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SAI Weekly #12 - 24: Li Auto Comes Up Short, Hybrids Now Welcome by the US, Modi Courts Tesla



 

In Tampa now since the boys are on spring break next week so we’re all getting on a ship for a few days, cruise ship that is. I’ve never done the cruise thing, so I am looking forward to it. Will try to manage the food / alcohol consumption so that I don’t look more rotund once we get off the boat.

 

On the way down, I started reading Kara Swisher’s Burn Book. I’ve always kinda/sorta tracked Silicon Valley and the tech companies that come out of the region just because I spent a bunch of time there and friends that I’ve worked / partied with when I was there  have or are now working for many of the companies she refers to in her book. What technology has enabled the world to do over the last 40 years has been nothing but amazing. AI is going to allow even more progress over the next 40.

 

Politicians need to better understand what its capabilities are and importantly, what its limitations are and how bad actors can use it to manipulate the media and commerce. But the pace of change is only going to accelerate so hold on tight!

 

I only got through the first few chapters but her recounting of how 90's Silicon Valley startups became the 21st century media giants echo what’s happening now in the automotive space. She even mentioned the early Yahoo days which made me reflect on going to the caf there almost every month to try out their food. I lived about 1 mile away from the HQ in Sunnyvale. We'd also go to Google's or I'd host people at Apple's. Best of all, it was all free with the exception of Apple and I am talking really good food here.

 

We are only in the early innings of how technology and globalization (or the lack thereof) will shape transportation for the next 100 years. As Tesla & China EV Inc learn more, they’ll get faster. The tech companies are mostly working behind the scenes still too. But that won't last as they'll all try to move towards the forefront. That should scare the shit out of Legacy Auto. 

 

One passage from the book in particular that struck me:

 

Few tech leaders had learned the most potent lesson of the sector yet: The young inevitably eat the told. The manic nature of the industry has to be seen in this dichotomy, in that every single tech company is on its way to something else, and power does not last in ways that it did before. It felt ephemeral at the time, which was one of the assets (change!) and one of its greatest weaknesses (wait, too much change!).

 

This seems to be where we are, in the too much change portion of the show. This is reflected in the Biden administration updating the rules for EV sales to slash carbon emissions to now include hybrids and pushing out EV sales requirements to past 2030. Why the Biden administration initially thought that, GM, Ford & Stellantis had the capabilities to make it a reality in such a short period of time in the first place is a bit of a headscratcher but that discussion is for another day.

 

A few, quick google searches on ‘EV battery manufacturing’ & ‘minerals needed for EV batteries’ could’ve avoided all this.  

 

 

CHINA EVs & MORE (CEM)

Now it’s me traveling so we will again have the live show tonight at 9pm ET, for those of you available, please join us. Bring any questions or topics you want us to chat about.

 

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.

 

 

INTERVIEWED / QUOTED

-   The Guardian. Amy Hawkins and I talked about the insurmountable lead China has on battery capacity vs. the US & EU. A big reason for that massive lead – CATL. She and I talked CATL, how they built their 37% share of the market and what the west can do to try and compete. Worth the read for those in the early innings of learning about the EV battery sector.

 

 

TESLA

-   Modi shifts gears to help Tesla. Tesla can import MIC M3s & MYs to India, but only 8K / year or less than 1% of its current capacity there, at a discounted tariff rate if within 3 years they invest $500M to build a factory in India.

It doesn’t seem like a big deal, but it actually is. India is now the 3rd largest passenger vehicle market in the world at >4M units sold / annum. They also lean very heavily into motorbikes of which 10M were sold in 2023.

 

So the potential for Tesla to be a first mover and prep their brand for the largest country on the planet shouldn’t be lost on folks. Some people point to the past and India’s inability to really compete with China on the economic development side, specifically when foreign automakers spent billions to add capacity in the 2010’s to see no real growth in the space.

 

This is different. The skies in India are heavily polluted (in many different cities) so to stay in power, Modi needs to clear them up. One way to do that is push everything in transportation towards clean energy. Also, there are 1.5B people that live in India, so even if only .5% of the India market can afford its vehicles, that’s still 7.5M people. And that number will only get bigger. Finally, if India hits its targeted goal of 30% EV sales by 2030, that makes for a market of potentially close to 2M cars.

 

Finally, the ‘all eggs in one basket’ strategy shouldn’t make investors feel very good, especially since the US China relationship continues to have its challenges. Having the now largest country in the world but a counterweight in case the market turns for the worst in China is strategically important for operations even if sales there won’t really move the needle for Tesla for quite some time. Any significant capacity that’s not consumed locally by Indian consumers can easily be exported to the rest of South Asia and Southeast Asia.

 

 

BIGGEST NEWS OF THE WEEK

-   Ford must read the newsletter. In a turn of events that seems to directly address the elephant in the room, Ford has decided to elevate getting an ‘affordable’ EV on the road by the end of 2026. I’d touched on this in a previous newsletter but am taking a different turn with this post. I know you’re thinking affordable is a relative term so let me define what Ford means by affordable - $25K!

 

In interviews, previous newsletters, interviews and podcasts I’ve said that for the Detroit Three to be successful in the EV era, they’d need to be selling tons of small EVs. So, they would need us to help us unlearn that we want BIG, gas-guzzling SUVs & trucks and learn that actually we want small EVs that are better for the environment and allows for us to share the road with other smaller EVs.

 

The rub here is that the US Three conceded the small & midsize sedan / hatchback market to the Germans, Koreans and Japanese. So not only will they need to teach an old dog new tricks, but they’ll also need to convince us that the small cars they build ARE indeed better than their non-US counterparts.

 

But let’s celebrate that first win. Ford, that advice was free and …you’re welcome. Glad I could help, now if you’re going to market yourselves as serviceable small car EV designers and manufacturers, we can also help with that – but that’ll cost you.

 

-   XPeng launching a competitor to BYD and LeapMotor brands. We don’t know much about it yet except that it’ll have multiple products eventually (duh) and that it’ll target the ¥100K-150K price point. For my western readers, that’s $15K – 23K and sits firmly in the same space many BYD products sit. It seems that the hunter is finally being the hunted.

 

Since most cars sold in China, ICE or EV, sell for less than ¥300K, that’s where most other brands that most westerners have never heard of sit too. I am not so sure BYD is shaking in its boots just yet, but XPeng has been better with its ADAS ambitions so if they’re able to trickle down some of that knowhow into the real ‘mass market’ then they could have a hit.

 

This likely also means that they move XPeng a little further upmarket since it’s kinda a tweener right now. So, the count is that both NIO & XPeng will launch mass market brands to compete in the exact same space where BYD lives, and charges others rent.

 

That having been said, this probably reflects the notion that He Xiaopeng and Li Bin saw some limitations in the XPeng and NIO brands from a positioning and competition standpoint. Since their brands kinda established the positioning in the China that their younger competitors were forcefed, they likely saw it as easier to start with clean sheet, new brands to move to more volume sales – and we know the winner in all of this will be the one that can scale to reduce their costs.

 

-   Li Auto misses sales forecast and Wall Street hammers the share price for it. Li Auto lowered its estimated sales for Q1’24 by ~25% down from 100K to about 75K. I look at this as a market thing but also a Li Auto thing.

 

The Street was disappointed and sent shares down 6%. This is the pressure that Li Auto, NIO and XPeng deal with that most other China EV Inc don’t have to deal with. Major missteps can be very unforgiving.

 

-   Wang Chuanfu and Tim Cook meet up. Tim is visiting China and helped open a new Shanghai store in the Jingan Si area where basically all the western companies have offices, most of the non-automotive ones at least. This shouldn't be a surprise to most since BYD has had a relationship for quite some time. I would've loved to sit in that meeting though as these two gentlemen run two of the most consequential companies this century (so far).

 

BY THE NUMBERS

-   -$1.5T. Fisker share prices fell 55% when the WSJ reported that it was prepping a bankruptcy filing. The combination of Canoo, Fisker, Nikola, Arrival, Lordstown, Hyliion, XPeng, NIO, Polestar, Lotus Tech, Lucid, Vinfast, BYD, Li Auto, Tesla and Rivian have lost $1.5 Trillion dollars since their market debuts. That’s a massive negative number. Tesla reps a big chunk of that but

 

We should separate BYD, Tesla, Li Auto, XPeng, NIO, Polestar, Lotus Tech, Lucid and Rivian from the earlier listed because they are all still valued at much >$1B while the others are NOT.

 

-   100%. That’s how much Trump threatened to increase tariffs on China manufactured vehicles by in a speech last weekend and close any loopholes about building in MX. This would actually encourage Chinese EV makers and tier 1s to manufacture locally in the US. That’s my read at least.


We should have been doing this the entire time. Think of it this way, the investment that has been or will be announced by Chinese entities in the automotive space, could’ve likely as easy been used to hire American workers to build their cars here. We wouldn’t have gotten all the investment, but I think we could’ve won more fights (for investment) than we’d have lost.

 

 

INTRODUCING

-   The BMW Vision Neue Klasse X. This should be what the next gen iX3 will look like when it comes out in 2025 or ‘26. I like it. I like the exterior much more than I like the interior, but this is what gives me hope about Bimmer. They made the kidney grilles less prominent. The design is simpler. And less garnish on the vehicle, yes, I know it’s a concept but the form is right and the designer’s constraint is very apparent. More of this.

 

They had the right idea with the i8 and i3 but pressures forced them to abandon moving those ideas any further.




 

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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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