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NIO Phone launches, UAW digs in, UK kicks out ICE ban to 2035 - SAI Newsletter 35



 

Back to our regularly scheduled programming. What a crazy last couple weeks. Munich then Detroit and a few personal things going on as well. Pepper that in with the EU launching an antisubsidy probe on China EV Inc. NIO’s new phone. The UK pushing out its ban on (the purchase of new) petrol / diesel fueled vehicles to 2035 to match the EU. The current STRIKE and ongoing negotiations between the US Big Three and the UAW. And a lot of bitching and complaining about how unfair the world is. We will talk about all these things below. Thank you to Ann Arbor Spark for inviting me to moderate the panel discussion this week on EV charging at the A2Tech Mobility Summit. It was a great group of folks (Nathan King – itselectric, ‘Q’ Johnson – Plug Zen, Simi Barr – City of Ann Arbor and Sarah Hipel – Joint Office of Energy & Transportation) that were knowledgeable and passionate about getting infrastructure in place in urban, rural and in underrepresented communities. And the most important question about EV charging was answered – it’s the egg that comes before the chicken – charging needs to be in place before the adoption curve really takes off. QUOTED - Financial Times: I spoke with Gloria Li about the EU’s probe on Chinese EV manufacturers and how the ‘cheap Chinese EVs’ threaten the European auto manufacturers. First, Ursula von der Leyen’s description is off. I would switch from ‘cheap’ to ‘affordable’ (not all of them are affordable either – see BYD Han / Tang) and next, I would add ‘highly competitive.’ Ursula’s implication is that the products clearly do not measure up to their European offerings and that the ONLY way they win is through price manipulation. WRONG. There’s a ton to unpack here but the fact that many Chinese EV brands are entering Europe shouldn’t be a surprise, especially if you’ve been reading the newsletter or listening to the podcast for any significant amount of time. Due to the price war, prices on Chinese EVs have been slashed by many manufacturers but NOT so much in Europe. Except for perhaps Tesla, which isn’t a Chinese EV company but ships the some of the largest quantities of EVs from China. Next, there IS reason to be very concerned about China EV Inc taking massive amounts of share from European brands, but it’s because the Euro Legacy brands can’t design / engineer/ manufacture affordable EVs themselves. Not yet anyway. But I make some distinctions that if Ursula was honest about, she would too. There isn’t any stopping the EU from implementing their own Inflation Reduction Act if they are concerned about an ‘invasion.’ But that would mean they’d likely NOT reach their own 2035 goal of banning the sale of petrol & diesel fueled vehicles (see the UK). There aren’t enough products from the European Legacy automakers, specifically at the <€40K pricepoint. Implementing any type of protectionism could also lead to retaliation on French and German goods outside of the automotive space that are shipping to China. For instance, the minute after any tariffs or limits are placed on imported EVs from China from the EU, the LVMH share price would likely tank. Airbus could likely also get orders slashed. Those are just two examples off the top of my head. Finally, the EU could’ve also invested heavily in the sector early on (that includes the entire supply chain and skilled labor necessary to launch successful startups and transition legacies over to compete with the Chinese companies), but they didn’t, now they are scrambling to ‘save’ their automotive sector. BIGGEST NEWS OF THE WEEK - The NIO iPh …phone. More appropriately it should be compared directly with other Android phones and unless you’re a NIO STAN, you likely don’t see the point of selling a phone, but I am OK with this move. Is it taking precious resources (capital and human) away from designing, engineering and building great EVs – probably. One thing that’s been consistent with NIO is that they’ve always described themselves as a lifestyle brand. This closes the loop on the ‘life’ part. The early adopters for the phone, assuming that the take rate for NIO owners is VERY high (>75%), will provide key insights into how they use the phone with the vehicle, how they use the phone outside the vehicle and how they use the phone instead of the vehicle. NIO will develop services around those insights. Most automakers are making bold claims about how services revenues will be a significant share of total revenues by mid next decade. That only happens if they can create services in the vehicle (or outside) compelling enough to want to subscribe to them like we do with Netflix, Spotify, etc. Even Apple isn’t there with that connection yet. But once they do launch an Apple Car, unless they only want to provide the software, it could be curtains for some automakers. Remember there are US & Chinese companies that know what we buy, search for and what entertains us. With the NIO phone they are attempting to close that loop so that we NIO buyers don’t ever need to leave their ecosystem so look for partnerships, collabs, or acquisitions that will help bolster that integration between the phone and vehicle. Look for other car companies to partner with handset makers as well since there’s ALWAYS FOMO in the space. The competition inside China will be markedly different than the competition outside of it. Especially in Europe where data privacy laws are much more robust than they are in the US. It’s too early to assume that they’ll launch this phone in other regions so we’ll just have to first see how it does in China. Finally, remember that NIO is launching two more brands, so the implications are clear. More phones in more customers hands means more opportunities to engage, develop and sell services to them, even when they aren’t in their cars. Now it’s all about the vision and execution of that vision. And most importantly, can they get enough cars on the road themselves to have the phone be a real differencemaker. If they can do that, even the doubters will look back in 10 years and think that this phone launch was a brilliant and logical move. - The current UAW strike threatens not only the Big Three but suppliers even more. For those interested in how the BIG THREE are really doing vs. the UAW’s narrative that they’re making bags full of cash; this article does a good job of painting a more realistic picture of their current situation. It compares the BIG THREE’s profitability and share price over time with its contemporaries from Japan, Germany and yeah even Silicon Valley / Texas. What we get from those comparisons is a very different story – one that shows that Ford, GM and Stellantis aren’t fairing that well against their global competitors. I’ve pulled out a couple graphics that reflects the challenges in profitability for the BIG THREE vs. others. I am all for getting when the getting is good, but it seems that every four years we get to this point where both sides dig in and point fingers at each other rather than try to hammer out a deal. The UAW wants its pound of flesh, but it has to know that an EV future means that jobs will more than likely go away, or at least get shifted to the suppliers which generally earn less money, right? One peculiar thing that’s absent from the UAW’s demands which include a significant wage increase, less work hours / week, COLA (cost of living adjustment), reviving pensions and elimination of the tiered wages is job guarantees. I’m old enough to remember some of the STRIKES that occurred when I was a kid and not really understanding what was happening although I do remember my dad picketing. Honestly, most UAW members would rather work and for now, although Shawn Fain may be looking better from a PR standpoint now, that’s likely to fade as the strikes continues. Let’s hope that it doesn’t for much longer.



- Europe’s innovation and scale challenge that won’t be fixed by a European Inflation Reduction Act. I have been debating with A LOT of people, mostly Europeans of course, about my views on the anitsubsidy probe specifically that it points more to the European carmakers uncompetitive EVs as opposed to ‘cheap, Chinese EVs.’ This is the same attitude that I encountered 5, 6, 7 years ago when I started looking at the shift and knew back then that this is likely where we would get to. I also don’t like that many Europeans describe their legacy automaker’s entry into China as ‘forced.’ ALL the players had a choice. Enter the market through a joint venture or not enter the market at all. No one was forced to enter the market. Let me add that by them entering the market, companies like Volkswagen Group & ABB benefited greatly from it and that they wouldn’t be who they are today had they not entered. Finally, and this is very important. The Chinese players NEVER gained an advantage on the ICE side of things. I’d argue that had it not been for the swift shift to EVs in China, the foreign legacies would still be dominating the space. It wasn’t until the shift over to NEVs (New Energy Vehicles) or what China calls (BEVs + PHEVs + FCEVs) that the Chinese players got the upper hand. So where was this so-called technology transfer that caused great harm to the foreign legacies competing in China? One thing that Jacky astutely points out in the article is that the size of the Chinese market (22M passenger vehicles sold last year) allows for scale and costs to be amortized over a large denominator. This creates cost advantages too. Was the sector subsidized – YES. Does Europe do it too? Absolutely. If you look at pricing of Chinese EVs, many of them in Europe aren’t that competitively priced, but what many of them offer is value, which when put side by side against the European products, they do NOT. I am hearing from many of my contacts in Germany that this is much more bark than bite and that Germany will not allow any type of significant tariffs or protectionism to be placed on these Chinese imports. I trust my friends, but we shall see, we shall see. - The UK pushes out ban of petrol / diesel fueled new cars to 2035. This date matches the EU and effectively the US since California and a few other states said they’d be doing the same by 2035. First, that 2030 date was unreasonable to begin with. On top of that, the UK providing no incentives for EV purchase also made it an impossible date to meet (as I was told by many Brits, that they have no money so they couldn’t subsidize EV purchases). This gives the UK more breathing room but unless they are able to subsidize the purchase of EVs, which EVERY other country is doing, 2035 still may not be enough time to get their act together on charging, products and demand for EVs. CHINA EVs & MORE (CEM) We are back to our normally scheduled LIVE show at 9am ET on Friday but have been a bit behind on dropping new episodes so to catch up, I’ve just dropped episode #130 & #131 for your listening pleasure so make sure to get your double dose this weekend. I plan to drop #132 early next weekend and try to get caught up by end of next week, let’s see how it goes. If you’d like to join the live show, follow me on X: @sinoautoinsight and at 9am at the top where the Spaces rooms show up, you should see our show. It’s an opportunity to ask any questions and have discussions with Lei and I so if are itching to know more about something, join us tomorrow morning! BYD - The Yangwang U8 is officially launched and retails at $150K or ¥1.09M. Deliveries will begin in October which means they’ve started building them at the factory. Wang Chuanfu believes that it’ll take sales from the premium automakers, namely the ones from Germany so I am certain that the folks in Ingolstadt, Munich and Stuttgart are monitoring their sales very closely. What’s important to note is that it’s an EREV like Li Auto’s entire current lineup with a BEV version likely to launch sometime next year. Features that I am certain will be tested by some tuhao rich Chinese folks: It can float on water (for up to 30 mins). For full details, click on the link. TESLA - Elon being courted by Thailand now. We know that Elon has spoken with Indonesia. We know that Elon has spoken with India. Now we know that he’s just spoken with Thailand. What better way to start a bidding war? Indonesia, home to the lion’s share of nickel, which is a rare earth needed in NMC / NCA battery cells is trying to leverage that into replacing Thailand as an auto hub for Southeast Asia. Since ASEAN has free trade between its 10 member countries, this would be a HUGE coup for Indo. The truth is, if Elon is to get anywhere close to the 20M by 2030 goal, he’ll likely need factories in 2 of those 3 locations, especially since India won’t allow tariff free MIC M3 / Y to be shipped there. He will also need a ton more capacity and (affordable) products in China to sniff anywhere near Toyota’s 10M units. - From a front and rear Gigacasting to a one-piece? That’s Elon’s goal in order to make a profitable $25K Model 2. According to UBS, he’s already got a major cost advantage by having single front and rear Gigacastings but he’s not satisfied and would like to develop a single piece that would incorporate the battery pack. If legacy automakers are supposed to be manufacturing gurus, how come they never thought of this when their initial pivot to manufacturing EVs started? The conservative nature of automotive companies won’t allow them to make these types of bold, risky moves.

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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 global automotive and mobility sectors. 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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