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Model Y coming soon, EV adoption, GM D-Ham plant to build EV/AVs - SAI Newsletter #4



Happy Year of the Rat!


I was able to make it to Detroit to celebrate with my family and am now camped here for the foreseeable future. More on that in a bit.


I headed over to Pittsburgh for a few days last week and was able to visit Carnegie Robotics (CR) and the Carnegie Mellon University (CMU) Robotics Institute, two global leaders of innovation! Carnegie Robotics is a startup that was spun off from the Robotics Institute (RI) and specializes in developing autonomous robots (software + hardware) utilized across various functions from agriculture, transportation, exploration and safety - you name it they’re probably working on something that’s trying to revolutionize (and likely automate) how it’s done.


If we press rewind, a few years back Uber poached a bunch of Carnegie Mellon researchers to start their Advanced Technology Group (ATG) in Pittsburgh, well those guys came from the Robotics Institute. Both Uber and CMU have since hugged it out now with Uber agreeing not to raid the RI to find new staff and both agreeing to work together on autonomous driving research projects.


I can’t tell you specifically what I saw at CR so let’s just say that a few of the products currently in development there you’ll likely see in the future at your work or your home and that the main tenet of Andrew Yang’s run for president, that automation is going to eliminate many current jobs is not only possible but likely.


The combined experience of walking around talking to the folks making things happen at each of those places just blew me away!


ADDRESSING THE ELEPHANT IN THE ROOM:

For those of you who do not follow China on a normal basis, the big news out of China is the coronavirus that has spread to many parts of China and the rest of the world. It’s led to a quarantine of the city (and surrounding cities) where it originated, Wuhan aka the ‘Motor City of China.’


There are many manufacturers, not just auto, in the area so the effects of this virus will be felt globally from an economic standpoint for sure. My original plan was to return to China on Feb 20TH but that seems unlikely now as most US airlines have cancelled ALL flights to China for the foreseeable future.


Since I am with my family here in the US (thankfully), working through the scenarios staying in contact with friends and colleagues still in China and getting updates from them has really made for a hectic last week.


It seems we still haven’t reached the peak inflection point so it could get a lot worse still.

To those readers in China, please stay safe.


IN THE NEWS THIS WEEK (AND LAST):

- GM announces that it’s investing $2.2B in Dham (Detroit-Hamtramck) assembly to convert it into GM’s first plant dedicated to manufacturing electric/autonomous vehicles. This is worth me deep diving below.


- Tesla is worth more than VW Group and just behind Toyota now for #1 automaker in the world. That is ABSOLUTELY bananas! This isn’t a sales volume thing so does the ‘Street’ think that Tesla can out-innovate EVERY one of these carmakers? Seems like a BOLD assumption.


- Tesla’s made its first annual profit EVER …depending on who you ask (also see below).


- Ford to use ‘contract manufacturer’ Rivian to build first electric Lincoln.


- Lordstown Motors to debut their electric truck in June at the Detroit International Auto show. There haven’t been any electric trucks launched yet but the market seems to already be getting crowded.


- (GM) Cruise Origin is launched.


- Amazon to bring 10K electric delivery rickshaws to India by 2025. This announcement could be a gamechanger for electric ‘last mile’ vehicles in India and can hopefully help with their pollution challenge as India has now surpassed China with having some of the most polluted cities in the world. Cheesy promo video that’s worth a watch in the link.


TRENDING ON SOCIAL MEDIA THIS WEEK (AND LAST):

- Kobe Bryant & 2nd daughter Gigi die in a helicopter crash.


- A couple of teaser adverts were posted online for the electric Hummer.


- Parasite becomes the first South Korean movie to be nominated ‘Best Picture’ at the Oscars. I watched this movie on the way over from Beijing. One of the best movies I’ve seen in a few years.



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 US, I also provide a point of view that I hope educates and sparks debate.


The Sino Auto Insights team

OEMs

GM Dham plant gets a bolt of new life. (www.detnews.com)

On the heels of VW Group’s MANY announcements about how it’s totally dedicated to a future of EVs, GM decides to dip its toe in the water and announce that it has future product to build at one of its most symbolic plants. Detroit-Hamtramck aka Dham, where I happened to work at for a short project as a rookie at GM a lifetime ago, is named after the plant being on the border of Detroit and Hamtramck. There was a decent amount of pomp and circumstance around this announcement but is this really news anymore?


Tesla announced that they were building a plant in a foreign country, got it built, and started shipping product out of that plant before GM could finalize negotiations with the UAW to keep this plant open. This could be GM’s way of saying to the world that ‘we’re serious about EVs’ and from a marketing standpoint an announcement like this still merits some clicks but maybe the best way to announce your entry into the EV world, with all due respect to the Volt & Bolt, would be to just put your head down, get back into the lab and pump out amazing product. A game-changing product. A product that’s going to put GM, Detroit, and the US back on the map as a global player.

Not just in the transportation space either but in the ‘baddest company in the world’ space. Stepping off my soapbox now.

#GM #Dham #EVs #AVs #CruiseOrigin #Hummer


EVs

Why China is leading the way in EV adoption. (www.wsj.com)

The mother of all product transitions is taking place in the auto sector in the US, EU and China and we’re continuing to see frustration among the leadership of some of the major OEMs regarding the lack of interest/demand in electric vehicles in the US and to a lesser extent, China.


I am here to tell you though that that ship has sailed. It sailed when VW announced that it was turning over basically its entire lineup to an electric powertrain. That move alone should pull the entire sector towards this transition so the key will be how do companies plan this transition, not if they should, to ensure that they are able to still generate revenue while they shift over to the EVs.


Consumers could be forgiven as well since there’s just not a lot of product out there to choose from. Do we really believe that a Chevy Volt or Nissan Leaf will create the excitement or demand all their own? It’s going to take a bit more time and A LOT more viable product to dethrone the internal combustion engine vehicles as the preferred powertrain but make no mistake, this is a painful exercise for EVERYONE.

#Subaru #NoonewantsEVs #somepeoplewanttheminChina #ChinaFirst


Tesla posted its first annual profit, kinda sorta. (www.cnn.com)

To be clear here, on an operating basis Tesla made a small annual profit but on an accounting basis, they still lost their shirt. What’s important to take away from 2019 for Tesla is that they’ve solidly built momentum going into 2020 and could substantially increase their sales for the year if China decides to cooperate. This momentum has catapulted Tesla into the position of 2nd most valuable car company in the world, behind only Toyota.


With the recent positive quarters, Tesla has carved out some breathing room for itself, if just a small bit. That’s because in order to merit the current share price, they’ll need China to be their growth engine. With all the uncertainty about how much the coronavirus is going to negatively affect the economy in 2020 on top of the already challenging market, Tesla could again quickly find it difficult to breathe.


Tesla will fall down. They (the OEMs) all do. The spotlight is now brighter and hotter since the opening of the Shanghai Giga. Tesla's ability to respond to those future unknown challenges will indicate whether or not that share price is warranted.


One item of note regarding Tesla though. On a recent trip to Pittsburgh while driving on the Ohio and Pennsylvania turnpikes, I noticed at least 4-5 truckloads filled with Tesla’s, mostly Model 3s, it stood out. I did NOT notice any other brand of vehicle in such high volumes being shipped east.


Anecdotally that tells me that Tesla’s demand in the US is consistent and that they should be taken VERY seriously and that they brand is starting to resonate with many more consumers in the US. It’ll be China though that makes or breaks their 2020.

#Tesla #morevaluablethanVW #Chinaisthewildcard #2020willbetoughtopredict


Battery swapping back from the dead? (www.electrek.co)

For those readers that remember the battery swapping company Better Place, could they be an example of great product, but wrong time / wrong place?


Looks like China is exploring how to standardize battery swapping to push along EV adoption and they’re looking at the lower end of the EV market to ensure that its available to most, if not ALL EVs on China’s roads. This could really be a gamechanger for longer haul drives and I could see it incrementally increasing sales in China but it would come at a huge financial cost with the risk of these stations becoming obsolete as battery & charging technology progresses.

#BetterPlace2.0 #batteryswapping #China #turningovereverystone


Tesla under-promising and over-delivering? (www.theverge.com)

I’d mentioned in earlier newsletters that Elon was likely putting pressure on his manufacturing teams in Fremont and Shanghai to pull in the launch of the Model Y, the vehicle he said would likely sell as many as all the other Tesla vehicles combined.


Looks like that pressure worked as Tesla announced that they’re ready to start shipping the long range Model Y in the US in March. This is HUGE and should boost the already pumped up share price.


Observations: With a likely mid-February the Job1 date for the US, it’s likely that Tesla would be able to begin shipping China made Model Y’s by end of summer so we will keep an eye on when they begin taking orders for it there.


With the compressed timeframe between their back to back to back launches (Shanghai - Model 3, US – Model Y, Shanghai Model Y) you can bet that qualifying local ‘China’ suppliers is not their highest priority. This should help with quality and reliability for the initial vehicles but that also means big potential hits to margins for the China made vehicles since that would mean they’re shipping parts, kits and modules from Fremont.


I would think that it could be up to two years before both China made Model 3 & Y vehicles are more than 90% locally sourced.

#Tesla #ModelY #readyforproduction #Chinawillbethewildcard #ALLEYESonChina

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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