SAI Newsletter #4 - August 29, 2018
Updated: Jan 29, 2019
We are still experimenting with the format of this newsletter in order to make it one of the best resources for understanding the China automotive / transportation sector and how it’s transforming.
After feedback from a few readers, we’re going to dig a little deeper with each article and try to reinforce, dispute or add detailed color via our commentary. We appreciate any feedback or constructive criticism that you have in order to help do that. If you would like to contact us directly, please do so at: firstname.lastname@example.org.
Although we realize attention spans have shortened, we will go against the grain for a few issues and see what you all think about diving deeper into what we believe is newsworthy.
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The Sino Auto Insights team
Last week, there was another passenger murdered by a Didi driver, the 2nd in less than 4 months. A complaint was filed by a passenger of the same driver just the day before. Makes you wonder, of the 21M drivers Didi has working for them, how many have serious complaints against them that have not been investigated.
People started deleting the app, with #BoycottDidi trending on Weibo. Public outcry may finally force Didi to reconcile their business practices, although I find it hard to believe there will be less pressure from investors for Didi to grow and disingenuous of management to say that they will stop focusing on growth as a goal ahead of their IPO within the next 18 months.
These three articles highlight3 distinctly important and different points in the product development cycle for automobiles before leading to ‘Job 1,’ what car guys call the first car off the line using production parts, tools and processes, that can be sold to a customer. In these cases, Job 1 will probably go to the founder(s) of each company.
To be clear here for those who aren’t familiar with the automobile manufacturing process, these cars were hand built from most likely hand-built parts in a lab or technical center, not with production parts off a production line. These cars cannot be sold legally and, in the U.S. at least, will need a manufacturer’s plate (M plate) to be driven on public roads. It’s why they will only build 100 by the end of the year. It takes time to hand build parts, then put them together and make them all fit the way the designers meant for them.
We explain this to emphasize that, although they should receive credit for getting to this point, the team and their suppliers, still have a long way to go before Job 1 rolls off the line.
The management and engineers have to be working around the clock to determine what caused this fire.
By now, they’ve probably been able to pinpoint the problem to a few parts or modules and have requested that the suppliers of those parts stop manufacturing them until the WM team can confirm what started the fire.
If I were WM Motor investors or suppliers I would VERY concerned about this when they’re only a month from production start. There will likely be delays. If production is 1 month away that means parts from suppliers have already been approved, shipped with some sitting in boxes at the plant so that’s a lot of capital tied up in raw materials or WIP (Work in process).
There also seems to be confusion about who the battery cell supplier is but either way, since it’s an electric vehicle, a problematic battery is obviously a non-starter. If WM is indeed dual sourcing batteries, then maybe they do NOT trust their primary supplier to provide ‘good’ parts at the volumes necessary to meet production needs.
In this case, FF is likely using a combination of prototype & production parts and assembling them together via the planned mass production process they would for the FF91 to build this pre-production FF91. There is production and engineering validation similar to a high-tech product that occurs and also this is where factory shop floor managers get trained on how the work should flow through the factory and where any lineside issues are identified and resolved.
When you read about all these EV startups going through the EXACT same processes and challenges as the traditional OEMs to build their vehicles, do you still believe that they are not automobile manufacturers but are the ‘technology’ companies as they claim to be?
Of course, in 5-7 years, if they are still ongoing concerns, these companies may be able to pivot and provide the types of services that they promise is in their product & service roadmap but until then, shouldn’t they be judged, valuation-wise and operationally, the same as GM, VW, BMW and Daimler?
Based on the recent tumble Tesla’s stock has taken due to reality catching up to perception AND Elon’s erratic behavior, I’d think the analysts are starting to realize this as well.
Make no mistake, this is one of the reasons why NIO decided they want to IPO in the near future since they might not see the valuation or be able to raise the amount of capital necessary to keep production going while investing in R&D for their next 2-3 cars.
Once the market gets crowded with viable competition from recognized brands, it could be a rough go for the China EV startups, especially if there any delays launching their vehicles, challenges building in mass production quantities, at high-quality rates or carving out a position in the market.
I will put this in the FOMO category. These companies may have very talented, intelligent teams working on bringing Level 4 autonomous driving to the masses but both Roadstar.ai and Pony.ai have shown nothing and proved nothing. Non-exclusive partnerships shouldn’t convince anyone that they have a viable product that can compete with a free, data abundant (when compared to Pony.ai & Roadstar.ai) Baidu’s – Apollo Project. How do they compete against free again?
Seeing as that Jingchi, Baidu, Pony and quite a few other Chinese EV and AI ventures opened offices in Silicon Valley it’s only right that Waymo opens one in China, right?
It will be interesting to see what they will try to accomplish here since it’s been reported that they already have employees in China. I wonder if the Chinese AI companies felt protected by the Chinese govt. since most auto folks in the know believe that they would not let a foreign company collect data on Chinese consumers, their habits nor the roads they travel on. Could this be another trade conflict and would it be ‘fair’ if the U.S. govt decides that the Chinese AI companies can’t collect American’s data?