• Tu T. Le

SAI Newsletter #6 - September 11, 2018

Updated: Jan 29, 2019



As we mentioned last week, we’re moving this newsletter to Tuesday delivery so here we go.


For all that have provided feedback, thank you. If there are any topics you’d like us to cover, disagree with our POV or would just like to add to the conversation please let us know. We’re open to experimenting different formats and will try a few out in the coming weeks.


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

Sharing & Mobility

Is Didi doing enough? (www.scmp.com)

Let’s be clear about this. These additions they made to the app and the service MAY help passengers moving forward but it’s really a band aid on a symptom and does not address the cause.

If they really wanted to do the public ‘good,’ they would allow for a bit more transparency with their 21 million drivers and:

  1. Let us know how many have had complaints against them and how they grade the severity of each

  2. How they’ve circled back with their current fleet of drivers to identify any potential ‘risks’ to customers

  3. How they have changed their screening system to flag any potential risks prior to any of them even picking up their first passenger

  4. What their SLA (service level agreement) is regarding investigating ANY complaints against a driver

  5. The (most) common types of complaints they receive from passengers

Information is power.

Didi could offer some of that power back to its passengers. We don’t believe Didi informing customers on each of the above items would risk anything business or IP related. That’s unless there are a large number of its 21M drivers that aren’t fit to be driving us around China.


OEMs

Mercedes 2020 EQC to begin production in 2019 in Germany then also be built in Beijing. (www.insideevs.com)

This could be a little wonky for a portion of our readers but this article outlines many more details about Mercedes major move into the EV segment with this SUV. Exterior styling is similar to what Merc already has on the road here in China, with the exception of its powertrain. There are high quality pictures and many specs should you feel like digging into the details. No pricing details yet, but we would guess it’ll come right around or below Model X pricing in China.

Again, this is one of the MANY entrants the traditional OEMs will be launching in the next 2 1/2 years so the EV startups better have all their ducks in a row, launch on time, at a competitive price, with the initial quality that’s necessary to compete with these guys.

We are not saying the traditional OEMs will not make mistakes or have design/quality issues, they ALL will. What we are saying is that traditional OEMs have developed and sold cars that they have not made money on, sometimes to try and push a competitor out of it. EVs that are NOT prepared to have a long, drawn out fight for the market AND the deep pockets to fund it will not be building EVs for very long.

Building a vehicle that people want is just a qualifier. If the market grows as its forecasted to, selling out their capacity wouldn’t be that challenging, downside is that good sales numbers may mask ‘real problems’ they could be having.


Ford CEO Hackett finally lifting the veil on what the Ford team is doing. (www.forbes.com)

This is a great ‘pop in’ view of what the Ford team is doing to try and turnaround their ailing business. We were asked last year by the head of China strategy at a German OEM, how do we ‘transform our business while keeping our revenue from falling off a cliff?’ Short answer is, you CAN’T. This is what Ford is finding.

In their defense, they ARE the only American OEM that did not go bankrupt and that bit them. Their resources needed to be focused on a few products that pulled them through the crisis but ultimately because they weren’t able to ‘clean’ their balance sheet, they were left with the same challenges that GM and FCA shed when declared bankruptcy.

Ford also came late to the China party, so they got last pick on JV partner – Changan – and have been dealing with relationships headaches since.

Finally, Americans do NOT want to hear this but now that China is the largest automotive market in the world China will now be influencing the design of ALL car manufacturers. It’s been the other way around forever, with American design being massaged for the China market but as this article emphasizes, Ford designers are thinking about the Chinese consumers when pen hits pad.


A few observations

  • Love that Hackett had the guts to pull the plug on a product that he thought was too generic.

  • The turnaround needs to move even faster. And Hackett knows this as evidenced by his ‘We’re four or five months later than I thought we’d be right now.’

  • With the exception of Hackett, there aren’t many other outsiders making decisions. They need more outside management to keep the Ford lifers honest.

  • It’s risky to link your introduction to the EV market by theming it a ‘Mustang inspired’ performance utility. The Mustang doesn’t have the history or awareness in China it does in the U.S. so not sure why they’d do this. It could be the opportunity to create a whole new EV vehicle line and not tie it to your past.

We look forward to seeing all this play out and will keep everyone updated on what we hear.


Light electric vehicles

Scooters will rule ‘the last mile?’ (www.bloombergbusinessweek.com)

This seems all too familiar with the ridesharing & bikesharing launches in numerous cities around the world. FOMO is pushing the valuations of these startups to astronomic levels just like Tesla, Uber, etc. Do ANY of those companies yet make money? That’s a rhetorical question.

There should be some cities, the ones that have the resources and aren’t afraid of technology, that should just buy some of these scooters themselves and launch a pilot that they manage. Box these privates out so that they don’t turn the city into a dump site for scooters. Living in China we have seen it at it’s worse.

The unfortunate outcome of oversupply is that customers get used to walking 10ft to find a scooter and have no incentive to ‘park’ them properly so that they don’t create a bottleneck for pedestrian flow. Then once a city gets fed up, they try to regulate by designating areas for the bikes and decreasing the overall supply.

This creates animosity with the consumer because now it takes much longer to find a bike and secondly, they’ve formed the bad habit of parking it wherever they stop and will not take the time to ‘unlearn’ bad parking for the sake of making sure they bring the bikes back to newly ‘designated’ parking areas.


EVs

How do you get automakers to make more EVs? Name, shame and fine them. (www.scmp.com)

China has called out 30 automakers – a combination of Chinese and foreign & Chinese joint ventures – for failing to make enough EVs to support their adoption in China. There will be HUGE growth the NEVs (EVs + plug-in hybrids + fuel cell) and besides the carrot of subsidies and discounts, there is the stick of paying fines for not producing enough.


Borgward has a unique vision for tackling EVs and just opened their own Silicon Valley office. (www.prnewswire.com)

A Chinese startup that formed in 2015 when the name ‘Borgward,’ an old German automobile nameplate, was acquired to be used as the name of this startup.

Borgward is going to fund its EV R&D through sales of internal combustion engine vehicles. It’s unique due to the fact that his Chinese counterparts went straight to developing & launching EVs. Our first thought was this must be pretty complicated. The large foreign OEMs have the budgets, resources and manufacturing capabilities to transition out of one and into another drivetrain but we give them credit for zigging when everyone else zags.

Let’s see if this really makes them smarter than everyone else or they just found a different way to burn through a bunch of someone else’s money.


A portion of registered capital for Tesla’s Shanghai Gigafactory 3 in place, still need more. (www.electrek.co)

With all that’s going on with Tesla specifically – Elon Musk – business as usual as they look to expand production into China. Initially targeting capacity of 250K units upgradeable to 500K units as needed.

Batteries

GM Expanding Bolt production. (www.greencarreports.com)

First, we are predicting that the announcement from Pam Fletcher regarding which other countries the Chevy Bolt will be sold will not include China.

We also linked to an article last week about GM’s supplier for a Chinese EV set to start production was having problems with their Chinese battery supplier, A123 Systems. We believe that due to the steep ramp in production for Chinese EVs and the requirement from the Chinese govt. that all locally sold EVs be made with a Chinese battery manufacturer, this will (and for GM, already has) become for some OEMs a major issue that may delay launches of some of the EVs set to begin production with the next 18-24 months.

Unless there is a breakthrough from multiple Chinese battery suppliers on quality and reliability, then the investments made to increase capacity will be in vein, at least until Chinese batteries match their foreign competition’s quality and reliability.


#FOMO #GM #Didi #batteryissues #A123 #ChevyBolt #Borgward #Tesla #Ford #Giga3 #Merc #electricscooters #SinoAutoInsights



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