• Tu T. Le

SAI Newsletter #14 - November 6, 2018

Updated: Jan 31, 2019



Baidu just had their World Technology Conference last week and made some more announcements mostly about the partners they’ve recently signed which I cover a bit in the articles below. Next week, we’re also expecting more news to come out of the Guangzhou Auto Show about potential partnerships, investments and fundraising.


None of the StartupEVs have really had anything to say about how they feel the China economic slowdown will affect anything that they’re doing but I assure you that the Strategy folks on their team are working with the finance folks to reconcile their breakeven point in the future with regards to sales and costs due to the longer time it should take for them to sell the breakeven number of vehicles they were originally forecasting.


I wouldn’t be surprised if this causes some to do another round of fundraising to increase their war chest to fight off the onslaught of new offerings scheduled to launch in 2019 while the overall slowdown causes them to take longer to sell vehicles than they originally forecasted.


If there are any particular topics you’d like us to cover, feel free to send over your suggestion to tle@sinoautoinsights.com. Would also love to hear feedback or comments on anything that’s been written whether you agree or disagree.


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


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AI

Baidu, the only real game in town? (www.cnbc.com)

Baidu keeps adding to its collection of automotive partnerships, this recent announcement with Volvo, in order to get its platform on the road in China.

The list now includes: BMW, Volvo, Ford, VW, JLR, Hyundai, Honda, Daimler as well as a number of domestic Chinese automakers and EVStartups.

That’s a lot of power in the hands of one entity. The partnerships vary in scope for sure and I am also fairly certain that most of them ARE NOT exclusive so if there’s another team, say Waymo, that could actually come to China and develop a significant presence, these companies could and would ALL likely jump ship. Waymo coming here, although they’ve opened an office in Shanghai, in any large way is still a VERY long ways off.


Simulations are still not real world. (www.thestreet.com)

All the major AI developers use simulations, basically driving vehicles in a virtual world, to help them add information to their databases that help their systems and platforms make driving decisions. Waymo has racked up billions of ‘simulated’ miles that they use alongside their ‘driven’ miles that will help their vehicles make ‘better’ decisions.

With that said, the U.S. government does not recognize simulated miles so although this should help their AI systems make better decisions, it won’t help them get on the road faster, only real world miles driven will do that for now.

Having grown up in the Midwest where winters can last over 4 months and include 2-3’ of snowfall at one time, I am also not convinced that simulated miles can really create the weather related, dangerous situations that people experience living in those areas.

This is a MAJOR reason why we’ll likely see autonomous vehicles being launched in 2-3 season climate cities much sooner than anywhere in 4 season climates. Or at least services being suspended during the winter months in the 4 season cities while they gather real world miles.


Built in bias for AI + and moral decisions that it will need to make. (www.interestingengineering.com)

There will be endless discussions on this topic from now on due to logical, moral and statistical dimensions and the bias each person that touches the system carries with themselves.

What we should also expect is that governments with all their competing interests that pull them in different directions; depending on priorities, philosophies and most importantly decision-making abilities (democratic vs. non-democratic) will lead to different AI systems at the city, state and country level.


OEMs

Ford and VW mashup? (www.freep.com)

Both have already agreed to joint development of commercial vehicles earlier in the year so this is a natural progression of their discussion to work together on more ‘things.’

Both of these companies have been dealing with major issues recently, VW with their ‘dieselgate’ catastrophe that has cost them over $36B so far, Ford with their ever shrinking China marketshare, so it makes a TON of sense for them to look for ways to reduce capital spending by sharing costs with another automaker(s). This is on the heels of the recently announced GM + Honda mashup as well.

In the U.S. VW has never been able to grab any decent marketshare in the 2nd largest automotive market in the world and that’s been very frustrating for them so this is a way they can do that while reducing their risk. They’ll also have access to Argo AI, Ford’s AI partner for the autonomous vehicles.

There have been assurances made that there will not be any financial commitments made to one another, (in my most sarcastic tone) since we’ve all seen how the Daimler + Chrysler partnership worked out, so no one is buying anyone at this point in time.

If Ford and VW are able to develop the partnership into something tangible, exciting and potentially lucrative, they would likely set up a separate joint company that would free it from getting dragged down by the traditional business of selling cars.

Partnerships normally mean less work for each side so there will likely be announcements of early buyouts and layoffs from the two (GM & Ford have already announced restructuring plans with GM offering 18K buyouts) that would affect tens of thousands of employees at both companies.

This is essentially in an effort to close the gap on Waymo and Tesla who are the current leaders in the AI / EV / AV space. Not a desperate move, but a move that hopefully helps them avoid making desperate moves.


VW exploring ALL options. (www.reuters.com)

There is some deep, deep consternation in Ingolstadt and Wolfsburg due to the moves being considered by Diess and what’s being discussed as ‘on the table’ for changes to VW Group in order to remain competitive in this fast moving landscape and put the emissions scandal behind themselves. Audi has traditionally been VW Group’s driver of technology but they weren’t even capable of providing the appropriate diesel tech which has cost them dearly so it’s reassuring to know that Diess is willing to consider what in the past would be non-starters because if drastic measures aren’t taken now then the VW Group will not be a very large part of the future of transportation.

I always thought that the VW Group’s brand lineup made them the best automaker to lead into the future of services and autonomous vehicles due to their vertical integration and little overlap, but unless the brands are willing to step back a bit for the betterment of the Group, I could very well see brands being shuttered, sold off or closed altogether ala Oldsmobile, Pontiac, Datsun, etc.


Another way tech companies are different from automotive companies. (www.theverge.com)

This will become more and more common as software gradually takes a predominant role in a vehicle’s ‘systems.’ Whether it’s a bug in the ‘virtual’ instrument panel or a firmware update to the entire OS, consumers will gradually adjust as these occurrences become the norm.

When the features that are changed or added that relate to any safety items, like the example of the braking improved by 19 ft, I do think there needs to be some regulation involved so that the consumers have an amount of time to digest what’s just happened to their vehicle.

Maybe there can be an ‘opt in / opt out’ option for the software upgrade?

One thing I am not sure I agree with about this article is their implication that the customer doesn’t have a say in the changes since this is really no different than buying a previous vehicle’s model year right before the new one launches. Isn’t it normally pretty standard operating procedure that many optional equipment from a previous model year become standard in newer model years?


Hongqi goes autonomous thanks to Baidu. (www.scmp.com)

I need to take a ride in one of these when they begin to put them on the road! As a foreigner living in China, these cars are so ICONIC. I would imagine that the tech, quality and reliability are marginal on an ICE version but they’re just so cool looking.


Other

Could this also affect AV development? (www.reuters.com)

As the U.S. ratchets up pressure and scrutiny of Chinese companies that purchase technology and equipment to manufacture technology, in this case ASICs or microchips, I can’t help but postulate that without certain technology, whether from the U.S., Japan or Korea, for batteries, sensors, chips, etc. this could hamper the adoption, and progress currently gaining momentum in China for autonomous vehicles.

We know that the current Lidar and radar tech that’s out in the market isn’t ideal to be able to support L4 / L5 autonomous driving so unless there are some national champions in China that DO NOT use any tech from abroad, this could be a risk.

I am sure each of these countries is studying and monitoring this very closely.


You’ve heard a Top 10 worst? (www.thedrive.com)

This list is AWESOME. I especially love #’s 1, 4, 5, 7. Sorry, Take the time to click and read them all, pretty entertaining what he writes and is mostly accurate.

Cadillac and Volvo both need to step up their game. BMW needs to move into another gear and get rid of this loose cannon Klaus Fröhlich or lose the title of ‘Ultimate Driving Machine’ and finally, tech experts are experts at nothing in particular…

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