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My 2023 BIG, BOLD Predictions, Tesla Basic Facts, India Wants to be a Player - SAI Newsletter #2



 

What a crazy first couple of weeks of 2023! As I flagged in last week’s newsletter, we got another price cut from Tesla which upset quite a few recent buyers in China, and if you were wondering, after >10 years the Chinese govt did NOT extend EV subsidies into 2023. Fearing that the incentives would be eliminated at the end of the year, Chinese EV buyers pulled early 2023 sales into December which will likely lead to an anemic sales number for Q1’23 if you add in that CNY is about 2 weeks away. These are the same subsidies that a few years back paid out companies like BYD $1B / annum! They’ve been reduced significantly in the last few years and were supposed to be eliminated in 2020 but then you know what happened so they were extended till December 2022. TESLA Many Tesla watchers would like to point to Elon buying Twitter and all the crazy stuff that’s been going on there since as one of the main reasons that Tesla’s share price is tanking lately but those people would be wrong. Not completely wrong but largely wrong. At a $1.3T valuation, Tesla was overvalued. This shouldn’t be a controversial statement, it’s like saying Rivian & NIO were both overvalued when they hit their $100B valuations a few years back. Is Tesla worth $386B currently? I feel more confident about being able to explain that valuation than I could the $1.3T valuation and here’s the key. I’ll throw down a few more basic, universal facts about Tesla:

  • Their ‘innovations and new products never make it to market when Tesla says they will. We are still waiting on the Cybertruck & 4680 battery (still not in mass production quantities)

  • FSD is NOT the L4 capable system that the Tesla folks imply that it is

  • Too much supply, too fast – Normally, capacity is added when current product demand + additional demand from new & refreshed products > current capacity based on a long-term product plan. That additional capacity can supply the demand for that new/refreshed product

  • Tesla, like all the other automakers selling into the China market, underestimated the speed of change and the level of competition that would come from the other competitors, specifically the domestic competitors in the EV market

  • Price cuts now won’t pump up demand as they did in the past and that’s a problem

  • The perceived technology advantage that Tesla had over its competition globally has now for the most part disappeared.

What’s important here is that if you don’t agree with any of the above, then you’re likely a Tesla STAN and have a difficult time being objective about their situation. Because these aren’t my opinions, these are facts. At the end of the day, Tesla’s revs are still dominated by vehicle sales. PT Elon can spin it any way he wants but much of their valuation should be calculated like a Rivian, BYD or a NIO, not a legacy since they have many more foundational issues and much messier balance sheets. CHINA EVs & MORE We just hosted our 100th episode during our live Twitter Spaces today. If I may take a minute to humblebrag about the show. We also recently posted our 100th podcast (these include our MAX episodes) and were given a summary banner of data from Buzzsprout, where we host the site. The stats that stood out to me:

  • We’ve been listened to in 85 countries! WOW. Now that is GLOBAL.

  • 1.23 episodes / week last year means we were consistent

  • Sydney was the #1 city for downloads (a BIG surprise to me). LA was #2

  • Our MAX episodes with Omer Kheilaf – Cofounder/CEO of Innoviz, Frank Wu – Head of Design at Jidu Auto and Maxwell Zhou – Cofounder/CEO of DeepRoute were #1, 2 & 3 as most DL’d or listened to.

For those that can’t join our live Twitter Spaces room (shame on you!), the China 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. Quite a few of you actually pinged me about wanting to see my Big, Bold Predictions for 2023 so here they are:

- Tesla is gonna need a hug after 2023 ends. I think Berlin + Austin + Fremont + Shanghai (- no new products) + (- late refreshed products) = price cuts in China, the US, EU, Japan, S. Korea, Singapore, Australia markets and valuations closer to $200B than $300B by the end of the year. My big asterisk (*) Unless they refresh BOTH the MY & M3 before June 2023 and/or launch an M2 or mass-market product that’s <$30K – which now would cannibalize the sales of the ¥229K MIC M3 now with the recent price cut. - The China NEV market hits >9M units which will be almost an almost 40% take rate for NEVs in China. The machine keeps running. - BYD more than doubles sales but isn’t able to hit Wang Chuanfu’s 4M sales target for 2023 - >3 China EV Inc announce they’re entering the US market - BYD BOTH announce they’re building factories in the US as well as somewhere else in North America. - BYD Apollo will be the clear global leader in AV pilot launches and will announce >1 pilot program outside of China. - >100% growth in EV sales in the US - 4M EVs will be exported to Europe from China Before the end of 2023: - NIO gets to >30K in monthly sales - Rivian gets to 10K/month in production - Bye Bye Hengchi, Faraday Future News that we paid attention to this week: - EQ no more. After this next set of vehicle launches, Merc is going to drop the ‘EQ’ branding from its vehicles. Over 2 years ago, in a presentation I did for an investment bank one of my slides was that the ‘E’ in EV would likely drop out by 2025 since there would be more EV products in the market than ICE products so this sounds about right. Whoever thought to pay the creative agency a boatload of €€ to come up with that ‘EQ’ sub-branding should likely be demoted. - Tata Motors is all-in on EVs for its home India market. India last year surpassed Japan to become the 3rd largest global market for passenger vehicles and Tata is a top 3 player there so this announcement is BIG and will force others to pay attention. There’s also a lot of protectionism going on in India with regard to imports so this market could be Tata’s for the taking if they’re fast and their products are good and affordable. Of course, there’s the challenge of infrastructure and charging that would also need to be addressed which could really slow adoption down in India as well. That said, a successful product in India is NO INDICATION that it would succeed outside of India. That protectionism keeps companies & their products soft – only real competition will strengthen the industry, think – iron sharpens iron – or in the case of the China market when Tesla entered it. It pushes the weaker players out and forces the marginal players to step up or step aside. India also ranks 4th globally in vehicle manufacturing volume which is a bright spot for some foreign automakers like Stellantis and Skoda, who both struggle in the world’s largest market. As Europe, the US and China could struggle in the early parts of 2023, India could be a bright spot for the global automakers. - India’s clean energy vehicle revolution is revving up – on 2 wheels. Those that have followed me and this newsletter for any amount of time, know that I try to highlight what’s going on in South Asia & SEA on the two-wheel side since that’s what most people in those regions can afford and use for transit. I’ve beaten the two-wheeled EV drum for quite some time now there so it’s nice that mainstream media has finally caught up. And there’s a HUMUNGOUS opportunity for companies that help India go green. Right now, EV sales make up about 2% of total vehicle sales but are expected to rise >40% in 2023 alone. Further, Bain predicts that the entire sector (vehicles + supply chain) should hit >$76B in size by 2030. The challenges are just like any other country that’s newly adopting EVs: price, charging and range anxiety. Charging is a bit more complicated because many folks in the big cities live in MuDs aka Multi-unit dwellings and aren’t able to charge their moped in their garage. With the infrastructure, both the roads/highways, as well as the grid, need major upgrades in order to speed up adoption as well. But companies like Gogoro are intro’ing battery swapping to India and others like Ola Electric are doing their best to make electric mopeds more affordable. The key here is that India’s pollution is some of the worst in the world, even worse than Beijing a few years back, so if Modi wants to stay in power he’ll need to make the consistently gray, polluted skies in many of his major cities go away very soon. Here are the US Top 10 EVs sold in 2022: 1. Tesla Model Y – 225,799 2. Tesla Model 3 – 195,698 3. Ford Mustang Mach E - 39,458 4. Tesla Model S – 28,300 5. Chevy Bolt – EV/EUV – 38,122 6. Tesla Model X – 24,099 7. Hyundai Ionic 5 – 22,982 8. Kia EV6 – 20,498 9. Volkswagen ID.4 – 20,511 10. Ford F150 Lightning – 15,617 So here's the rub on this list - the Tesla numbers for the S & the X aren't posted but I was able to find the X number but I am not too confident in the S sales number so I'll double check on that and confirm in next week's newsletter. For their MSRPs, I was a bit surprised that the X & S made the top 10 but that’s as much an indication of the lack of competitive product in the US market and that there are A LOT of rich people here. TRENDING ON SOCIAL MEDIA - Tesla to manufacture in Indo? No official commits yet, so they’re still doing the dance but is this really the right time to announce another few hundred thousand units of capacity coming online within the next 3-4 years? It’s fine if there is a product that’ll sell into ASEAN, a product that would have to be well under ~$35K that the Model 3 sells at in China. Indonesia, has been a major player in the EV manufacturing game over the last few years. With the world’s largest deposits of nickel, a key component in battery cells, it’s using that fact to try and get OEMs committed to investing in manufacturing locally. If successful, it could dethrone Thailand as the biggest automotive manufacturer in the region. - XPeng’s He Xiaopeng to step down as the CEO? I knew that they were looking to replace some management and that there was plenty of blame to go around on many of the last several month’s worth of issues but hadn’t heard about Xiaopeng wanting to step down. This tells me that even he think this is waaay too much for an unseasoned manager in the automotive space to handle. XPeng shouldn’t be considered a startup anymore and as I’d mentioned in the Tesla post, if your main revenue source is vehicle sales, you’re a car company …until you’re not. - WM gets bailed out. By Apollo Future Mobility Group. Yeah, I am not sure either but I’ll see what I can find out. There are foundational issues here a la Faraday Future so a cash injection or a bit of funding isn’t going to make that go away. And they are getting further and further behind and irrelevant by the day. Tough road ahead for WM. - Toyota sales fell in China. That hadn’t happened to them since 2012! It wasn’t a huge decline (.2%) and you could even call it a rounding error, but it should be further proof that the market is changing drastically as even the mighty Toyota isn’t able to weather the storm. ’23 could continue to be tough for the global legacies in China.

BY THE NUMBERS - 3,332. How many minutes the 64 China EVs & More episodes in 2022 were made up of. Now multiply that by 3 or 4 and that’s likely the minimum amount of time that was either edited out or used for editing the pod. #LaborofLove - 882. That’s how many battery manufacturing projects have been announced in the US since 2009 representing $108B of investment with almost 25% of them since 2022. - 41,886. That’s how many EVs BMW sold in China in 2022 across 5 products and makes up about 5% of total sales for BMW there. Bimmer’s high runner was the i3 or 3 Series equivalent which sold about 13K units. BMW will continue their EV full-court press on the China market with products from Rolls Royce, Mini and more from it’s namesake brand BMW. I’d be pretty disappointed in that sales numbers, especially considering it took some coaxing in the form of price cuts and other incentives to get to that sales number. Time to re-evaluate and come up with a better plan and/or products for ’23. -------- 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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