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NIO Day, GM's CES, My 2021 Predictions - SAI Newsletter 1



And here we GO! The first newsletter of 2021! We did a decent amount of review in the last newsletter of 2020 so I will do my best to focus on what’s going on now (with the exception of my predictions sections) and what I think has been interesting over the last couple of weeks including NIO’s NIO day and GM’s surprises at CES. First though, I can’t pretend like nothing happened last week. As an immigrant who has experienced the best of what the US is, I am sad and disappointed in what I saw. Gutted actually. I am still worried about where things go from here especially the next 10 or so days but am hopeful that, although it’ll take quite some time, we can ultimately get past the extreme rhetoric and find common ground in order to move the country forward. It’s been pretty difficult to focus on work, to be honest and I am not normally one for excuses, but that’s one of the reasons this newsletter is a bit later in the weekly cycle than usual. As for Covid, there have been some flareups here recently so some sections of Beijing are under observation as entire neighborhoods or 小区’s are tested within days. Chinese New Year this year is on February 12th but my kid's school decided to pull up their last day so they’re officially off for 40 days as of today. The next month and a half are going to be very interesting. NIO Day I wasn’t sure what to expect from NIO Day and am not feeling as warm and fuzzy as some analysts after. First, I like the ET7 just like I like the ES6 & 8, although not so much the EC6. I could see the EC6 going away <3 years since that’s their low runner anyway. There is a bit of speculation on their ‘solid-state’ battery and we won’t likely get any further clarity on whether or not it’s truly solid-state or not anytime soon. I am a bit skeptical about the range numbers they’re throwing out though, that’s for sure. They will clearly be in the driver’s seat if they can actually hit 1K km/charge. One thing though analysts, this is going to compete with the Model S not the Model 3. And yeah, maybe I’ll eat my words here but I don’t see battery swapping really catching on in the passenger vehicle segment. Commercial yes. Besides, if I can go 1K km on one charge, why do I need to swap? I guess they’re willing to cannibalize their swapping revenue which can’t be that much anyway against the CAPEX spent on each station? This is the whole issue with swapping stations, battery range & charging time over time will cease to become major bottlenecks to EV adoption. What happens to those stations then? I love the ambition. How they actually map a ‘second living room concept’ into an actual vehicle and its features is TBD but if that was what I wanted from my car, I’d just as soon get a Canoo or a big, empty van. GM CES This is what I AM talking about! For those who are not connected to me on LinkedIn, I posted a short piece on GM’s logo refresh that you can read here. What started out as a comment on another LI post from one of my connections turned into a full-fledged rant for me. As the first company I worked for and a company that I still have family working at, there are some sentimental connections I have with GM but as most of you know, I try to root for all the Detroit Big Three. That won’t stop me from being constructively critical of each when I feel the need which is precisely what that LI post was. Dare I say Mary was listening? With their major announcements and reveals. We see that GM is working to articulate further what they mean by having goals of zero emissions, zero accidents, and zero congestion. I thought their Brightdrop announcement was pretty significant and could be an immediate, if small, new revenue stream for them. The fact that they’re looking to leverage the Ultium battery platform across multiple businesses shows that they’ve tried to think the strategy through and shows that they really are committed to the EV, which also points back to the logo refresh. In a nod to XPeng, Cadillac posited that flying drones could be in their future. Where I thought that it may have been a bridge too far for XPeng, I think it’s a step forward for GM since it shows that they are TRYING to extend themselves farther than they ever have before with new ideas, ones that do NOT involve 4 wheels. I also think that the GM team is capable of executing on these new ideas and I don’t think I am the only one here since their share price popped after the preso. The best thing about both NIO & GM’s recent pressers is that this pushes the entire sector forward and places extreme pressure on other entities & organizations, whether automotive or technology related, to bring their ‘A’ games and to keep pushing the innovation envelope if they want to be players in this sector. It’s nice to see someone other than Tesla leading headlines and having investors and the Street take notice as well. Apple Car Apple is NOT looking for an equal partner for their rumored ‘Apple Car.’ And Hyundai probably got thrown to the back of the line by leaking to the public. There's no point in entering this complicated, competitive, cash draining sector unless Apple believes their product is superior in every way. A partner with strong opinions would get in the way of building that superior product. Whichever partner(s), if any, they decide to work with would need to concede most of the control and decision-making if they're to become Apple's CM. In return, they'd learn design, software & product development, digital service delivery, HW/SW integration, and much more from arguably the best in the biz. ...AND they'd need to be able to keep a secret which looks like is an issue for Hyundai Motor Company. Besides, with Apple's current cash position, there are plenty of OEMs right now they could just buy outright. That's likely biting off more than they want to chew though. Decisions, decisions... 2021 PREDICTIONS - Assuming that chip & battery supply issues can be contained in the near term, and there is no other major disruption ie. Covid-19 to the economy, both the ICE & EV sectors will carryover the growth momentum from the end of 2020. I can see EV sales reaching well above >1.6M units with a few brands capturing much of that growth. - There will be manufacturing issues/growing pains from Tesla, NIO, and the others including the legacy OEMs as they grow sales, or in the OEM’s case, switch from hardware-driven to software-driven companies. - This will be one of the toughest years ever for the management teams at GM, VW Group, Ford, Toyota. You’ll see conflict bleeding out into the open and more reorgs from each of them. They will struggle to hire enough software engineers to keep their digitization plans on track. Layoffs will also continue to be announced. If you’re an investor in any of these companies if you don’t see this happening, be very worried. - There will be a couple of pleasant surprises, ala SGM Wuling Hongguang Mini EV, that will sneak up on us and sell well in the China market. I will try to identify which ones could be this year’s Mini EV in coming newsletters. - The Model Y will sell at a >1.6:1 ration to Model 3s. - OEMs will struggle to sell services in their vehicles. This needs at least another year or so to marinate in the Chinese market before the ‘habit’ will be picked up, so the promise of connected services revenue will largely remain – a promise. Chinese consumers aren’t used to paying for these types of things and it’ll take more than a year to convince them that the services they’re providing, whatever they may be, are useful enough to pay for. - CATL is selling the picks & shovels. Will it be too much from a capacity, quality, and reliability standpoint when they make their way into non-China destinations? CATL will have growing pains to go along with those high expectations. It’ll open doors for smaller players to grab share. - E-Bikes will continue their meteoric rise in popularity, I may even get one, as more cities decide to keep private passenger vehicles out of their centers. TESLA IN THE NEWS - You will see Tesla’s in India this year. They’ve already been approved for two business licenses. Could we see an ‘India’ Gigafactory? I’d say ‘Outlook Good’ as the Indian govt. is likely exploring attractive plots of land where Tesla can build a manufacturing presence there. It’s likely in or around the Gujarat state where other OEMs and tier 1s have decided to establish their presence and hence would be easier for Tesla to source locally made parts, etc. This is a tricky decision for Elon since there’s likely enough demand to import in the thousands for now. The question is, when will India’s economy get to a take rate of >120K units? It wouldn’t make sense to break ground on volume smaller than that. My thought would be that US-made Tesla’s would be shipped over to accommodate immediate demand as they study the possibilities and establish their sales/service, and charging networks. I think the current challenging relationship India & China have with each other would make it dicey to ship Chinese made Tesla’s to India for sale. - Michael Burry, who made a ton of money shorting the housing market in the late 2000s and was made famous by the Michael Lewis penned ‘Big Short’ thinks it’s time that Tesla took a huge fall. There have been a ton of people that believed Tesla has been headed for a spectacular fall including Burry, the share price at least, and they’ve had their pockets emptied as the stock grew 695% just in 2020. If you’re wondering who – google Jim Chanos. Many of the short-sellers have backed off but Burry is still short Tesla. But does Michael have a point this time around? I suppose he’s wrong until he’s right. But he’s losing each day the stock gains which seems like it’s been forever. IN THE NEWS - Hyundai launches a hydrogen fuel cell brand HTWO to build on their 20 years of research in the space. It seems that Hyundai believes they will ultimately book enough business in hydrogen fuel cells across multiple forms of mobility including passenger vehicles, trains, boats, and drones that it needed to separate the business out along with the EV brand they launched late last year called IONIQ. - The cars we want to drive in 2021 – US Edition. Yes, PLEASE. BTW, I am thinking that Mustang Mach-E, Rivian, and Lucid Air are going to do just fine, thank you. As in selling in the 20-30K range in their first years in production for the Lucid and Rivian. The Mustang Mach-E should be able to double that number. - Can’t have the cars we want to drive without having a look at some of the electric motorcycles that have us pumped about 2021. Yes on the retro RGNT, hubless Verge, and the Niu RQi-GT. - Could this new tech be a gamechanger for electric bicycles? An e-bike with an automatic transmission is nothing new but it is when it’s all built into one housing alongside the mid-drive motor. It has 7 gears that automatically shift depending on your level of effort. No need for a rear derailleur. Look for this system to be part of e-bikes in 2021 since Valeo has no plans to make their own e-bikes. - As SPAC’s have rocketed to popularity, are they really good ways to raise money and go public for the startups? For the TL;DR crowd, the general consensus is NO. As competition heats up to find startups to take the plunge, premium SPAC owners still get the cream but the others compete for the best startups and a progressively less lucrative financial ‘pie’ which equals friendlier terms for the startups. For the subscribers that are investors, this may be an article you click on. CAVEAT EMPTOR. - This humungous touchscreen/IP seems cool but is it really? I am not so sure. The challenge with bleeding-edge tech like this, people are still mostly just driving in their cars and need to spend most of the time with their eyes ON the road. Next, it will take time for people to get used to not having physical knobs, dials, buttons so I think the folks that can design an interior that combines the right functionality with a natural feel for the touchscreen will own the ‘best in the biz’ interiors. The reigning champ in my opinion for traditional interiors has been Audi. They have the right amount of bling, the fit and finish is top shelf, and the layout makes sense. Can they incorporate user experience design into their process to get that combo right? - Will Chinese cars finally make it across the pond to the US? Maybe, and only if they’re EVs but if they do these will be the most likely. The current 27.5% tariff on Chinese made vehicles to the US makes that a less compelling equation but the US is still the 2nd largest automotive market in the world. Challenge is that many of the Chinese EV cos. have already decided that the EU was a surer bet so I’d be hard-pressed to think that any startup would be confident enough that they’d enter two extremely complicated markets at essentially the same time. It would put a TON of pressure on their teams and their partners in that market. Not to mention it would be a time, capital & resource suck. - California will likely lead the way for the US to make that first major step towards EVs. This time, they should have full cooperation from the legacy OEMs. Gov. Newsom wants to subsidize the cost of EVs and invest in charging infrastructure. And we all know that car companies use California as a barometer for where the auto market is headed since California buys almost 2M new cars/year it doesn’t make sense to build a set of vehicles for CA and another set for the rest of the US. - WM Motor making its way overseas? All signs point to YES. This should boost their rumored IPO sometime this quarter. TRENDING ON SOCIAL MEDIA - What tech we need to survive in 2021. These digital trends will continue to rule our lives, at least as long as COVID-19 keeps us cooped up in our homes. Then, ALL BETS ARE OFF. Thought the ‘EV, American Style was apropos as well. - Kia follows in the footsteps of VW and others in refreshing their logo. I am not sure what to think. And I am not sure this is going to grow on me. I wonder how much they overpaid an agency to come up with this. I am sure that the update relates to a ‘rebirth’ and a nod to ‘clean’ energy vehicles but I don’t believe you. - The Ultimate electric rides for land, sea, and air in 2021. That title alone should make you want to click. JUST THE NUMBERS - 0-60MPH in 1.72 seconds. Want to get whiplash? Then jump into an Aspark Owl, a 1,985hp electric hypercar by Osaka based Aspark. There will only be 50 units built, initially at least, with 10 of those headed to North America. Other vital stats: Top speed: 249MPH, range: 249 miles, 1,479 lb-ft of torque, price: $3.56M USD. - $200M USD. The amount Foxconn plans to inject into Byton to help them get the M-Byte into production. This is also another step in the EV arena for Foxconn. Earlier they announced a partnership with FCA to co-develop EVs and in October 2020, Foxconn unveiled their EV chassis and software stack that they plan to license to partners that are cash strapped but still want to design their own vehicles. By my calculations, unfortunately, I still don’t see $200M being enough to buy the parts, etc. to get the M-Byte into production! PRODUCT & SERVICE INTRODUCTIONS - It’s a bird, it’s a plane – YES! Juiced Bikes Hyper Scorpion could be all of the above for e-bikes. Not the prettiest thing …but looks bulletproof. I wonder if it’s fun to ride? - India’s Blacksmith Electric launches the B4. It’s what a moped would look like if Lego and Vespa had a baby. And it follows in the footsteps of its older B3 & B2 siblings as being some of the most striking (in a good way) mopeds out there - I approve! —— 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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