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MOBILITY Conference, Ford & CATL to do the Dance, & Tesla outsells VW in Germany - SAI Newsletter 7


For my American readers – Happy (belated) Valentines Day! It seems that Ford didn’t want GM having all the fun with their announcements about lithium mines and chip supplies recently so they dropped a HUGE announcement themselves this week, partnering with CATL in order to build LFP batteries for their cars in the US market. The details are as follows. Ford will own the plant (in friendly MI) and the workers will be Ford badged employees. CATL will just be ‘licensing’ their technology to Ford to build the cheaper LFP batteries, a chemistry that is less costly (but lower range’d) and hence absolutely necessary if the legacy automakers plan to make affordable EVs for the US market this decade. We have to really unpack this though since we know that China Battery Inc for the last couple of years at least, has been trying to find a way into the US despite all of the challenges between US and China relations, even moreso recently. Now one, the baddest of the bunch in CATL which commanded 37% share of the global battery market in 2022, is getting cover fire from Ford Motor to enter the US. Now that that door has been kicked open by Ford, it won’t be as shocking to hear others mimic the deal that CATL is getting with Ford and low and behold, I am hearing that there are one or two battery cell manufacturers looking for similar deals to enter the US market. Yes, ALL the legacies building in the US need to use LFP batteries if they want to lower the price of entry for US buyers so could we see a similar arrangement with BYD, Gotion, CALB or EnvisionAESC? But ALL needs aren’t created equal, whereas GM was quite profitable in 2022, Ford was not. Quite the opposite actually, losing ~$2B while GM made almost $10B. Further, and this is why I think Ford HAS to make more drastic moves – it has seen it's sales shrink dramatically (not unlike other foreign automakers) in China over the last few years. As recently as 2015, Ford sold >1M vehicles there but in 2022 that number is closer to 300K, that's a mighty drastic and fast drop so in Ford helping CATL, they could also be trying to help themselves China? With the China market, things are never what they seem. In China, CATL suppliers just about everyone so perhaps this allows Ford to jump the line on supply and price in China? Also, this is likely looked pretty favorably upon by the Chinese govt. and at this delicate time for Ford in the China market, that couldn't hurt. A few more years or sales shrinking the way they have the last several years will likely force Ford to leave the market. You know what they say about desperate times... I had my guest spot on John McElroy's Autoline After Hours show and it was great! There were a lot of thoughtful questions, some skeptical musings about American’s acceptance, at least initially, of Chinese brands and ultimately whether or not they could succeed here. Rather than tell you about our discussion, I invite you to watch it yourselves, you can do that here. I’ve also worked with TechTown Detroit over the last couple of months to help plan an event celebrating the achievements of Black leaders in the mobility space for Black History Month. It’s an in-person event (remember those?) scheduled for the morning of February 16th – details and signup are here. For those that’ll be in Detroit, I look forward to seeing you there! MOBILITY CONFERENCE MOBILITY, a Climate Transformed & Sino Auto Insights Collaboration, is three days of daily virtual forums that takes an immersive look into how Electric Vehicles (EVs) will, within the next several years, replace the internal combustion engine as the primary mode of transport. Via twelve panels featuring global industry leadership and innovators, Climate Transformed & Sino Auto Insights addresses the groundbreaking changes underway, changes that are about to revolutionize mobility as we know it. MOBILITY is in its 3rd year and in the past has hosted over 100 panelists representing Amazon, Stellantis, Bosch, Ample, What 3 Words, China EVs & More, EY, Carnegie Mellon University, Snow Bull Capital, GIZ, Lyft and many more entities. Tomorrow is the final day and the schedule is as follows: 9am – China Enters the World Stage w/ me, Lei Xing (China EVs & More), Elliot Richards (Fully Charged) and Jill Shen (Technode) 10am – The Tesla Factor w/ me, Taylor Ogan (Snowbull Capital), Paul Krake (Climate Transformed) 12pm – The US Legacies: Juiced by the Inflation Reduction Act w/ me, Joe White (Reuters), John McElroy (Autoline) Sign up here to join in the discussion. CHINA EVs & MORE Lei and I will have our live show tomorrow – 4:30pm ET via Twitter Spaces. For those wondering, 3pm ET is still when we’ll normally host the live show but the last couple weeks I’ve had a conflict so apologies to those that aren’t able to join the (temporary) new times this and last week. We’ll try to be back at our normal hour in the next couple of weeks. Promise. For those that can’t join the live show, I invite you to listen to our recorded China EVs & More episodes at this site. And as always, we appreciate any feedback that you think will make the show better. Also, if there are any companies/questions you have, you can let us know. TESLA - Here’s a mindboggling statistic for you. Tesla overtook VW in 2022 to become the best-selling EV brand in Germany, VW’s home turf. Adding insult to injury, Tesla January sales surged by 919% YoY for a total of 4,241 units sold in Germany. Volume wise, a small number but gaining fast! This points to better product, building locally and slashing prices being the killer trifecta for Tesla, but let’s see if January is an anomaly or something truly sustainable because if so, VW has an Elon Musk sized problem to deal with in its home market and in China. BerlinGiga’s run rate as of December was 3K Model Ys/week and that should only get larger so we could see that distance between VW and Tesla getting even wider towards the end of 2023. - Tesla will shut part of ShanghaiGiga down to get ready for production of the refreshed MIC Model 3. The new Model 3 is supposed to be shipping before the end of ’23 but my guess is they’re doing everything they can to pull it up into just before summer ends. - Tesla and Elon trying to play nice with the US govt. Tesla has announced that it’ll open up at least 7.5K of their charging stations to non-Tesla vehicles in the US. Elon had made this announcement a few years ago and this is already happening in other parts of the world like the Netherlands so this should be too surprising for anyone that’s followed Tesla. - Tesla opens a digital retail store in China on For now, this online retail store is only to purchase Tesla schwag but its probably only a matter of time before you can purchase your MIC MY or M3 via this store. INTERVEWED/QUOTED - Technode. I had a brief chat with friend of Sino Auto Insights Jill Shen for her story about Li Auto’s launch of the L7, it’s most affordable SUV yet. I wrote about it a bit last week and emphasized for Jill that Li Auto, due to the new and recently launched products, should be able to grow their sales in 2023 despite the warnings of a slowdown in the market. Jill further details the features on the L7 and who it’s competing against in the China market. Worth a read if you’re curious about one of the Chinese EV companies that are publicly traded in the US. NEWS THAT GOT OUR ATTENTION THIS WEEK - Cadillac is launching 3 new vehicles that’ll go into production in 2024. We know at least one of them will be introduced in China and my guess is that the other two will reside, at least initially in the US. This is on top of their halo vehicle, the completely bespoke Celestiq that’ll cost you (at least) a cool $300K and take >18 months to build. - Xiaomi Auto is looking the manufacturing license from defunct Borgward to get their EVs on the road. There’s no guarantee that they’ll get approval as manufacturing licenses have become very hard to come by as the Chinese Central govt tries to avoid overcapacity. Currently, Xiaomi still plans to launch production sometime in 2024 so they are also exploring options with other manufacturers that would be able to contract manufacture on their behalf if the Borgward license falls through. For those unfamiliar, Xiaomi is a handset maker that's over time expanded into a number of different markets and become more of a technology lifestyle brand that ties it all together via an app. Xiaomi generally has a good reputation among Chinese consumers so this could help with their EV as long as it is feature rich and affordable. - Jidu Auto Robo-1 to launch with Baidu’s version of ChatGPT. Jidu Auto is leaning heavily into the Baidu tech stack and when the Robo-1 begins delivery later this year, it should jump to the front of the ‘most technologically advanced vehicle’ line and I mean in the world too, not just China. TRENDING ON SOCIAL MEDIA - Google updating Android Auto. But not because there are bugs. They are doing this in order to create a consistent design language and hence a consistent UX (user experience). So for Android users, it should mean that the UI (user interface) should look, feel and operate a lot like your Android mobile and/or tablet. For the automakers, this should give them pause because what Google is dong is trying to increase ‘stickiness’ of Android Auto because if you are already an Android user and are used to it, the less likely you’ll want to learn how to operate an entirely new UI for your vehicle which means you'll bypass the OEMs system and stick with Android. even while in your car. So as carmakers try to design and develop their own HW/SW stack to support the connectivity of their own vehicles, the Google’s, Apple’s and Amazon’s, Huawei’s, Alibaba’s and othertech companies of the world are doing everything in their power to make sure YOUR customers don’t make the switch to YOUR ecosystem. - The Gigapress, a gamechanger that would’ve never been thought of by the legacies. Here’s a reality about the automotive sector. Costs run so high on R&D, manufacturing and sales that it had to become one of the most innovative sectors in the world, the automotive sector used to apply for patents on those innovations like it was going out of style. But that was back when it was getting started decades ago. As the years went on, it became insular and ‘industry standards’ on how to develop, manufacture and then sell cars began to emerge and which created the norms consistent across brands and companies that we largely experience now. There was innovation here and there on the fringes but for the most part, companies accepted the way things were done and didn’t really challenge those norms. Fast forward to Tesla where they changed everything. How they developed, how they sold and how they manufactured vehicles, as in this case by developing the one piece underbody module using a massive 9K lb press. This underbody used to be made of many parts and +60 welds which meant it was expensive to produce. The savings is enormous – 40% on manufacturing the chassis and 30% on the components. It seems like a lifetime ago but it was just over 10 years when Tesla was still a struggling, scrappy EV startup trying to make its way in the crowded automotive sector dominated by the legacies. They HAD to innovate and weren’t blinded by any norms on how to try to do things better, cheaper, more efficiently. Have they had failures, of course they have. You can point to delays in new products like the Cybertruck & the 4680 batter and refreshes for the MY & M3. But their drive to explore new ways to save costs and generally be more efficient led to the one piece chassis module. Why I speculate that the idea of a Gigapress would’ve never come from a legacy is because these companies have become VERY conservative. Just look at the tenures of many of the executives - a disproportionate number of them have +20 years at these companies which WAS perfectly fine BT (Before the time of Tesla). And now that they're all on the cusp of retirment, the last thing they want to do is rock the boat. And I acknowledge that I am using a fairly broad brush to paint with but in my experience speaking with automotive folks from the US, German and Japanese legacies - this is what I see. But now, PT (Post Tesla) if the legacies are to be successful, caution needs to be thrown to the wind. They need to embrace risk, dare I say gamble a bit more on growth strategies, and take chances on things like a single piece underbody that BT would’ve been unthinkable. And they just need to do things faster. - Ford stops production of Lightning due to battery issue. Management needs to step it up here, this is basic blocking and tackling and not building means that they’re not booking revenue. Expect this to happen to the other legacy automakers as they ramp their EV products. They’ll all feel a bit of ‘manufacturing’ hell. - Jidu Auto and the Roboverse. – Jidu Auto, the JV venture between Geely and Baidu has opened up their first set of experience centers in China and it pushes the envelope for customer engagement. The US and Europe aren’t likely ready for this type of tech forward retail experience but I guarantee you China is. From the Gasgoo article “ROBOVERSE is a product experience system that contains intelligent driving, smart cockpit scenarios, and other ecosystems. It also includes a service experience system consisting of offline experience centers, user services, and a credits mall, as well as a brand experience system consisting of derivative products, digital art, and sci-fi projects.” Can’t wait to check it out for myself later this year! GET SMARTER - People still don’t like touchscreens. Especially Merc’s Hyperscreen. But I have a different take on this. The touchscreens the legacies have designed that are currently out in the wild pretty much suck. They’re slow, not intuitive and generally not very sophisticated. As Jony Ive famously said, 'Simple design is really hard.' Has anyone been able to nail it? Not really but Tesla comes the closest. It’s responsive but takes some getting used to but when you do get used to it, it becomes second nature. So there’s a car I have been driving for the last few weeks. Let’s say it’s from a US legacy. The screen is actually very nice, it’s quite clear and easily legible and doesn’t take up that much space. WIN. BUT when I try to use Car Play, that’s where it falls apart. First, it gets confused if there’s another person who uses their iPhone to also connect with it. Which should it connect to? Next, I’ve tried to use Siri but sometimes it answers via my iPhone and sometimes it answer via the touch screen – well, which is it? Oh, and don’t get me started on listening to music. You know why it’s dangerous to drive while fiddling with a touchscreen? Because between the time I press the screen to forward a song, it takes a full 1.5 seconds (at best!) before it moves to the next song which makes me think that I didn’t touch it properly so I press it again, which actually means I pressed it twice. Now, this should become a moot point as voice recognition and gesture control becomes ubiquitous and a key part of the UI (if you’re wondering what the acronym stands for, it’s in one of the above posts) which will happen faster than most of you think. Designed well, even the luddites will complain but most others will wonder why this wasn’t rolled out earlier by the legacies. BY THE NUMBERS -3.8K. Ford has announced staff reductions in Europe as it transitions European operations over to EV production. Most of those jobs will be reduced in Germany (2.3K) and the UK (1.3K) – that’s 11% of Ford Europe’s operations. This points back to Farley stating that they aren’t competitive, or about 25% less efficient vs their competitors when building cars. EV production would exacerbate that with less parts and complexity. Farley is being forced to make the tough, yet correct decisions. But if you saw the post above, you also know Ford is in a more dire situation. ___________________ 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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