.
For you new readers, my name is Tu Le and I am the founder and managing director of Sino Auto Insights.
This weekly newsletter is a collection of articles I feel best reflect the happenings of the week or important trends that have effects on the automotive and mobility sectors here and in the U.S. I also provide a point of view that I hope educates and sparks debate about how I look at the issues. We will mostly divide our articles into these buckets: AI, Mobility/Ridesharing/Ride-hailing/Bikesharing, OEMs, EVStartups, Investments, and Other. If you know of anyone who would like to sign up for this newsletter please have them visit: www.sinoautoinsights.com. Thanks for reading.
The Sino Auto Insights team
EVs & EVStartups
Spoke with Chris Udemans from Technode about Faraday Future (FF) and their new lifeline from The9. As a follow up to the funding announcement last week, Jia Yueting – CEO of FF, teased on Weibo a silhouette image of the what they plan to build in China with the funding, a derivative of the FF91 called the V9.
From the looks of it, it’ll be a boxy van-like vehicle which should make it easier to design and manufacture. I could even see a scenario where FF pushes manufacturing of ‘modules’ to the suppliers with final assembly occurring at their location in order to save on costs and be quicker to market.
As I surmised in past newsletters, due in part to the challenges in the market, many of the Chinese EVStartups are undercapitalized and will need more funding. Startups that are launching or have recently launched will likely soon need to announce another fundraising round to keep the dream alive.
XPeng is looking to raise $500M through equity and debt. If they’re able to reach their goal, it’ll push their total funding to ~$1.8B, still not enough to launch a vehicle, build a plant and invest in product development for a new vehicle(s) IMHO.
I estimate the going rate right now for any EVStartup to launch a vehicle + build their own plant is going to be >$3-3.5B with their valuations not getting the pop they used to just because they built a $150M prototype to bring along their fundraising tours as a marketing tool to woo potential investors.
I’m curious to know what XPeng's current sales figures are for the G3 since they’ve been delivering since December, especially with the recent figures NIO announced are they faring any better? Will post once I find out more.
Leap Motors is looking to raise $372M by the end of CQ3’19 at a valuation of about $2B. This will be to help fund the production of their 2 door coupe, the S01. One would question the wisdom of launching a lowrunner (smaller sales volume product) like a coupe as the first vehicle, a strategy shared by Qiantu, since I don’t see that many 2 doors on the road in Beijing or Shanghai and when I do, it’s normally a VERY expensive sports car.
Leap has also chosen a different path with regards to their S01, pricing it around $25K, a much lower price point than other EVStartups which means they’d need to sell a lot of volume to make a big impact and large profit. They are planning an SUV next, which we may get a sneak peek at next week’s Shanghai Auto show.
If the SUV is priced in a similar range, it would likely compete directly with XPeng’s G3 which is priced in the mid-$30K range as well.
MIT follows UC – Berkeley, Stanford, and U of Minnesota lead, who’ve all recently cut financial & research ties with Huawei and ZTE due to the current view by the U.S. govt. that both companies violated sanction restrictions.
Although not directly tied to the automotive or mobility services sector, this is something that we will monitor since the chips, AI, Lidar, radar, and their sale could all become more scrutinized by the U.S. govt. which would have large negative effects for companies in both the U.S. and China.
Initial incident reports were released for companies testing their self-driving software in China and the data seems to be even less useful than the annual reports the state of California publishes.
In 2018, Beijing had 56 vehicles from 8 companies (Baidu, Pony.ai, NIO, Tencent, Audi, Daimler, BAIC and Didi) that logged a combined total of ~93K miles.
Baidu gets credit for the lions share of vehicles and miles driven at 45 vehicles and ~86K miles driven.
Now you know as much as most folks in the AV sector about testing self-driving vehicles in China!
I spoke to A LOT of folks about the validity of the State of California’s annual self-driving incidents report and whether or not anything significant can be gleaned from it, specifically whether you could do a side by side comparison between all the entities testing in California and come up with a definitive ranking of best to worst.
Mostly everyone I spoke with said there were too many unanswered questions, undefined scenarios, and too much left up to interpretation for it to be that useful.
I’ve highlighted this article because the author seems to be able to glean quite a bit of knowledge from Beijing’s first, recently released self-driving incidents report. Although he explains how he came up with his conclusions I am still unclear with some of his assumptions and logic as to how he came up with some of his conclusions. Would love different perspectives on this if you’d like to discuss with me further.
The Citi Bike, bike share program in NYC is adding 4K pedal assist bikes into its current rotation of 12K normal push bikes across 760 stations. The price of admission for these e-bikes, a wallet denting $2/ride! That’s in addition to the daily fee/annual membership prices people have traditionally paid. Other cities like SF and Washington D.C. have already launched e-bike programs with costs/ride varying widely from no extra costs to an additional $1/ride.
Advocate groups point out that this high price makes the e-bikes inaccessible to low-income riders. Those that have followed my newsletter early on know that I am a firm believer in e-bikes supplanting e-scooters as the preferred ‘last mile’ mode of transportation in the mobility services portfolio due to the bikes being a safer option with a longer range, hence giving the service providers more revenue generation options.
This initial backlash on pricing gives Lyft, the owner of the Citi Bike program, a good data point for what isn’t an acceptable cost in order to use the e-bike. I could see a nominal usage fee, much less than $2/ride + a variable cost/m/km/mile depending on each market’s economics and utilization. Lyft or Uber, who both have acquired bike-sharing companies, may likely be the first to crack the ‘revenue’ nut on these e-bikes so we will stay tuned for all the latest news. We may find that the business model may be better suited for Europe or more mature Asian cities that already have the infrastructure in place to support the e-bikes.
Ford has finally given a bit more insight into how it plans to stop the bleeding in China, its 2nd most important market.
Details include launching 30 new vehicles, of which 10 will be electric, in the next 3 years, working more closely with its local JV partner Changan whom they've had a rocky relationship with while also hiring/promoting more local employees and designing the vehicles to cater more toward the China market.
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.