• Tu T. Le

SAI Newsletter #20 - December 20, 2018

Updated: Jan 31, 2019



My name is Tu Le and I am the founder and managing director of Sino Auto Insights.


This weekly newsletter is a collection of articles I feel best reflect the happenings of the week or important trends that have effects on the automotive and mobility sectors here and in the U.S. I also provide a point of view that I hope educates and sparks debate about how I look at the issues.


On an administrative note, I will be paring down the newsletter the next two weeks as I will be back in Detroit visiting family and meeting with some cool companies out there. Will be back at full-force first week in 2019 hopefully with better, friendlier format for the newsletter as well.


If you know of anyone who would like to sign up for this newsletter please have them visit: www.sinoautoinsights.com. Thanks for reading.


The Sino Auto Insights team


#SinoAutoInsights #Qiantu #qualityspill #downmarket #moneyonthehood #EUandAI #nohorseintherace #importtariffs #backdownto15% #Waymo #milesahead #Graphcore #AIchip #Uber #lastmile #Ofo #bankruptcy

EVStartups

Qiantu for sale in the U.S. (www.carscoops.com)

I’ve always wondered about this brand. I’ve not seen any of their cars on the roads here in Beijing although they’ve been on sale here since August. They have a retail store at Nali Patio for those that have been to or live in Beijing but outside of the 2 K50’s that are parked inside the store, you’d have a hard time guessing they’re trying to sell you an electric car.

At over $100K USD though, it’s a bit steep and the market for coupes in China is just really small. Leap Motor is also actually developing a two seater but that won’t be launched until 2019.

They will need to really up their quality game if they think they’re going to be able to sell any of these in the U.S. The fit and finish on the K50’s parked in the retail store have a TON left to be desired.


Entering the market as the tide turns for the worst? (www.cnbc.com)

Recent launches and announcements by NIO (the ES6) and Xiaopeng or Xpeng (the G3) set the table for what looks to be a very unpredictable 2019. Since both cars are launching when the market is shrinking, will that make it more difficult to convince consumers to move away from ICEs and on to EVs? With autonomy still a ways away, the only real features that differentiate NIO & Xpeng’s products from conventional ICEs is their battery and some of the online capabilities but those advantages will go away once the traditional OEMs begin to launch and manufacture their own NEV offerings.

If they don’t hit their internal sales volumes quickly, inventories could build that will tie up their working capital not allowing for investments in other areas of the business.

As mentioned in previous newsletters, expect NIO and the rest of the EVStartups to go searching for more capital to withstand the suddenly more competitive market.


Other (AI, tariffs, chips)

Europe a distant 3rd in the AI race. (sifted.eu)

I don’t completely share in Kai Fu Lee’s grim picture of Europe’s ability to be a major player in the next set of AI related companies BUT a lot of his reasoning is sound. I’ve sat down with some European friends to try and name some really, really interesting stuff that’s coming out of Europe in the tech space but everything that we thought of seemed to be a derivative of something that was done in the U.S. and China already.

Worst case scenario for a lot of the German OEMs and my largest fear for them is that they ‘partner’ their way to irrelevancy. Diess, VW Group’s global head knows this and that’s why he’s kicked the urgency up about 100 notches for VW but unless there is some internal and/or homegrown innovation occurring, it won’t matter that you own the customer experience.


Tariffs on U.S. built vehicles to China reduced. (www.thecarconnection.com)

I think there seems to be some confusion here at least when I am speaking with folks about the tariffs placed on U.S. imported vehicles to China.

The Chinese govt. has announced that starting Jan 1, 2019 the tariffs on those vehicles will go from 40% to 15%, a large reduction that will mostly help the German OEMs that build and ship their SUVs over from the U.S. and sell here.

With that said, in March of this year the Chinese govt. had already made that announcement about reducing the tariff from 25% to 15% but had not attached any date to that occurring.

I don’t really consider this a concession since the reason it increased to 40% in the first place was in response to Trump putting tariffs on billions of Chinese made goods shipped to the U.S.

Both parties, the U.S. & Chinese govts. can market this as a concession from the other side and a win for their sides but it’s not as big a deal as they make it out to be. But I bet, the folks at Daimler and BMW are cheering!


A little bullish on Waymo. (www.forbes.com)

Great article that simply explains machine learning and how it’s come a long way in such a short period of time. This writer, a hedge fund analyst, believes that no one is going to catch Waymo on its way to world domination!

I think the stories of victory and breakthrough will be a bit more nuanced than how he sees it but, like I’ve stated in past newsletters, unless the car companies are willing to make the tough decisions like slashing workforces, closing plants, getting rid of management dead weight, and doing all this yesterday they’re going to have this anchor that’s not going to allow them to be nimble enough to innovate and/or play defense against Waymo, Uber, and whoever started a company today that can rival them.


Graphcore is coming after Intel, Nvidia. (www.businessinsider.com)

A recent entrant into the AI chip space has gotten some attention and along with that some major investment from companies such as Microsoft and BMW.

It’ll take a lot more investment and brains to dethrone Nvidia and Intel in the AI chip sectors but being smaller could really help them move quickly.

The key would be to bring a viable product to market within the next 3 years in order to keep Nvidia honest and making things competitive for them on the pricing front as well.

Will keep an eye out to see how they do in the future.


Mobility, Ridesharing, Ridehailing, Bikesharing

Uber takes another step into the ‘last mile’ game. (www.theverge.com)

All the hype across the pond surrounding the e-scooters, to me is just that, hype. These companies aren’t making money and although there are rumors about acquisitions and further investment for the main e-scooter startups, I think at the end of the day it’s the e-bikes that will replace these e-scooters as the preferred mode of transport for that ‘last mile.’

E-bikes would be more palatable for cities than e-scooters, they’re safer and are more comfortable to go farther. Multi-modal is a word being thrown around a lot lately and I e-bikes could be one of the key modes for being multi-modal.

2019 figures to be the year that it’ll all shake out so we’ll see if the e-scooter craze makes it past 2019.


Ofo on its last leg? (www.ft.com)

There’s been a run on Ofo headquarters by angry customers who would like their 99RMB deposits back from the company and weren’t able to get any responses from Ofo requesting refunds via the app.

Although Ofo may ultimately fail, they make for a terrific Harvard business case. It’s a prime example for those unfamiliar with the Chinese market of how brutal the competition is, even if you’re being bankrolled by one of the BATs (Alibaba in this case).

Also, Ofo was so bent on growth and remaining competitive with its main rival Mobike, it lost sight of how it was managing capital and where new capital would come from. Ultimately, they needed to pivot and weren’t able to do that which puts them in the place they’re in now.


As I stated in the Uber piece above, for those that have e-bike sharing dreams, this could provide a roadmap of what not to do and/or scare off the China market as a place to do it in.


Sino Auto Insights is a Beijing, China based market research and advisory firm that specializes in assisting companies analyze, strategize, and position themselves to take on the future of mobility and transportation through their products and services.


Members of our team have experience working in Detroit, Silicon Valley as well as here in China across sectors and functions as entrepreneurs as well as working at larger companies like Apple, Google, Amazon, GM and FCA and many others.

China: +86 13 811672141

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