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SAI Weekly 04 - 24: My Tesla Rant, BYD Democratizes Autonomous Driving with DJI's help.



 

Pictures of the Cybertruck are starting to make their rounds on Chinese social media since landing this week for its China tour. For those wondering if it’ll be sold in China, that’s not really up to Tesla. It could be, but current regs in most major cities limit the streets vehicles like the Cybertruck can drive on.

 

For the Americans here. Imagine not being able to drive your F150 on I75 or the 101. It’s one reason why the F150 doesn’t sell in high volumes in China. That’s by design. So if they do sell it, they will be either very limited on where it can be driven or the cities will lift the restrictions (not likely) and if that’s the case, look for Toyota, Nissan, Ford, GM, Ram all opt to ship their full-size trucks to the China market.

 

The Lions are two wins away from winning a Super Bowl. Whether you like American football or even sports at all, there should be a Harvard business case written on Lion’s coach Dan Campbell’s leadership of this team.

 

As a long and tortured fan of the Lions, I remember the last time we won a playoff game 32 years ago. Over that time, we’ve had moments of potential that was never realized and we’ve had a season where we didn’t one 1 game. To say that we’ve been one of the consistent cellar dwellers of the NFL would be an understatement.

 

The real dichotomy of the consistent losing is that also during that time, we’ve had arguably three of the best to lace ‘em up at their positions, Barry Sanders (running back), Calvin Johnson (wide receiver) and Matthew Stafford (quarterback) and still no luck in the postseason, so what Dan Campbell and General Manager Brad Holmes has been able to do in 3 years is nothing short of miraculous.

 

If you’re wondering why the Lions resonate so much with me? It’s because as a small Vietnamese refugee / kid growing up in Pontiac, MI, rooting for the Michigan based sports teams made me feel connected to the US and more importantly, where I lived. It helped me feel like I fit in since it's something most of the kids could all relate to.

 

Even today, I hear stories of expats working in Detroit asking what all the fuss is about re: Lions even asking me where the best place to buy Lions schwag is. Sports and rooting for the home team is an easy way for different types / groups of people to find something in common that they can all agree on.

 

I realized this recently as I was sitting watching the Lions with my wife, kids who’ve all fully embraced being metro-Detroiters and my sister and her husband who are and have been diehard Detroit sports fans with the Lions being no exception. And yes, I also believe that this particular team reflects the city, state and the people. Gritty, tough, hardworking and easy to root for. 

 

To that I say, GO LIONS!

 

 

CHINA EVs & MORE (CEM)

Join us every Friday, 9am ET.

 

We’ve just also dropped our latest MAX episode with guest Gansha Wu, founder & CEO of UISEE. Gansha sits down with Lei to talk about the different use cases that UISEE applies their solution to, the challenges and decision-making he’s had to go through in pursuing certain opportunities and not others and then talks about how he sees the autonomous vehicle future plays out. Don’t miss it!

 

To join the live show, follow me on X: @sinoautoinsight and at 9am at the top where the Spaces rooms show up, you should see our show. You can any questions you have.

 

If you can 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.

 

 

QUOTED

From Professor Danny Quah, Dean of the Lee Kuan Yew School of Public Policy: “So if 🇨🇳 ONLY grows at 4.5% this year and does that for the net 4 years, in that time, it will have grown 1 India. An 🇮🇳 which is 1.5 Billion people producing things, GDP … 🇨🇳 can grow that in 4 years. Every year it grows almost two Thailands 🇹🇭 , every three years it grows two Indonesias 🇮🇩 .”


This is an excerpt from the latest Channel NewsAsia award-winning documentary series: When Titans Clash.


For those not familiar, Channel NewsAsia is a top Singaporean 🇸🇬 digital media company that broadcasts to over 80M people all across Asia. If you’re Southeast Asian / Aussie you’d definitely know this media company and have watched shows its produced.I had the distinct pleasure of being interviewed by host Pearl Forss for this documentary. We discussed the China EV space and the attention its recently attracted from foreign governments concerned about an increasing # of exports entering its markets.


I’ve waxed poetic about this for quite some time via this newsletter and the China EVs & More podcast. Pearl covers not only the #EV space but more broadly threw other lenses. The documentary also looks at how 🇨🇳’s relationship with its foreign partners is evolving as more 🇨🇳 companies are looking to expand past its own domestic borders.


Finally, the documentary dives into the continued attractiveness of the 🇨🇳 market for foreign companies. Yes, it’s still a VERY attractive market for many companies despite its recent economic challenges.


As for how important these topics are outside of 🇨🇳 , the 🇪🇺 & 🇺🇸 ? It was viewed over 400K times over the weekend after it posted! I invite you to do the same, I'll post a link to the documentary in the comments. Special thanks to Bill Quan!

 

 

TESLA

-   Tesla Earnings. Most folks that follow the EV space know that Tesla had its earnings call yesterday so I won’t go into too many gory details. I will highlight some of the things that stood out to me and try to unpack them from my perspective. Here's a link to the deck for those that want to drill down further into the details.

 

Sales growth in 2024 to be less than 2023. That means it’ll be less than the ~38% growth from last year. For those paying attention, the Chinese economy is having a rough time of it and it’s been that way since coming out of Zero Covid.

 

In addition, the US & EU demand for EVs is softening. Combine that with the fact that Tesla will not launch any new products in 2024 and that Cybertruck is a niche vehicle that they’ll have a difficult time ramping and we get a 2024 growth rate of <38%, and depending on how challenging the Chinese economy continues to be, it could be MUCH less - which is my guess.

 

We're less than a month into 2024 and Tesla has already cut prices in 2024 in both the EU and China on the Model 3 & Y. That's almost a year to the day they did it in 2023 which ignited what many will look back and see as the Great China EV Price War. To add insult to injury, Hertz is crushing the residual values of its used M3 & Ys by trying to dump thousands of their vehicles and replace them with ICEs.

 

Tesla stock is down ~9% right now since their earnings.

 

Elon said that Tesla is in between two sets of growth phases and I agree wholeheartedly with that. The Cybertruck may be getting buzz but it’s not going to sell in the volumes that’ll push them significantly towards that 20M unit sales by 2030 goal he threw out a few years back.

 

The next growth phase comes with the Model 2. They’ve been back in the lab sorting out how to manufacture it at scale profitably and that includes sourcing strategy for the battery cells, at least in the US where not being able to use Uncle Sam’s thumb on the scale would put it at a HUGE disadvantage vs. it’s competitors there. Rumors are it will be launched in mid-2025.

 

There are two sets of assumptions that I want to call out, one for Tesla and one for Legacy Auto.

 

For Tesla: Will they be able to get it out by mid-2025? If we look at the delta between the original announcements vs. the actual launches of the 4680 & Cybertruck, I’d say no. Even though BOTH are commercially available, if you can’t build a ton of them at certain quality levels, you can’t say they’re being mass produced.

 

The next assumption has overlap between Tesla and the Legacies. I’ve received some messages about how the Legacies will have electric vehicles in the market by then that should be able to compete with the M2 when it comes out and of course in China, there are already competitive EVs priced at or even below the $25K price-point.

 

Let’s talk legacies ex-China first. Just because there is a new platform that Legacy Auto is touting, whether it’s the Ultium platform from GM, the SSP platform from VW Group or the CMF-EV platform from Renault, they have no experience building off this platform.

 

As a technology consumer, early adopters embrace the chance to be the first to own new technologies from their favorite companies, it’s why you see lines at retail stores when the latest version of X tech goes on sale. But most people will wait and make sure that the bugs are all sorted before they will take the plunge.

 

I see this very similarly, but on a much grander scale. We have seen GM trip all over itself as it tries to ramp the Ultium platform. Since when did Legacy Auto become experts at battery cell manufacturing / building battery modules and packs? Since when did they become experts are developing their own BMS (battery management system) to regulate the temps of said battery packs?

 

Since when did Legacy Auto become experts are HW / SW system integration and user experience design? Do you see where I am going here? They haven’t. Even if they ‘buy’ all the software and hardware they need and Frankenstein it together to meet the timelines they’ve announced, the software bugs will be nasty as evidenced by YouTube videos of early vehicles from VW, GM and yeah, even Teslas.

 

I don’t think many folks in the traditional automotive space appreciate the difficulty of creating compelling user experiences that’s only able to be executed via a seamless integration of HW / SW. Are we really saying that Renault, GM, Volkswagen can compete against Apple, Amazon, Google, Tesla and even Uber today in SW development?

 

Let's remember that Tesla was founded on July 1, 2003 which this year makes them a 21 year old company. Further, as we all know Tesla was birthed in Silicon Valley, San Carlos to be exact which is a target rich environment for software developers. I say this to point to the EPIC challenges that lie ahead for Legacy Auto, whether you’re in Tokyo, Wolfsburg, Stuttgart or Detroit.

 

Let’s say Tesla’s engineers are made up of 80% SW dev engineers and 20% traditional engineers. It still took Tesla 20 years to get to where they are and that was WITH the horses they needed to develop a software dominated passenger vehicle. Now, lets flip this – Let’s say currently Legacy OEM has 20% SW engineers (not likely) and 80% traditional automotive engineers.

 

Do we really believe that in one product lifecycle, the Legacy Automakers can build vehicles in the same way that Tesla and China EV Inc does? Remember, also that there is an entire division consisting of engineers at these Legacy Automakers that’s only function is to design, engineer, test and then manufacture powertrains.

 

And if that wasn’t challenging enough. They need to do it while running a profitable ICE business which is in steep decline in their most profitable market.

 

Not impossible for all, but impossible for some.

 

And the reason isn’t because of a lack of talent / or incorrect skills, not completely anyway but because the management leading them have no idea how to get to building that Model 3 competitor. BYD has been building batteries since 1995. Tesla started designing them in since 2016 at least. Uber was founded in 2009. NIO, Li Auto and XPeng were all founded in 2014 / 15. Before we get to ‘how would the leadership know …’ and any other whataboutism, isn’t that why these leading the ship? Isn’t that their entire responsibility? To see what’s next?

 

I’ve said this before and I will say it again. Leadership needs to change. Not all leadership and not even at the CEO level at many of these companies. But more tech / service / DTC leadership needs to be added and new blood that have the desire to get the company moving much, much faster while also embracing more risk. Poaching one man / woman from Apple or Amazon is NOT going to get it done. If they aren't able to push for significant change and aren't given the autonomy to make the tough decisions that current management have deferred till now, they will also fail. 

 

 

GET SMARTER

-   Putting governors on AI chips? AI has infiltrated all types of businesses and mostly for the good. But most of us have also likely seen ‘The Terminator,’ a movie where machines take over the world having the ability to go back in time to eliminate forces that go against it in the future.

 

With that said, researchers are looking at how to cap / limit the speed of the computing power that trains the most powerful AI algos. This would go well beyond any laws or policies by etching roadblocks on the physical silicon and only being allowed to access if you have the approvals which could reside with US / foreign govts. Etching is a one of the processes used to fabricate silicon. Think of it as helping carve out the pathways where the data flows on each piece of silicon.

 

I am not sure where I stand with this since AI has really moved into the forefront over the last couple years. AI can most certainly do harm and damage if placed into the wrong hands, but is THIS the answer? It’s still being studied so the jury is still out.

 

-   The Chinese govt looks to limit overcapacity of the NEV sector in China. This would be taken as good news in the EU as they are currently investigating cheap Chinese EVs and how they got so cheap BUT we’ve seen this movie before. They have wanted to limit capacity of ICE passenger vehicles since, well forever.

 

That hasn’t worked out so well. As the economy continues to struggle, that capacity will need to find a home somewhere.  

 

BYD

-   BYD has decided to BUY. As in ADAS systems. They’ll work with DJI, for those who aren’t familiar with drones they are the 800 lb. gorilla in that space. They are also making inroads into media with killer gimbals, video & audio recording devices.

 

This is actually a pretty HUGE development since by 2025, we should begin to see Level 2+ ADAS in vehicles with price-points well below ¥200K ($30K), putting pressure on the mass market brands that compete in that segment but don’t provide any intelligent driving features.

 

Can you say ‘democratizing autonomous driving?’

 


_________________

 


 

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 global automotive and mobility sectors. 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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