Photo by zhang kaiyv on Unsplash It was difficult to concentrate last week, to say the least. Something that started on Wednesday AM local time but that wasn’t decided, depending on which side you sit on of course, until late into this past weekend will influence everything about the US-China relationship. Of course, I am referring to the presidential election. One thing for certain about these elections was that there was as much interest and curiosity about who would win from my foreign friends here in BJ as there were from the couple three Americans all of whom I watched the early returns from election night with at Beersmith here in Beijing CBD. What comes next is a very interesting next 70 days or so and likely a reset of US diplomacy in many parts of the world. This will be welcome by some global leaders but not so much by others. I am not going to get into who I voted for but I will say, for the sake of my family who are all in the US, I hope this means a much more coordinated and serious response to the pandemic. For selfish reasons, I’d like to be able to visit my family soon without having to worry about borders closing and/or my family getting sick from my visit. It saddens me to think that may not be until well into 2021. This week was also very busy in terms of how MANY interesting articles there were to vet so it took a bit of time to edit them down. As I’d noted during the Emerge panel, I thought that autonomous vehicles would take that next step in 2021. That came a bit earlier with the capital raise announcements from Nuro and Pony.ai. That’s going to put more pressure on the others to pad their war chests as well. Those announcements, along with all the robotaxi & delivery pilot programs launched this year in the US & China means that these companies are marching full steam ahead Covid be damned! If we look at share prices there’s still a lot of capital looking for a home. That’s reflected in the crazy valuations of Tesla & China’s Big Three. Even Toyota’s President seems to be envious of the spike in market cap of those companies. Oh and with some articles predicting the imminent demise of Tesla as their sales in China flatten, I don’t buy it. I think the Model Y is going to be a major and global hit for them. Along with their tequila… TESLA IN THE NEWS - Rumor has it that Tesla China plans to produce a total of 550k vehicles in 2021 broken down it’ll be 300k Model 3, 250k Model Y, among which 100k Model 3s and 10k Model Ys shipped abroad for export (per 36KR). That makes for a ~3:2 ratio of Model Y : Model 3 China sales for 2021. I think the ratio will be higher and that the Model Y will be a big runner for them. As in 3.3-5:1 ratio. - Tesla was on the brink of bankruptcy. Twice. The first time was in 2008 when they needed a $40M loan to keep the doors open. Here’s the story of the second time. Basically, a bridge loan back in November 2018 allowed Tesla to get themselves out of ‘manufacturing hell’ and get the new Model 3 into mass production. This is one of the key moments in Tesla’s history that allowed ultimately allowed them to reach their current $400B market cap, claim the most valuable auto company in the world title, and Elon earn ~$12B in Tesla shares. IN THE NEWS - Kandi K27 Micro-EV approved for CA roads and priced aggressively at ~$8K. But make sure to read the fine print. That $8K includes a federal tax credit of $7.5K and another $2K from the state of California – The price before those discounts: $17,499. Not as attractive. The Biden administration is going to find it hard to defend imports from China hitting the US markets to undercut domestic competitors in this hyper-partisan environment. These China EV cos. will be treading very ‘carefully’ with their export plans lest they be upended by a change in literal ‘trade’ winds. This product will also be a VERY hard sell for those in the Midwest & South where MANY auto assembly plants reside. But at 100 mile (likely at best) range, there will be a new category in the US that I am designating as Micro-EV. This is also going to blur the lines between e-bikes and micro-EVs over the next 5-7 years since ranges, form factors, and use cases will likely begin to overlap as more and more cities around the world update their transportation network strategies and de-prioritize private passenger vehicle use. The folks at GM are likely looking at how to ‘Americanize’ their big hit – the Wuling Hongguang as we speak. And if they’re not – SHAME on them! - A lot of attention is being paid to China’s Big Three EV cos. NIO, Li Auto, & XPeng but which one is the best investment? This author has a go at trying to evaluate them for you. We are not in the business of picking winners and losers for the sector for investment purposes so we will leave that up to others. Having said that and for those of you that have been subscribers since the early days, I believe I’ve (we’ve) given you a lot more color on these EVStartups, the sector they compete in, and how their competitors including Tesla, play into the global equation. For those new to my newsletter, please feel free to review all my back newsletters posted on the company website to get a much more detailed outlook on China’s BIG THREE. And as always, ping me with any specific questions you may have. - Most major automakers are getting out of the sedan business. Ford Motor being the latest with its Lincoln brand halting production of the iconic but recently just above average Continental. Just like the overall market, the demand for the Continental continued to shrink over the 2-3 years it was for sale. As most companies already have or will move their entire product lineups to cross-overs and SUVs, that leaves opportunity for those still investing research dollars into sedans. It’s still lucrative enough for now that with less competition & lower customer acquisition costs, generating revenue from this segment could create a temporary ‘easy’ money situation for those still paying a decent amount of attention to it. And now that we see the entire world moving towards EVs, it’ll be easier to pay for that transition if there are opportunities such as this to make some ‘easy money.’ - Innovation in the electric bicycle segment is just starting to blossom. I’ve long been a proponent of electric bicycles and predicted their increasing popularity in numerous past newsletters. I try to stay humble but that was a drum I’ve been beating on for some time. With that increased popularity it would make sense that more capital would follow in allowing for innovations like this from Exro Technologies out of Vancouver, Canada. They’ve basically designed a more efficient inverter, squeezing out higher performance from existing motor & battery combos when compared to current inverter output. These are the types of innovations that broaden the appeal of e-bikes, helping to grow the market even further. - Compressed development times + virtual development tools + fewer parts = Less engineers needed to bring new vehicles to market = lower costs = (potentially) smaller, more nimble companies. This equation can work in a number of ways but for now, let’s leave it like this. As the OEMs begin to evolve so will what they need to do to continue to compete, even outperform their new competitors. But clearly, this will NOT be easy for the OEMs. Mary Barra boasts that GM has reduced from 5-6 years down to <3 years the product development cycle. Elon during Battery Day said that Tesla with their investment in battery tech and product launches are going to move FASTER not slower so getting smaller and faster is what’s necessary and really just a qualifier for ALL the OEMs, whether they’re German, Korean, Japanese or American, to become competitive with their EV counterparts in China and the US. The question remains, are they targeting to be small enough, move fast enough, and/or generally evolve enough? In the past, they’ve always waited until the last minute. If they do that this time, they’ll get steamrolled. More importantly, this is only part 1 of the major overhaul needed at the automakers. Once they get smaller, say up to 50% in many cases, they will then need to get bigger, this time with software developers, user experience designers, digital marketers, product managers, etc. all roles that will help them become software development & service providing NINJAs on top of their deep vehicle design and manufacturing chops. As I’ve said before, the trend with OEMs has been to outsource much of the software development to ‘partners’ but if they’re to maintain any semblance of independence & dominance, each OEM needs to remake themselves into viable competitors to Uber, Waymo, Didi, Tesla, NIO, Meituan, Alibaba, and all the other tech companies that want in on their automotive turf. That means getting really great at something they’re not very familiar with within a short period of time. This likely means the desire for more partnerships. This is a losing proposition for them. Some partnerships are OK and dare I say strategic. But you can’t ‘partner’ your way into a dominant position (please see Tesla). And one last thing, it’s not automotive turf anymore – It’s mobility turf. Automotive to me looks backward whereas mobility looks forward, Whether its passengers or packages, it stopped being automotive years ago. - Austin just becomes the latest city to prioritize the mobility of all its citizens over the ones that own cars. I am a broken record about this but more and more cities will adopt this posture and join NYC, SF, Paris, and Madrid to name just a few that are taking the city streets back from passenger vehicles. Austin’s example might not work for cities like Detroit since raising taxes there to fund the transformation is likely a non-starter but getting creative and setting the right priorities while also allowing the private sector to bring their innovative solutions could be an answer for the cities who struggle with their budgets. Bottom line is that it’s being done all over the world so there’s bound to be a ‘customized’ solution that works for each city’s particular situation. - Ferrari is resisting, for now, to move entirely over to an EV platform. That’s OK since they make some of the baddest cars on the planet but as performance gets honed on the EV side (see Model S Plaid & Lucid Air), will their cars still be able to keep up? Therein lies the rub, it may not be up to them to make that switch. - India’s own Ola Electric wants to be the biggest, baddest electric scooter manufacturer on the planet! Currently, that title resides with Honda and its facility in Gujarat, India which manufactures ~1.2M petrol engine two-wheelers /annum. For those who haven’t followed Indian mobility that closely, there’s a revolution going on there in the mobility space as well but this one’s being led by vehicles with two & three wheels. Ola is looking for 100 acres in or around Bengaluru (aka Bangalore) to break ground on the factory they’re hoping will steal that title of world’s largest from Honda. Be it for private use or for delivery India will soon become a giant for scooter manufacturing competing with China to be the world’s largest. Unlike China, India is a democracy so new policies and laws tend to change much more slowly there so it could be some time before China concedes any ground to India. TRENDING ON SOCIAL MEDIA - At heart, I am still a car guy. When I am old and gray, which unfortunately is coming at me sooner rather than later, I hope to have a barn full of cars that I’ve always thought were beautiful, fun to drive, and that piss people off when they hear them coming around the corner. File this car under the ‘Just Because’ category. Who needs a station wagon that can do 190MPH – NO ONE. Who wants a station wagon that can do 190MPH – ME. That’s why I’ll have an Audi RS6 Avant in my barn. - Next level, material science evolved battery modules: The batteries that in the future could just be part of the product structure. Reducing weight, and thus increasing the battery’s efficiency. Elon talked about it, but some folks are already experimenting with it. - Great grandson, and current president of Toyota, Akio Toyoda, compares Toyota to a full-service, profitable restaurant to Tesla which he says is more like a chef with a few recipes. Sounds like Toyoda is starting to get pissed. I love it. Toyota is one of the few companies that can change an industry from within and if they decide they want to focus on the EV sector they along with the 10M or so vehicles they sell each year globally and can bend the sector to their will. Unless Elon has anything to say about it. More fireworks to come so stay tuned. - I honestly am at a loss for words for this thing: The Italian designed Aznom Palladium. It’s like a Maybach had a baby with a Dodge Ram truck & a Bentley Bentayga. As PT Barnum (I think?) famously declared, “There’s an ass for EVERY seat.” This thing will NOT be cheap – it’ll likely be north of $300K! - Tesla Tequila sells out within hours of launch. Now importantly, I was told by a few friends who were able to get their hands on a few bottles that the tequila isn’t a gimmick and damn tasty. Not as good as say Cierto Tequila’s Reserve or El Tesoro Paradiso, two of my favorite sipping tequilas, but it’ll do the trick in a pinch …like during a stressful election! - For those on waiting lists for bikes/e-bikes, here’s to hoping your place in line is set. For those thinking about pulling the trigger, better plan properly as there’s still quite a queue for them and it’ll last well into 2021. JUST THE NUMBERS - Nuro, manufacturer of self-driving delivery vehicles raises $500M from T. Rowe Price, Fidelity, Softbank, and Greylock. This funding should expand its operations into more cities. This will be added to the $940M Nuro raised in 2019 giving them a substantial war chest & rumored valuation of $~5B. - Big $267M capital raise by Pony.ai boosts their valuation to ~$5.3B. Pony operates ridesharing pilots similar to Waymo in both the US (NorCal + SoCal) & China. They’re really going for it and will need that capital since it’s two separate markets, policies, and competitive landscapes in each region. A HUGE unknown is how the Biden administration will deal with data collection and usage of US citizens from foreign companies in the future. So far this issue has been flying under the radar and from my understanding, it is much easier for foreign companies to collect, ship and utilize data gathered in the US than it is for say Chinese data to be shipped to the US and used there. Any limitation of resources or data could put a pretty decent sized dent into the market opportunity and hence valuations of companies like Pony that straddle the US and Chinese markets. October 2020 China sales (approximates): NEV Sales - Overall: 144,000 (+120% YOY) - EV: 121,000 (137% YOY) - PHEV: 23,000 (+59% YOY) NIO - ES8: 1,477 (+383% YOY) - ES6: 2,695 (+21% YOY) - EC6: 883 - TOTAL: 5,055 (+100% YOY) XPeng - P7 (sedan): 2,104 - G3 (SUV): 936 - TOTAL: 3,040 (+229% YOY) Li Auto - One: 3,692 Tesla - MIC Model 3: 12,143 SGMWuling - Hongguang: 23,762 PRODUCT & SERVICE INTRODUCTIONS - Yamaha with their own Vespa style electric moped. Again, mopeds in the US = Scooters to the rest of the world. - Yawboard – Electric skateboard hybrid. Looks sweet, has big knobby tires for off-roading, and seems like a decent alternative to Lime/Bird type shared scooters. Now, I need to find a reason to own one of these bad boys! - Another innovative Dutch startup enters the electric bicycle market. This one’s called Mokumono and their angle is that they’d like to reduce their carbon manufacturing footprint by sourcing only in the EU. They’ve created a welded aluminum frame, a concept borrowed from the auto sector, and their first product is called the Delta S which currently goes for about $3,499. That’s on the higher price range for an ok spec’d bike whose battery doesn’t detach. It’s a looker but obviously, the jury is still out on the reliability, comfort, and ‘fun to operate’ factors. Will update as I find out more. - Voro Motors, a CA-based electric scooter distributor is bringing some serious heat to the electric kick scooter market. It’s upcoming Roadster electric scooter will supposedly have a 62-mile range and top speed of 50MPH. I’ve ridden enough electric scooters so 50MPH seems like a really easy way to get into an accident so I’d definitely only reco it for intermediate to advanced kick scooter riders. Not many pictures or pricing yet but bet that this thing will make a splash once it’s finally launched. —— 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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