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OEMs Flawed SW Strategy, VW Seeks Elon's Approval, Polestar 2 is Legit - SAI Newsletter #35



Going through some of the updates and articles this week got me pretty fired up! It’s probably reflected in one or two of my posts so would appreciate a sanity check to see if you agree, disagree, and if it’s the latter then why. A couple of pieces of big news this week. First, the Tesla fanboys took a bit of a bath with the Tesla share price losing ~33% of its value over the last 7 days. Elon himself took a ~$16B haircut as well because of the stock price drop. It should be OK for those that have been in a while since they’re likely still playing with the house’s money, but whether or not this is sustained and bleeds over to the China EVStartups remains to be seen.

Most will tell you that it was overdue and that Tesla is overvalued, and there’s an argument for that but there’s also an argument that currently there is no other company in the market that does what they do and has been able to expand sales as they have in a short period of time across various regions. Most OEMs aren’t able to juggle multiple markets successfully so it’s been quite a meteoric (17-year) ride for Tesla so far.  

There are ALWAYS going to be Tesla bears and bulls and Elon has been great at creating that froth. Good on him. For Elon and his numerous companies, it’s easy to stay in the news. The thing is, for the past 12-13 years, people thought he was crying wolf. With China having its best-selling sales growth in two years in August, Tesla is poised to take full advantage of China’s quick recovery from COVID-19 and continue to grow its sales in China. With rumors that the Model Y production will kick off in November at the Shanghai Giga, the trajectory of Tesla’s sales could increase significantly starting in CQ1’21.

The other big news just yesterday was GM’s mashup with Nikola. From the initial reports, the ‘deal’ seems to make sense to both sides especially since it doesn’t seem like GM has any cash outlay but will pay for their 11% in Nikola by providing in-kind services. Let’s hope that GM gets first dibs on acquiring Nikola should their vehicles be competitive against the Cybertruck, Lordstown Motors, and the other automakers who plan on launching electric pickups. Since this deal is hot off the press, I am going to noodle on this for a bit to see how I really feel about this partnership and of will let you know once I’ve developed a POV.

IN THE NEWS:

-   Pickup sales are picking up? Sorry about the pun but it looks like there are at least two more automakers in China that want to take on Great Wall for the pleasure of being the #1 pickup maker. We aren’t talking F150/Silverado/Ram full-size pickups either, at least not yet.

-   An inside look at a NIO House. This one’s in Chongqing and it’s pretty luxe. With that said, spending capital on opening these is what got NIO in liquidity issues in the first place. It’s a cross between Apple, Muji,  Store,

-   For my road biking friends, they’ve always known about all the cool gear they’d wear or bring along when they’re on the saddle for 4-5 hrs. or more at a time. Now that biking has become a ‘thing’ again, no really it has, (see the post after this one) regular folks who’ve recently been reacquainted to biking again. I am a big fan of the cargo backpack and the muscle rub BTW…

-   Don’t sleep on the guys in Cupertino. They’re still developing their AV platform, and they ALWAYS play to win. And they normally win BIG.

TRENDING ON SOCIAL MEDIA

-   Tesla loses 1/3 of its value in a week. Are we starting to see that correction we’ve been waiting for or is this specific to Tesla? It looks like the bears of come out specifically for Tesla this time, at least so far.

-   If masks are going to be our new normal, we might as well make the best of it. This mask allows you to display your emotions.

-   When Vogue dedicates a segment to them, it’s definitely become a cultural phenomenon and, dare I say ‘cool?’ Of course, it highlights arguably the two coolest e-bikes out there – the Dutch-designed VanMoof and the Taiwanese designed Eeyo.

PRODUCT & SERVICE INTRODUCTIONS:

-   Want to go for a proper ride while you’re traveling, Brompton just won’t do but you don’t want to have to lug your bike out of oversized baggage? No.22’s Travel Bike with couplers allows you to take apart a normal road bike and put it in a ‘normal’ sized suitcase without any interruption in ride or build quality.  

-   So the Chevy Tahoe and Land Rover Range Rover had a baby – Introducing the Jeep Grand Wagoneer. Faux wood paneling optional. BTW, the Jalopnik journo who writes this does a great job of comparing it to its older, much more original self as well as contemporaries that the Grand Wagoneer will be competing against for someone’s hard-earned $80-100K.

-   We don’t often see this form factor, as a matter of fact I’ve never seen this form factor before. A fat tire, folding, electric bike, this one is called the Aventon Sinch and it looks pretty bulletproof and like a ton of fun to ride! It’s going for $1,499 so pretty affordable especially when you consider that the starting price of a Brompton folding pedal bicycle is around the same.

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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 When the OEMs invite the wolves to guard the henhouse. This has ALWAYS been a headscratcher to me with some automakers, the ones who’ve allowed customers to bypass their native infotainment systems for the likes of Apple’s CarPlay and Android Auto. I mean, I kinda understand why they did it but this will become SACRED land for the automakers in the very near future as more services are offered via each vehicle’s operating/infotainment system so if they concede it now to outsiders that really know what to do with it, they may NEVER get it back definitely NOT willingly. And it’s only going to get worse. Google, Blackberry, and other tech companies are already rolling out complete auto OS’s because they know the market potential are fighting to be the one to provide that software to millions of vehicles globally. The OEMs need to have a cohesive, complete, internally developed HW/SW stack for their vehicles in order to maintain complete control of the user experience, data, and revenue-generating service offerings developed from that data. Right now, if I am an OEM and my customers decide to use CarPlay instead of my system, all the revenue generated from apps purchased but used while in the vehicle will be captured completely by Apple. Partnering with a tech company more formally so that they provide the software plays further into the tech cos. hands as mentioned earlier. The only way to exclusively capture the lion’s share of the revenue is to put in the hard work and develop your own stack. Look at Tesla, it’s one of the reasons they’re so far ahead of the automakers, they do most of their SW dev in-house. They’re even designing their own silicon. I get that the OEMs’ initial attempts at designing and developing the stack internally left A LOT to be desired but so what? Tech companies know that in order to get the product right, they need to iterate, in some cases, a lot in order to put an acceptable piece of SW/tech out in the market. Maybe the OEMs’ constraint is not having the horses internally to be competitive in the race, but those decisions made years ago to kick that can down the road for whatever reason and not hire a substantial, formidable software development team is likely going to bite them where the sun doesn’t shine in the near future. That’s why we have SO many partnerships. These guys didn’t want to put in the work! The fact of the matter is, some of the automakers can pull themselves back from the brink if they can swallow that pride, get rid of dead weight or in other words right-size, getting much smaller in some cases, and overpay for the resources that’ll put them on a path in the right direction. Otherwise, as Frank would croon, ‘Regrets, I’ve had a few…’ #CarPlay #AndroidAuto #AndroidAutomotiveOS #Blackberry #QNX #needdevs What’s this all about?? VW CEO genuflects when Elon visits… I am sure that Diess has a good relationship with Elon but man, seeing him post pictures & videos of Elon driving the new ID3 & 4 and having Elon needle him about the features in the vehicles must be pretty demoralizing if I am a VW employee. As if Elon needed another stroke of his ego. This is your competitor and the market leader for god’s sake! Have some PRIDE! You don’t have to so willingly raise the white flag and get Elon’s approval that you ‘did good.’ Just seems not right. #VW #Tesla #Diess #Elon #wecannotbefriends #testdrive #itsok    EVs It’s about time. A worthy adversary for Tesla? Polestar – Welcome to the Terrordome! Polestar, a JV between Geely and Volvo, and their first product - the Polestar 2 - was reviewed by the LA Times and was deemed a worthy adversary and competitor to the Tesla Model 3, although the vehicle is a bit more expensive. I won’t get into too many details about the review except that the reviewer said in so many words that the Polestar is the EV for adults vs. the Model 3 which has a bit more style and excitement. As far as I can tell, there was really nothing about the design, technology, or user experience that stuck out when comparing to the Model 3. I grabbed this headline because it’s about TIME that an automaker launches a vehicle that at least in this reviewer’s eyes, seems to be able to compete with Tesla in every major way. Unfortunately, I think Polestar really missed an important opportunity to go for it and put something out on the road that would’ve redefined the segment and what EVs are and more importantly, what they can be. Here’s to hoping that one of the OEMs in the near future really takes on that challenge and hits it out of the ballpark. It’s not likely going to be VW brand, see earlier post. #Polestar #LATimes #truecompetitor #missedopportunity #goodfirsteffort AVs Here’s a suggestion on how to determine who will ultimately be the winners in the autonomous vehicle race. There’s a reasonable view that the great AI companies two important criteria that will separate them from their competition. First, great AI companies will be able to narrow their company’s scope to solve for a specific business challenge. Second, great AI companies will have expertise in both data science and software architecture. This theory seems pretty reasonable and logical but will it hold true? In the case of autonomous vehicle startups, I would think that their fundraising capabilities will play a major role in whether or not they’ll be successful since we know that it’s not going to be cheap to put L5 autonomous vehicles on the road in volume. In addition to deep pockets, finding partner(s) that are not only compatible but that actually can enhance what the AV company brings to the table should be pretty high up there as criteria for success. It’s not enough to find another company that will allow you to do your thing, that company needs to help you turn your power into a ‘superpower.’ #keystowinning #makessense #butthatisnotall #greatAIcompanies

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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