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Lockdown Update, NIO Beats Germany EV Inc in March Sales, GoTo Indonesia IPO - SAI Newsletter 15



 

There are still major cities and parts of China on lockdown due to the pandemic, numbers being thrown - >40 cities and >300M either locked down or with severe restrictions. Some OEMs have sounded the alarm bells and are being allowed to implement a ‘closed loop’ system in order to get production re-started like Tesla, VW, and a few others. There are limitations to this and the OEMs are still at the mercy of their suppliers who also need to be part of the closed-loop. The workers will effectively live at the factories, and for some, that’s OK since some facilities have dorms to house those folks. But ShanghaiGiga does not so its makeshift dorms are handing out sleeping bags and space on the factory floor for their workers to sleep. Yes – we’ve gotten to this point. Several of my friends who reside in Shanghai, the ones I was a bit concerned about, have all finally received food deliveries, some multiple, and are in better spirits. They are NOT out of the woods yet, there are still no definitive timeframes as to when the lockdowns will be lifted but at least one major concern, for the time being, has been sorted for them, for at least the next few days. If you’re wondering, Beijing is still holding strong. What’s happening in Shanghai has really soured feelings many 老外 or foreigners (what we are collectively called) have about Shanghai and China generally. Many international school teachers are leaving and will likely move permanently to other places in Asia, likely Southeast Asia to continue their work. In the past, there have ALWAYS been new foreigners that come in to replace the old. But that can’t happen right now and a 1:1 swap of old to new isn’t likely to happen either but this is following a trend that’s just been accelerated due to how Shanghai is being handled. For those wondering about automotive manufacturing, April is likely a complete write-off – production has to be close to zero for many OEMs, and even if they could build there are just not as many people to sell to because many of them are on lockdown as well! China will find a way to get everything back online because it’s China and that’s what they do but will things stay online and will they be able to produce in any significant way for a sustained period of time should be the real question. If by the end of April, which seems pretty optimistic to me, things can be generally contained the factories will likely be running three shifts or 24 hrs/day to try to make up lost units from April. That means that Tesla will likely NOT be shipping too many export units in Q2. BTW, there’s a report out there that says they have about 8K people reporting back to work, there’s NO WAY they’ve rounded up that many people to build their cars. Don’t believe it…. Please join Lei and I for this week’s EVs & More Twitter Spaces room at Thursday, 04.21 – 9pm EST, Friday, 04.22 – 9am China local time. For getting a download on all that’s happening in the space. For those that aren’t able to join, 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. QUOTED Technode. Long-time friend of Sino Auto Insights, Jill Shen reached out to me to ask about the shutdown and my thoughts and she captured them as part of her great piece for Technode that you can read here. Jill goes into a bit more detail about what’s happening ground level so worth a read for those really curious about what’s going on and potential fallout. Le Monde. For my French readers, here’s a story about Didi and their pledge to delist from the NYSE. They’ve effectively been in limbo since last July with no end until they delist and relist in HK. And ensure that they’re in full compliance with Chinese data regulations. If you can read French, click the link here. TESLA - ShanghaiGiga is back online. According to reports, the factory is running at about half the speed it was prior to the shutdown, or about 40ish jobs/hr. That’s still almost a car a minute. And they have about 2.5 weeks of inventory on hand at that rate. Let me speculate on why they’ve slowed the pace. Some of this is pretty obvious but I’ll still try to spell it out anyway. First, there may not be enough workers to get ramped back up to pre-lockdown levels of production. Next, with China’s OTR (over the road) transportation system significantly restricted and ports all jammed up, parts could be delivered at a snail’s pace, and running out would mean idling the factory again so better to go slower and build up to a certain momentum as the suppliers all get back up to speed as well. Manufacturing is a delicate dance between all of the parts, including logistics so if one’s out of whack there’s a chain reaction, hence the name supply chain. Finally, with what’s estimated (speculated) to be >300M people in severe restrictions or locked down, who would they sell to? Cars would just sit on the factory lots waiting to be picked up and delivered. I’ll leave you all with this. Production will have its fits and spurts. The OEMs and their partners up and down the supply chain are being as resourceful as they can but in any fight with Covid, they’re going to lose. How really closed, any of these closed-loop systems are will give an indication of how many of those fits they’ll have. My intuition tells me quite a few. - Another recall …err OTA update is needed for almost 600K Teslas. NHTSA needs to do better with this concept of recall in the digital age. Like, use a different verb. Like ‘Update,’ ‘Change,’ or ‘Flash.’ Put an adjective in before it like ‘Formal’ or ‘Nonvoluntary.’ Because Tesla will not need to touch ANY of these almost 600K cars in order to make the needed change to the feature as per most of their other recalls. THE MOST INTERESTING THINGS THAT HAPPENED THIS WEEK - The F150 Lightning production begins April 26th. That’s a BIG F’N DEAL. So this is where the rubber meets the road. Where Ford’s puts up or shuts up. From everything I’ve been told, the F150 Lightning should do just fine. Launching such an important vehicle, existentially important for Ford’s, in an environment like this dials up the degree of difficulty to about a 10 as well. On top of that, just in their rearview mirror is the production delay of what was Ford China’s most important product in several years, the Ford Mustang Mach E due to difficulty getting batteries from BYD. There’s a lot to love about this story – the fact that it’s priced at $40K so it’ll be affordable to many. That it’s giving Ford’s a boost share price-wise and in PR. That the Chief Engineer is Asian AND a woman. That it signals to the world that the US doesn’t plan to concede anything to the Chinese EV makers. This story is great BTW and worth a click. Just a couple of stats I pulled from the article, the F150 pulls in about $40B in annual revenues which is more than Coke, Mcdonald's, and Nike. Ford sells almost 1M F150s/year and on average for about $63K in primarily the US market. But it’s the anecdotes in the article on the design considerations and some of the innovations built into the truck that these articles highlight that make them fun to read. I do have some concerns about the Lightning but I can articulate them in a different post. And if you’ve NOT seen the cover of this week’s Businessweek, it’s worth a look as it perfectly calls out Elon and Tesla’s Cybertruck. It’s fitting. Ford’s - Let’s get this show on the road! PS. If you’re wondering why I write ‘Ford’s’ sometimes, it’s an homage to my old GM coworkers who ALWAYS called it Ford’s NEVER Ford. IN THE NEWS - GoTo debuts on the Indonesian Stock Exchange. GoTo, which was recently formed itself when Tokopedia, an Indonesian e-commerce platform merged with Gojek, Indonesia’s Uber merged in May 2021. They, along with Grab and a few other tech companies are all hoping to represent Southeast Asia among the global tech giants that can compete toe-to-toe with the Ubers, Lyfts, and Didis around the world. This is the first step in what’s likely to lead to a US listing as well. The markets have not been very kind to IPOs or market debuts via SPAC this year but GoTo has a solid foundation and I believe is better positioned than Grab out of Singapore, who they’re normally compared to. Will keep an eye on these guys and am rooting for their success. - NIO is beating the competition, and it’s not even close. In the month of March, here are the sales numbers: Tesla: 39,353 NIO: 9,829 BMW: 3,123 Merc: 1,199 Audi: 116 First, Audi should be embarrassed about that number. It’s like they didn’t even try. Next, NIO is beating the pants off of German EV Inc. And this is with the ET7 just beginning to build momentum and the ET5 still just a concept. Here’s the issue at hand for German EV Inc. – Price, features, and range. That advice is free BTW but if you want to hire us, we’ll gladly get you sorted straight away. Don’t let anyone tell you otherwise, this isn’t an anomaly and it has management at these companies ‘deeply’ concerned. And it’s going to continue to happen. Cadillac is going to take sales from them too. Each of these automakers has looked at China as their golden goose but rather than pay attention to customer’s needs and build products that they want, and I am referring to future and unmet needs, they decided to just give ‘more’ and on top of that charge more for it. These consumers remember. These companies aren’t going to starve or be driven out of the market by any means but those sales numbers they took for granted for so long aren’t going to materialize, if ever again unless they bring to market products that can compete with the domestics in those above categories. So – German EV Inc, Whad’ya you got?? - The battery subscription model - Viet version. Vinfast is taking a page out of NIO’s playbook by offering a battery subscription (and not selling the battery with the vehicle for now) in order to lower the vehicle price for potential customers. Not a bad thought – a new company and brand, lower the price of entry to attract potential buyers. Vinfast has decided to offer at launch both a fixed ‘all you can drive’ subscription fee for the battery or a cost-plus model where there’s a subscription cost and a set number of miles that comes with that fee. Drive more than your monthly allotment, you will be charged on a /mile basis. Similar to vehicle leases. I bet the All you can Drive option that’ll likely have a fairly high take rate IMHO. TRENDING ON SOCIAL MEDIA - Audi Urbansphere concept, Audi’s interpretation of a supersized minivan. First, this thing is humungous. As in 2 ft longer than a current Cadillac Escalade. Next, anything that’s called urban should be nimble, small, light, and eco-friendly. This is the EXACT opposite. We don’t need any more of THESE. We need those brilliant Audi engineers working on stuff that will make roads, safer, cleaner, and less congested. This was made with the Chinese consumer in mind – I am wondering which ones? Just paint it yellow and call it a bus! And require that at a minimum, there should be 4 occupants in the vehicle not including the driver or it can’t be on the road. GET SMARTER - China IS the undisputed manufacturer to the world. But it can’t be – and the shift needs to start now. For those companies that are starting to feel helpless because products they source from China have growing lead times, increasing prices, and spotty availability, THIS is what happens when you rely on one country for everything and then ~1/3 of that country effectively shuts down. CEOs need to be smarter than using one variable – cost, to determine ultimately what their strategy is for ensuring a continuous supply of product. Sure, there are 1.3B built-in customers to sell your product to here, I get that so it does make sense to keep some production here to sell to the local consumers but Southeast Asia (SEA) is growing as well and costs there are actually lower in many cases so update that cost model by tripling the risk multiplier, you’ll see that TOTAL costs, when compared with SEA, is likely similar or higher. If you’re still not convinced, remember this feeling of helplessness. Of NO control. And then think about the rising costs in China vs. the growing opportunity in SEA. Convinced yet? BY THE NUMBERS - $180M. The amount of the D financing round that was just closed by Rapido, an Indian food delivery startup. Don’t count India out on mobility innovation. It’s needed and the size of the country makes any decently vetted business model viable. If everyone in India EVER gets moving in the same direction, look out! - >$10K. What was announced by DeepRoute in December has now been unveiled via 30 robotaxis that they’re deploying in Shenzhen. DeepRoute is setting the pace, can others keep up? If you want to know the gory details on their HW/SW stack, click the link. Here’s a hint: It includes the use of 5 solid-state LiDAR that cost <$1K each. As he effectively admitted to during his guest appearance on China EVs & More. Want to know more about what he thinks – here’s a link to the pod. —— 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 Insight

 

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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