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Reflections on the Trip/Show, Fisker & Ample, China Continues to Dominate EVs - SAI Newsletter 17



 

I am back in the US! I decided to come back a few days early since it’s May holiday in China and the mainland is off from Mon – Wed limiting my ability to meet with companies and clients. I’ve only left China 7 months ago but how soon we forget things… For those wondering – Yes! We've reached that part of our program where everyone has now started to pay attention with many in the audience on the edge of their seats. Some filled with excitement and anticipation wondering what's next while others with dread - dread caused by seeing the exact same things that has their counterparts excited. In 20, 30, 50 years from now, we'll likely point to #AutoShanghai2023 as that watershed moment. It's the moment most media outlets acknowledged that the foreign legacies that dominated the China auto market for the last ~35 years have been overtaken and unable to compete with the #EV products that have launched by China EV Inc within just the last few years. The legacies haven't given up by any means, but the writing is on the wall. BYD overtook Volkswagen as China’s best-selling brand in CQ1'23, the first time that's EVER happened. BYD has no plans of giving up that title for the foreseeable future and are likely only going to pull away even further. China will never be like it was again where brand, heritage and being foreign gave you an advantage. The only way now to compete is to out innovate and aggressively price to protect the share they have left. To be clear: Tech / Price, Addressing Customer Needs > Brand. This should especially scare the foreign premium brands who’ve until now were the unquestioned leaders in those segments. But Premium China EV Inc are on their way too. The immediate challenges and the ones ahead for the legacies are immense. The biggest being unable to make the necessary but difficult decisions and even if they can, executing them fast enough and minimizing the mistakes in order to keep up. I spent a two full days walking >20K steps (yes, I was able to get my pass w/o issue), I saw MANY European executives who'd not been to China in >3.5 years with similar looks on their faces, those of disbelief and disheartenment. How did this happen? How do we now compete? What I was referring to at the top is that the entire world has now woken up to China EV Inc. Just in the last month, I’ve been contacted by a German (x2), Dutch, French and of course American media outlets wanting my takes on the impending downfall of the foreign legacies in China. Here’s the important part – They are now also asking how China EV Inc can possibly compete in Europe and the US. The whispers are growing louder - When will they ‘hit our shores??’ Real competition between the legacies and China EV Inc on their own turf is much closer in Europe than it is in the US. The Inflation Reduction Act (IRA) and the challenging current relationship, give the legacies building in the US a bit of a respite with their Chinese challengers. Not so for Europe. More than 20 brands have either already launched in one or more European countries or plan to do so later this year. And those wondering whether they’ll be able compete need only look at BYD in Israel, where it’s Atto 3 is the #1 EV sold. BYD also won New Zealand’s Car of the Year award for the Atto 3 as well. And if you think it’s only BYD, MG the British brand owned by SAIC also won UK Car of the Year for its MG4 EV. Further, on my way back from China, I stopped into Shenzhen and visited BYD on Friday where I had the chance to test drive the Tang, Dolphin, Yuan Plus, Song and Denza D9. Are they perfect? No, but can those vehicles compete today and win customers with their combination of low price, plentiful features and adequate ranges? Without a doubt. And the European executives know that as well, hence the looks of bewilderment at the show. I am not saying that ALL Chinese brands will be winners. In fact, I think that only a handful will really gain any meaningful traction in the European markets in the long run, but what will happen is that China EV Inc will bring the scrappy, ultra-competitive nature of the Chinese market to Europe, specifically in the lower priced, mass market segments that’s the strength of China EV Inc. For the weaker European brands, any significant increase in competition in Europe, specifically the intense competition that China EV Inc cut their teeth on in China, could create real existential threats for them. That’s why I see more protectionism out of the EU later this year or early next as Tavares and others sound the alarm bells. The reality is that for some China EV Inc that aren’t able to grab any meaningful sales in China, they look at Europe as less competitive and their chance to gain volume sales, see MG as a case in point. Now that folks from legacy auto, mostly European BTW as the American executives largely stayed away from the show, have been able to see with their own eyes how EVs have taken over China’s roads, the foreign legacies shouldn’t be surprised anymore about anything that happens in the future, but the question continues to be - can do anything about it? To summarize and reflect on my trip: Some of the companies I visited: Jidu Auto NIO BYD Snow Bull Capital A few others in stealth Robotaxis I rode: Baidu Apollo QCraft Pony AI DeepRoute There is a company out there trying to sell $4K reports touting their Autonomous Vehicle (AV) ‘Leaderboard’ but if they’ve not ridden in ALL the robotaxis that are being piloted by the above companies, how can they claim to be the experts on the space? Exactly - they can’t! It’s VERY disappointing to see many reputable media outlets refer to their report and visual ratings guide as any credible, definitive source of how the global AV companies stack up. Transportation utilized during trip: Plane Maglev Didi Meituan shared bicycle (in SH, BJ) Subway (in BJ, SH, SZ, HK) (a lot of) Walking CHINA EVs & MORE China EVs & More is back to our normally scheduled time. The live show will be hosted on Twitter Spaces at 3pm EST on Thursday. A lot to talk about as Lei and I have some space between what we saw, who we met with and what we now think about #AutoShanghai2023. Please join us. For those that can’t join the live show, I invite you to listen to our recorded China EVs & More episodes at this site. And as always, we appreciate any feedback that will make the show better. Also, if there are any companies you want our thoughts on, let me know. I’ve just posted episode #110 and we’ll get #111 posted this week as well if not #112. Apologies for getting behind but we’ll make up for it. INTERVIEWED/QUOTED There are a lot of clickbait-y articles that says that China EV Inc hasn’t been very successful in the European markets so far and that should point to the challenges ahead for them. I’ve visited and spoken with many of them and none that I’ve spoken with are in any hurry to try and fast track their way into any EU markets and remember what I said – trickle, trickle, gush! Let me ask you all a couple of questions. How important is price to most consumers? How many legacy automakers have launched an $11K fully featured EV? Because that’s what BYD just did. Oh, and BTW did I mention that they outsold Volkswagen brand in China last quarter selling ONLY BEVs & PHEVs? - One of the more comprehensive reports out recently is from the Economist. I spoke with Simon Wright for his deep dive into the global EV space, one that you can check out here. Simon does a great job of explaining what’s been happening and - I was part of a CGTN panel discussion with friend of Sino Auto Insights, Bill Russo with both of us Skyping in from Shanghai. You can watch it here. I was sitting in my hotel room in Xintiandi at the time so decided to use a virtual screen and kinda look like a freak since Skype did a terrible job of blending it in with my real body. Lesson learned. The funny thing is, right after that virtual panel discussion ended, I walked over to the AmCham Shanghai office to participate in an in-person panel discussion hosted by Bill. It was a great event with lots of insights and being back doing live events was exciting and I am glad I took part, TESLA - Tesla reverses trend – raises prices on some Model 3s & Ys in the US, China, Japan and Canada markets. It was only by $250 but as always every move by Tesla is placed under a microscope from not only the media, Wall Street analysts but also their competitors. Does this mean an end to the price war in China? I don’t think so but Tesla seems to be signaling No Mas on price cuts, for now at least. I think there’s still a good opportunity to lower pricing again this year as we move past summer and have a better idea about any govt moves to boost the sector. NEWS THAT GOT OUR ATTENTION THIS WEEK - Ford lowers prices of its Mach E while swapping battery chemistries. Ford has effectively adopted Tesla’s strategy of using LFP batteries (shipped from China) for its standard range versions of the Mach E. It’s also likely the reason the Mach E’s subsidy was cut in half last month. - Walmart promotes mobility within its ranks. Walmart has hired a Director of Workplace Mobility with that person’s sole goal to convert 10% of its 15K local Bentonville, AR employees to commute to work in other ways besides driving themselves. Walmart is unveiling a brand new campus and says that almost half of its employees will live within 5 miles of campus once it’s been opened. With so many folks living so close to work, the challenge seems doable. If nothing else, it’s worthy and something that more companies should look at implementing where applicable. - Fisker and Ample, making a go of battery swapping in the US & EU. The initial target market will be for fleet operators which tells me the swapping stations will be at their vehicle operations facilities. It’s always been the economics of battery swapping that has limited its appeal. With increased EV adoption, most would argue we’ve reached a tipping point, and Chinese EV makers already commercializing the concept will it work this time around? Credit Fisker for giving it a go. Look for it to be further legitimized if Ample can sign up one or two major OEMs. GET SMARTER - For those that can’t get enough learning about how TSMC has come to dominate the chip fabrication space, here’s another great piece. It’s a broad overview of the history of TSMC and what makes it so different, special and key to the future of innovation and technology. Worth the click. TRENDING ON SOCIAL MEDIA - The real challenge for NIO and Li Auto. Creating separation between it’s portfolio of products so that it doesn’t cannibalize sales of one another. For example, the ES6 & ES7 are so close that recent buyers of the ES7 which was only launched in June 2022 are complaining that the refreshed ES6 is better than their current ES7s. Li Auto with their L9, L8 and L7 also are VERY similar when features and appearance are compared side by side. I see this as growing pains for both companies and a better product strategy moving forward needs to be implemented increasing the space between their products so that each can reach its full sales potential. This is also likely an outcome of how fast the market is moving. It’s difficult to keep up so the companies develop derivative products in order to go to market with them faster. BY THE NUMBERS - 59%. That’s how much of the world’s EVs & PHEVs China purchased in CQ1’23. 1.5M out of a total of 2.55M - 14X. That’s how much BYD exports to foreign markets increased YoY in CQ1’23. - 38. That’s the number of models intro’d at #AutoShanghai2023 that were equipped with LiDAR. This tells me that L2/L3 Advanced Driving Assist Systems (ADAS) will become standard in vehicles within the next two model years with China EV Inc pushing this trend. Further, this is only possible if the technology that enables ADAS like LiDAR become more affordable over the next couple of years. I’ll further speculate that LiDAR will become commoditized within the next 5-7 years forcing the current crowded field of discreet LiDAR players to move upstream providing more fully-featured ADAS systems to OEMs in the future. Mark it down, since you heard it here first. ___________________ 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 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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