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OEM's Recruitment Woes, All The New EV Brands, Giant Can't Keep Up With Demand - SAI Newsletter #32



I was pleasantly surprised to see that Michigan announced this week that they’d dedicate a 40 mile stretch of I-94 going from Detroit to Ann Arbor to test connected and autonomous vehicles. It’ll be the first of its kind in the US. This is a pretty decent sized first step towards staying relevant. Details are scarce and the project involves Google’s affiliate Sidewalk Infrastructure Partners so there’s A LOT of fine print that needs to be hammered out. I believe it was Sidewalk that famously partnered with the city of Toronto to build the city of the future. That blew up last year with Sidewalk wanting too much (data) but not putting in enough. I hope Detroit studied that case before they decided to sign on the line that’s dotted.

Also, Amazon announced they’ll be investing $400M to turn the Michigan State Fairgrounds just outside of Detroit proper into a fulfillment center. Great news indeed. If Detroit and Michigan for that matter are to compete globally, these types of announcements need to be made much more often. Congrats to the local Detroit and Michigan teams that made these HUGE gets possible. Big positive steps for MI!

IN THE NEWS:

-   It’s difficult to tell whether these vehicle fires are one-offs or portend a larger and potentially VERY dangerous quality issue for Li Auto and XPeng. Li Auto & XPeng vehicles have NOT sold in substantially large numbers yet especially when compared to the OEMs so if this is indeed anything serious and if, this is a BIG if BTW, they’re able to grow their sales numbers substantially (>3x) over the next several months, we could see a NIO sized recall in both of their futures. Oh and this NOT the type of media attention they want after Li Auto’s recent IPO and XPeng’s forthcoming one.

-   Speaking of which, seems that battery troubles are NOT the sole domain of Chinese EV cos. Apparently the Porsche Taycan has them as well. To be clear, there was NOT a battery fire, but there were some overheating issues that need to be worked out. The Taycan uses LG Chem cells so assuming their quality is pretty solid, the likely cause gets pushed to either the packaging of the batteries which is normally the domain of the manufacturers or the BMS/EMS (read: battery management or energy management system) aka software, also the responsibility of the makers. We know that VW is struggling a bit with developing their own software so it could be surmised that Porsche may have outsourced the packing and software development as well? After a quick Google search, confirms that that a local German supplier, Dräxlmaier. As more Taycan’s get released to the wild, we’ll keep our eyes out for more problems. The good thing is their redundancy or failsafe worked, as the overheated battery pushed the car into what’s described in the article as ‘turtle’ mode – pretty funny but seemingly appropriate.

-   When OTA updates aren’t really OTA updates. Not to (really) pick on Porsche or the Taycan, since I think it’s a pretty sweet rig BUT according to the folks in Stuttgart, the Taycan can receive OTA software updates, that’s great right? Well, that’s unless they’re big – let’s call them ‘major’ updates, you’ll still need to head to the dealership to receive the patch or firmware update. Really guys? Tesla has been doing this since 2012. I’ve made up an acronym for EVs like these #EVINO = Electric Vehicle In Name Only

-   TuSimple is looking to the US to IPO in early 2021. For those that aren’t familiar with the company, TuSimple is an AV startup that focuses on commercial, over the road (OTR) trucking. Currently, I’m told that they have no plans provide their service to any market outside of the US. TuSimple would be the first AV startup seeking an IPO and am sure the banks they’ve hired are dangling the possibility of entering China in order to goose the valuation prior to IPO regardless of it being an immediate opportunity for them. There will definitely be many eyeballs watching this one closely from both sides of the Pacific and if they are valued at anywhere close to the top end of what’s being speculated, I can assure you that there will be more AV startups that will follow in their footsteps, either via a SPAC or traditional IPO.

TRENDING ON SOCIAL MEDIA

-   Aptiv and Hyundai shouldn’t get too Motional? I just couldn’t resist. That’s the name of the formal partnership that both had entered into 5 months ago to build L4 autonomous vehicles. Here’s my WAG (wild ass guess) for Motional’s near future – I am going out on a limb here but with Motional’s valuation ballooning (for no logical reason) and to allow external investment or in investment speak ‘to unlock the value of the company,’ Motional will be spun-off or out in the next 3-4 years. 

-   We’re going to need to buy a lot of NEVs to eat up all this capacity! A report by Wood Mackenzie forecasts Li-ion battery capacity will expand to 1.3TWh by 2030. China will host 800GWh of that capacity and in what may be a surprise to some, the EU will host 25% of that capacity. I can see battery cell costs generally NOT being an issue should all that capacity become real.

-   Do you enjoy a good burger? If so, here are a few recos.

A bit of background for why I posted this in the newsletter. First, I am a midwestern boy that prides himself on recognizing a quality hamburger when I eat one, I have eaten enough of them that’s for certain! For the readers who currently live or have lived in Beijing for any period of time, they’ll read this post and smile since they’ll know exactly what I am talking about.

Beijing for the LONGEST time did NOT have said quality burger. That was until Great Leap Brewery opened their taproom and put a cheeseburger on their menu. Expectations were low, but let me tell you it’s a very HIGH-quality burger, might I say world-class good.

It’s not fancy at all, it’s just a damn good burger. Now, dare I say over the last few years more competition has popped up in Beijing, not as much as say in Shanghai where there are a decent number of great burger joints (which I am happy to reco to you if you are ever there) but there is what I’d call a critical mass.

Last week, Shake Shack opened up here in Sanlitun. There have been multiple hour-long lines to grab one of their burgers since it opened its doors. I enjoy Shake Shack burgers but I do not ‘wait over an hour’ enjoy them. The debate among my friends here rages on about who has the best burger in Beijing. My recommendations for:

Best overall: GLB burger

Best fancy burger: Bistro B Wagyu (& foie gras) burger

Best fast-food burger: Fatburger

Others to try: 京A, Three Little Pigs

Oh, and if you ever make it to Pittsburgh, one of the best burgers I’ve ever had FULL STOP is at Tessaro’s. Trust me, you will NOT be disappointed.

-   Is GM really thinking about spinning off its EV unit to ‘extract’ it’s true value? According to Mary, YES! …but probably not really.

PRODUCT & SERVICE INTRODUCTIONS:

-   Hyundai creates the IONIQ EV brand and introduces the 5, 6, 7 which will be the first set of products launched under that brand. It’s really interesting to see all the different approaches the automakers are taking to address the burgeoning EV sector. Some are using existing brands, some are creating sub-brands and some as in the case with Hyundai think it’s easier to establish a new brand. Which approach works best is going to be completely dependent on the products. How forgiving consumers are if these new products don’t excite and fulfill the brand’s promise remains to be seen but we will know within the next 24-30 months once the majority of players here, both startups and OEMs, begin to lay out their cards.  

-   It’s starting to get very difficult to keep track of all the new e-bikes flooding the market, but we’ll keep at it. Meet the Movea eBike. None of the specs seem to stand out nor does the design. At > $4K, there seem to be a few worthy competitors so as we learn more, we will update accordingly.

-   Keep an eye out for these Jaguar E-Type 60th anniversary commemorative recreations. For many car aficionados, the E-Type is one of the prettiest cars ever built and I fall into that camp as well. Will have to wait and see if the current JLR team can do these machines justice.

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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 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

OEMs We need to hear MORE stories like this of execs being poached but in reverse. I am just going to flat out say it. Most of the traditional OEMs, regardless of whether we’re talking Wolfsburg, Toyota City or Detroit, don’t have the right firepower or enough of it on their current management teams to build the products and services, then market them, and as importantly do it fast enough, to properly compete with the products & services coming out of Silicon Valley and China. Ever since Tesla started poaching auto execs in the late 2000’s we’ve seen a number of them head west, but why is it so hard to attract tech folks to the OEMs? You know what, that answer DOESN’T EVEN MATTER because it must be done if the OEMs want to be players in Mobility 3.0. Do they need to be from Silicon Valley, of course not, but Silicon Valley is a target-rich environment so there’s a much higher likelihood the people with the necessary skills will be there. Here’s a quick example of what I am talking about. Tesla in the mid-2000s, like many EV Startups currently, was struggling to stay afloat and put products that people wanted on the roads and one of the reasons for those struggles was because they had too many tech folks in key decision-making roles. If you look back at 2008, they really began to broaden their hiring scope to include ‘auto’ people. I believe the hiring of Deepak Ahuja & Franz von Holzhausen, both poached from OEMs, along with auto folks in supply chain, sourcing, manufacturing, etc. made a HUGE difference and helped them turn the corner. I highlight the Deepak and Franz hires because they were put into leadership roles and that’ll also be key for the OEMs. Poaching needs to be aggressive and it needs to be often. There will be flameouts and employees that don’t fit the environment or culture, potentially lots of them. That’s just a necessary cost of doing business for now, at least until the culture, and pace of decision-making and execution speed up substantially at the OEMs. Until I see more announcements of external leadership hires from GM, Ford, VW, Toyota, and the tier 1’s, I’ll know the companies are still in denial and aren’t serious about competing, let alone winning. It’s like the OEMs are playing basketball with Chuck Taylors on (a classic and timeless shoe for sure BTW) when the team they’re playing against have the latest kicks with the cutting edge fabric and synthetic materials from Nike on. All else being equal, it won’t even be close. You guys that work at the OEMs (and tier 1’s) - both leadership and rank and file, if you DON’T think more outsiders with the proper technical skills & experience your departments currently lack, need to join your roster to improve your company’s overall competitiveness and to give you a better chance to survive, then YOU are definitely part of the problem. I am jumping off my soapbox now. #externalhires #moreoutsiders #leadershiproles #getserious #OEMs #moretechfolks EVs The move towards EVs has encouraged many new players to step up to the plate. That’s a good thing. By sheer sales numbers the China auto market is the largest in the world and likely in the coming years will extend its lead over the #2 US market. It’s amazing how the Chinese auto sector has grown from non-existent to #1 in the span of ~30 years. Recently, due to the Chinese govt’s interest in becoming a leader in the EV & vehicle battery sectors, we’ve seen many new brands popping up, many of which we’ve covered pretty extensively. As these companies have experienced for themselves how difficult it is to raise capital as well as design and build cars, many weaker players decided to tap out, either voluntarily or not. Over the last 4-5 years, the number of EVStartups has gone from what many analysts speculated was ~500 players to now where it would be tough to name more than 12-15 survivors. Contrast that with the US auto market which is over 100 years old. The US has gone through quite a few economic & technology cycles and there have been many auto brands, both foreign and domestic, that thought they had the right stuff to succeed in the sector but were quickly chewed up and spit out and no longer exist today. We can point to many reasons for this, lack of capital, fierce competition, and/or just an overall lack of understanding the American consumers being just a few. With both the China and US markets moving towards EVs, what we’re seeing now is a growing number of new Chinese and American EV startups. Some are completely new companies like WM Motor, NIO, XPeng, Rivian, Bollinger, and Lucid who are trying their hand at designing and building EVs for the first time. Along with the newbies are the traditional OEMs who are either pivoting existing brands, introducing sub-brands or creating all-new brands themselves to launch products for both the Chinese, EU & US markets. It’s like the wild, wild west right now with an announcement about an investment, partnership, or a vehicle intro seemingly every week! New products, services, and revenue models are being launched and tested. COVID-19 has accelerated interest in these new ‘businesses’ and with the Chinese govt. essentially guaranteeing that there will be an EV market in China sooner rather than later, international automakers are being pushed to enter the market likely before they’re ready, although you could argue if they’d ever be ‘ready.’ The crazy thing is – The big, bad OEMs don’t really have as many advantages in this environment as they would if the vehicle powertrains burned petrol. This level playing field allows companies like Tesla to steal headlines every week. I am excited to see what comes next, especially once these startups with ‘promise’ have their products out on the roads. What’s going to follow is an era of continuous innovation as EVs transition to AVs while connectivity creates opportunities for new services to be thought of and sold to users. We should see really strange bedfellows, as well as companies, scramble to put together a full set of offerings to their install bases. This is gonna be fun. Because I’ll be there each and every step of the way, helping the ambitious companies take leadership positions in the market. #EVs #newblood #majorpivot #whowillwin #levelplayingfield #lovethisstuff   LAST MILE MOBILITY The shift to two wheels is real and it will be lasting. Giant, the world’s largest manufacturer of bicycles is having a hard time keeping up with demand and if they’re having trouble keeping up, I wouldn’t expect the bicycle you just ordered to arrive any time soon. The increased popularity in e-bikes is really exacerbating a tight supply situation as well. Where Bonnie Tu – Giant’s chairwoman and I differ in our views, and just to be clear hers is much more informed than mine, is that I believe that the spike in demand of bicycles globally is not some flash in the pan and that it’ll last for quite some time. In other words, it’ll create new habits. Habits that will dramatically change transportation needs. It’ll have so much impact that it will push cities all over the world to reconsider how to accommodate them on their streets. It’s already happening in cities like Paris, Madrid, NYC, and SF just to name a few off of the top of my head. This is a good thing BTW since, if planned for properly, should help with traffic flow and lower pollution while reducing the need for so much parking. It should create a bunch of opportunities for new businesses that can take advantage of this shift to blossom.   #Giant #Taichung #bicycle #highdemand #heretostay #needmorebikes


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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