• Tu T. Le

New China NEV policy, GM/LGChem partner in Ohio, StarRides launches in Hangzhou - SAI Newsletter #46



Trying out a new format since I received some feedback so will try to summarize every week a couple noteworthy items in the intro. Still have deep dive topics below though so no changes there.


As there are more and more ‘reflection’ & ‘year in review’ type articles and posts the closer we get to the end of the decade, I will also try to look through this past year’s newsletters to see what I think are happenings of note and try to summarize them in a (near) future newsletter. I’ve generally received a lot of positive feedback but am always willing to tweak it here and there to keep things fresh.


Since we’re in December, I am also trying to close out a few projects so there may be a two week break on newsletters between Xmas & New Year’s but I also may just send out abridged versions if there is anything newsworthy and there’s ALWAYS something newsworthy.


IN THE NEWS THIS WEEK:


- Chinese government updates its NEV policy that places less emphasis on ‘fully electric’ vehicles and now wants the market to decide what the ‘right’ mix of NEVs should be (more down below)

- Audi to layoff 9,500 employees in Germany by 2025

- Daimler to layoff 10K employees globally by 2022

- Lyft facing even more sexual assault allegations and lawsuits

- For the EVStartups: Why positive cash flow matters. Now if we could just get the sales part sorted out.

- Ann Arbor based May Mobility raises $50M in series B financing led by Toyota

- Pittsburgh gets its first VC funded Unicorn, language app - Duolingo.


TRENDING ON SOCIAL MEDIA THIS WEEK:


- Neuron EV

- People are still talking about and creating memes for Tesla’s Cybertruck

- Tech that died this decade.


PREDICTIONS:


- We will see the Model Y before summer in the US, before October holiday in China (assuming no showstoppers for the Model 3 launch)

- We will NOT hit 2M NEV units sold by the end of 2020



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 about how I look at the issues. We will mostly divide our articles into these buckets: AI, Mobility/Ride-sharing/Ride-hailing/Bike-sharing, OEMs, EVStartups, Investments, and Other.


If you know of anyone who would like to sign up for this newsletter please have them visit: www.sinoautoinsights.com. Thanks for reading.


The Sino Auto Insights team

OEMs

Bimmer cleans up their ‘rookie’ mistake - backtracks on charging for Apple’s CarPlay, at least in the US. (www.arstechnica.com)

A headscratcher to begin with, apparently now even BMW realizes this. BMW is known for ‘nickel and diming’ customers by upselling individual options that end up pushing the final price of their vehicles up by 20-30% (they’re not the ONLY car company that does this BTW but…) but charging for CarPlay which, at $80/year wasn’t really going to move the revenue needle much and which Apple wasn’t charging BMW for, surprised me and I am certain annoyed many customers.


I look at this decision reversal as an example of how a company that’s still grappling with the challenges of shifting to a technology-centered or maybe more accurately, a more techno-focused strategy, is posing to their mostly analog decision-making. This also likely points back to the CEO change they made in June 2019. For now car guys and until you’re able to completely replace them with something different (read: better), CarPlay and/or most other apps, firmware or OS’s that help customers seamlessly integrate their lives outside the vehicle with the inside, concede it to the tech guys - just as long as you also have access to that data. It’ll give you motivation to think of a better, more customized user experience. This is YOUR customer after all so you should have all kinds of insight on them, right?

#BMW #CarPlay #headscratcher #puttingitinreverse #listeningtoourcustomers


BATTERIES

The American OEMs making their moves on EVs for the US now as well? (www.reuters.com)

LGChem and GM decide to partner on a battery plant in Ohio. >$1B from each side committed and should begin producing modules for GM vehicles before the start of 2022. There were rumors swirling around about the ‘who’s’ and the ‘when’s’ and now that Tesla/Panasonic, GM/LG Chem are dance partners, does that make FCA and Ford the ‘Odd Men Out’ (in the US)? Seems like this could make room for a Chinese battery manufacturer to swoop in and ask someone to dance.

#GM #LGChem #batterymodules #Lordstown #makingamericagreatagain


EVs

China opens up NEV requirements as they remain aggressive on growth. (www.technode.com)

The Chinese govt. decided this week that they are NOT married to just ‘fully’ electric vehicles and that they’d like the market and the players that compete in it more broadly to decide which direction investment and technology goes with regard to New Energy Vehicles (NEVs). They’ve also just announced a revised goal of having 25% of all vehicle sales in China be NEVs by 2025, that’s up from the original goal of 20%. NEVs comprise of electric, plug-in hybrids, and fuel cell vehicles.

The earlier emphasis placed on fully electric vehicles, when combined with the subsidies and govt. welfare, created what many believe to be a bubble in the NEV sector that will likely shake out in 2020, forcing the majority of the reportedly +450 EVStartups in China to close their doors.


Way back in 2012, China’s State Council had made a goal of selling 2M NEVs by 2020 and seeing is that 2019 will likely only get to ~1.4M units sold, that 2020 sales goal seems very unlikely to be reached. Manipulating markets can have unintended consequences and it looks like the push to get EVs quickly on the road, during an unforeseen but over year-long trade war with the US, made the China NEV sector take one step forward and two steps back towards that goal.


I think it also reflects the challenging nature of the sector, how difficult it is to actually build a brand and products from scratch. Maybe even a lack of appreciation from some of the founders of these EVStartups, specifically the ones that had NO prior automotive experience. A lack of appreciation for how truly costly and competitive the sector is and how much SCALE plays a role in flexibility and the ability to innovate.


This change should be good for the Japanese automakers and guys like Ford and FCA, since they were more conservative when it came to planned investments and quick changeovers of their manufacturing to EVs. This gives them a bit more flexibility and opens the door to bridges like hybrids in order to meet the requirements.


It seems more and more likely that 2020 will be a transition year that allows the sector to reset and the EVStartups to spend more time educating consumers about their brand, value proposition, and ultimately why a car shopper should walk into one of their showrooms or download their app in order to purchase an EV from them. Let’s hope they use this time wisely.

#NewRules #NewGoals #letthemarketdecide #25by2020 #ihavespoken


Tesla hits its stride in 2020 with the opening of the Shanghai Gigafactory? (www.teslarati.com)

2020 is shaping up to be the most pivotal year in Tesla’s history with the Shanghai Gigafactory ramping up and the introduction of the Model Y globally, my prediction is before summertime for the US and before October holiday in China. Within a few years, if there are NO major manufacturing challenges, Tesla could double its sales globally with just the Model 3 & Y.


The ‘Price is Right’ on both vehicles (<$60K USD) so demand SHOULD be high and that price point should allow them to sell a decent volume into China. Tesla also knows that there will be a TON more competition in the segments where the Model S & X play, can you say Taycan/E-Tron/MGS so they’re likely working on refreshes on those vehicles as well that you may even see in 2020, if not true external (major) refreshes, then at least major software upgrades. If they’re going to invest in updating those two vehicles, then they’re pretty much conceding those two segments to their competition.

#Tesla #BigYear #Model3 #ModelY #ThePriceisRight #ShanghaiGiga

Elon getting after it. With his gut. (www.wsj.com)

A few things stick out to me as I sit down to jot my thoughts down about this article.


First and this is a simple one, the author kinda assumes that the styling of the Cybertruck is BAD. It IS polarizing, that’s for sure but enough people have asked for my opinion about it which makes me think it should sell fine. Remember that Americans buy about ~16M new cars/year, give or take, with about 3M of those being pickups so if Elon can sell >90K of them or about (~.5%) and with a starting price of ~$40K (the current average price of a full size pickup in the US), I think he’ll take that as a WIN.


Second, there are exceptions to EVERY RULE. There are good managers and CEOs like Tim Cook, Alan Mulally, Satya Nadella to name just a few and if you have one, then your share price is probably consistently growing and you’re able to build sustainable, profitable businesses by selling and supporting great products and services. These are the ones that pour over data, making informed decisions that lead to those consistently profitable businesses.


Then there are Visionary leaders like Henry Ford, Steve Jobs, and Bill Gates that have been able to create businesses and companies through innovative products and services that created new markets and/or disrupted old ones. I’d certainly put Elon in the Visionary bucket, although he wasn’t an original founder at Tesla.


Third is the author’s lack of appreciation for embracing risk. The reason to analyze data is to mitigate risk and gain hopefully actionable insights, I get that. But there is still NO GUARANTEE that if you analyze the data and build a product based on your findings, people will buy it. That also seems to be an implied assumption the author makes.


Finally, true innovation isn’t based on studies and market research that tell you what’s missing in the market or what features customers want, that’s called product development. Innovation is having the ability to imagine a product that people may not yet know they want, have the guts to design & build it, then through savvy marketing not only convince consumers that they should want it but that they NEED it!


Do that where the cost to make and sell the product is less than the price of the product and you have a successful business. A LOT of business is still a WAG (wild ass guess), whether you analyze data or not but being able to consistently make the right decisions from analyzing the data is what good companies do. Being able to course correct in real time to minimize mistakes is also a sign of a good company.


Great, visionary, game-changing companies are able to anticipate which direction the market is moving and head that way with their product or service. Wayne Gretzky was asked one time,

‘What makes you so good?’ and his reply was ‘I just skate to where the puck is going to be.’


I have oversimplified my thoughts on the above but I don’t want to turn this into a leadership lecture. With that said, would love to hear your thoughts about innovation, management, and leadership.

#visionaryleaders #norisknoreward #thehighertheriskthehigherthepayoff #gamechangers


MOBILITY

Geely & Daimler launch StarRides – premium car hailing service in Hangzhou. (www.autonews.gasgoo.com)

Noteworthy to mention that Daimler and Geely are actually launching their StarRides service this month in Hangzhou, home of Alibaba, with a pretty small number of vehicles - 100 Mercs (a mix of S, E, and V-Class). More Chinese cities will be launched in 2020 although none were specified. Also, no mention of international expansion either yet.


The main differences seems to be the level of service being provided as the ‘mobility chauffeurs’ are highly trained and licensed with some of them even being able to speak English. They also happen to be badged employees of the Geely, Daimler joint venture company not individual drivers so that should lead to a more consistent customer experience assuming that training is consistent across towns/cities/regions.


This seems like a FOMO business that slots right in against Didi’s & YiDao’s premium service. Wil try to figure out if there is any other differentiating features to the service that customers would consider outside of the convenience, cost and availability requirements.

#samesamebutdifferent #nopricingyet #FOMO #Daimler #Geely #itsgettingcrowded


Will the ruling against Uber in London have a domino effect on the other ridehailing apps? (www.wired.com)

Problems keep piling up for Uber. The London Transportation Authority refused to renew Uber’s license to operate in the city because of concerns for rider’s safety. Uber is appealing and can keep operating until further notice but this would be a HUGE blow to Uber should they not be able to operate in London.


Uber stated in SEC filings last year that 24% of gross ride-hailing bookings came from London, San Francisco, São Paulo, Los Angeles and New York. Talk about the 80/20 rule!

Uber is also facing challenges in their other 2 most important markets with California ready to implement a new law that will re-classify Uber drivers from independent contractors to employees of which they will have a minimum wage and employee benefits rights. New York has decided to limit licenses for ride-hailing vehicles which could also limit the upside revenue in that city.


These challenges add cost and limit supply for Uber, but my takeaway here is that increased regulation and license revocations could affect ALL the ride-hailing companies that operate globally. These types of decisions don’t normally happen in a vacuum and could lead to other cities around the world adopting similar stances when it comes to how to ‘manage’ ride-hailing services. Alot of the blame could be placed squarely on the ride-hailing companies since their ‘growth at all costs’ led to lax or non-existent self-regulation.


Cities are now starting to catch / wise up and are not satisfied with how these companies operate. Can these ride-hailing companies, most of whom are still not profitable, clean up their acts while reconciling their businesses in order to become profitable in the foreseeable future? Blitzscaling was good to pump up valuations but that ship has sailed.

#Uber #London #nosoupforyou #moretofollow #whiccityisnext #notjustUber


Shared ride-hailing 2.0. (www.cnet.com)

As Lyft and Uber struggle to reach profitability, there are other ride-hailing/sharing business models that are being tried out in the EU. One of those is a service called Moia being piloted by the VW Group in a few German cities. The drivers and cars are owned by VW and it’s a shared ride but because of the interior and amenities like WIFI, plush seats and wraparound headrests, it feels like more premium even if there are other passengers in the vehicle. Pricing for Moia is targeted to be between public transportation and a taxi.


Here’s the key about Moia for those of us truly concerned about traffic and pollution. Because it’s a shared ride service, if popular, it could actually take cars off the road. VW estimates that it could take up to 1M cars off the road by 2025. That’s right, welcome to the world of mobility where a car manufacturer is highlighting the potential for 1M cars to be taken OFF the roads. This article also highlights other car services in the EU, all derivatives that try to enhance or improve the current Uber/Lyft/Didi service model.


There will be even more services rolling out in the next 18 months as startups and traditional companies alike experiment to find the right mix of service, price, profitability. The challenge is to find that right mix in each and EVERY market you play in – globally. I think it’s a very worthy cause, trying to think of innovative, cost effective ways to get around town, and a project my team and I would be happy to help map out! #abetterUber #canitmakemoney #lesstraffic #worthygoal #EU #Moia

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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