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SAI Weekly #15 - 24: Tesla Taps Out on $25K EV, Scale Reigns Supreme, BYD's Profit / Vehicle estimate



 

Cybertruck sighting in MI

 

Buttoning up some of the final details for my trip to China. I may or may not have a newsletter next week depending on jetlag and how busy I get once I land. It’s a delicate dance to balance the schedule with pre-planned meetings while also trying to pack in free time for random, last minute stuff and of course meeting up with old friends. I won’t get it right but the most important thing is trying to accomplish this To Do list I've made for the trip, some of which is pretty ambitious.

 

For the readers in SH / BJ / SZ, I’ll be in Shanghai starting next Weds and be in BJ Monday, April 22nd. We also plan to host an event in BJ while I am there since there will be a lot of car people in town for the auto show.

 

One thing I am really looking forward to – ALWAYS – eating. I am sorry, but Michigan just doesn’t have great Chinese food. My kids actually prefer Panda Express to anything deemed as authentic Chinese in metro Detroit. It’s not bad, it’s just not great and varied. Of course, we were spoiled for so long and the cuisine I missed the most while living in China was American and Vietnamese. First world problems.

 

Finally, I plan to try out a few different cars while I am there and will let you all know which cars I’m able to get behind the wheel and thoughts about each of them. I’d also like to do a couple factory visits but again, not sure I’ll have time to get to them this time around.

 

I was asked this week where I stand on the BEV vs. PHEV debate that is going on in some circles so I thought I’d give you all my take. I am NOT a BEV purist. I lived through the worst Beijing pollution days in the mid-2010s and if cities in other countries can avoid those types of situations if they accelerated their way towards clean energy vehicles, I am all for it.

 

Will it take some government intervention? Yes, for any country that is seeing growth and an increasing number of competitive clean energy products their citizens can choose from, it likely started with their government putting their thumb on the scale.

 

That could be in the form of funding R&D, subsidizing the build out of charging infrastructure & manufacturing, subsidizing the purchase of a clean energy vehicle, waiving sales tax or all of the above. With current debates about protectionism and subsidies, I’ll leave everything there and let it sit.

 

One thing that’s also appropriate to remember – China has 1.5B people give or take. What has happened economically in China over the last 40 years has NEVER happened before. FULL STOP.

 

It took the US >200 years to get to where it’s at. China will continue to break economic records for size and speed even as economists now believe it’ll be much more difficult for China to overtake the US in GDP anytime soon, if ever.

 

The fatal flaw with a lot of the current analysis that's being posted, its that you can look at what’s happened historically in the west and compare it side by side with what’s happened in China, even if you believe you’ve ‘normalized’ the measures.

 

IMHO, everything that’s happening is unprecedented and that should be acknowledged before any type of honest analysis about growth, subsidies, market opportunity, etc. is published. In the numerous reports, articles, etc. that our team pours over, that CYA (cover your ass) statement has been omitted more often than not.

 

 

CHINA EVs & MORE (CEM)

Join us tomorrow, 9am ET for the live show. We will talk F1, Beijing Auto Show and Tesla tapping out on the M2.

 

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 Economist. I had the chance to chat with friend of Sino Auto Insights and Economist journo – Simon Wright. His piece focuses on the importance of scale and at the end of the day, providing unique features that justify the prices being currently charged for said vehicles.

 

With Xiaomi launching its effort at the EV, we may begin to see how the tech guys really plan to disrupt how to get from point A – B.

 

 

BIGGEST NEWS OF THE WEEK

-   Tesla is OUT on M2. This news dropped like a bomb last week and made waves for at least a couple days on social and other media outlets. Reuters initially scooped this though. A lot of the buzz was about using ‘cancel’ as the term for abandoning a $25K Model 2 for sale to private consumers and instead focusing their efforts on having that vehicle for use as a robotaxi. 

 

A few of my observations. The China market does it again. First, it makes the calculus on Apple launching a vehicle much less attractive. For Apple, its less about the price and more about the unique features it could provide since many of those unique features it likely planned have already been or will soon be launched on China EV Inc vehicles.

 

Next, one of Apple’s foundational features was likely going to be providing L3+ ADAS and the timeline to that is still several years out. But its not just about the data. 

 

For Elon and Tesla, the main antagonist for offering a $25K Model 2? There are already plenty of great $25K EVs being offered in the China market. Launching one 2 years from now wouldn’t move the sales needle for them like it would’ve this year or even 2025. I’d guess it would be a hit for the US & EU markets but not likely a can’t miss hit in China. This is one of the reasons for the Street saying WTF?!

 

Always remember that Elon said Tesla’s goal was to get to 20M unit sales by 2030. To even get anywhere close to 10M by 2030, my guess is that Tesla would need to have the China, US and EU market share each be >25% of their sales while Latam, South and Southeast Asia and MEA picking up a few million together. That isn’t happening without Tesla launching several models that are <$20K all over the world.

 

If that's taken off the table, what global car(s) will be their high runners? And say FSD takes >5 years to get to anywhere close to being safe enough to be used on their many vehicles in the US & EU? Where will their growth come from? Refreshed M3 & MYs just ain't gonna get it done anywhere in the world. 

 

-   Cruise is BACK on the roads, but the vehicles won’t be driving themselves. Cruise is looking to bolster its data and maps by sending its vehicles back out on the roads but with humans driving them. And doesn’t look to be offering taxi services for those wanting to try out their vehicles.

 

-   By 2025. That’s when Goldman Sachs forecasts pack prices will go below $100 / kWh, the magic threshold where EVs become cheaper to build than EVs. If this is anywhere close to being right, then the Detroit Three should be able to make small EVs with decent range that are profitable much sooner than later. Do they really want that or are they going to stay addicted to big ass trucks and SUVs? And therein lies the rub.

 

 

BY THE NUMBERS

>40%. That’s how many public buses in the US run on diesel. The US govt wants to make its public bus fleet all clean energy. The problem they face is that there aren’t too many companies that have been able to be profitable building hydrogen and / or electric buses. Cleaning up public buses will be one of the keys to reach the Biden administration’s current climate goals.

 

California is leading the way of course by currently accounting for 32% of the US total zero emissions buses. Other states have started to receive funding from the US govt to help them purchase these buses, some of which can cost up to $1M!

 

The US really needs to get its shit together. It lags behind the EU and China in converting its fleet to zero emissions. Reasons it’s so tough to quickly convert? It’s complicated but a big reason is the lack of manufacturers. The US has 4. The EU has 35.  This causes a backlog and it the current purchasing process, payment isn’t sent unless the bus has been delivered, and for startups having to wait that long for a payment puts a lot of stress on their finances.

 

Lots of things going on, but I do happen to know of one electric bus manufacturer that could get us closer to our zero emissions goals if we gave them a chance to.

 

-   31 Countries. That’s how many countries have passed the 5% take rate for EV adoption. Bloomberg deems 5% as the tipping point towards adoption of new technologies. Two countries in particular that have crossed the threshold that may surprise you: Turkey and Thailand. Thailand got to 13% in CQ1’24. Turkey is now the 4th largest EV market in Europe.

 

At this pace, by 2030 there could be a number of smaller countries that surpass the US in clean energy vehicle adoption which would be quite a shame, and likely to the detriment of the Detroit Three. If you’re wondering, the US hit 8% last quarter.

 

Chart from Bloomberg


BYD

-   BYD’s profit / vehicle (drum roll, please10) …is $1,250. That’s according to a study by Late Finance. What’s most concerning is the article states that factory utilization at Chinese factories is 59%, which in any other country would be unsustainable. BYD is a mass market brand so comparing their margins to any premium or luxury brand is kinda a waste of time FYI.

 

There could be other ways to measure their relative competitiveness, but straight up side by sides on profitability / vehicle against others without a bit of context and normalization isn’t one of them.

 

 _________________

 

 

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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1 Comment


Hope you go to Xiaomi’s site for contract manufacturing by BAIC.

Am curious about the level of quality assembly there….despite Xiaomi’s very impressive promotional videos of the Su7 going through the line.

Thanks.

Oh, and what became of the old Borgward factory that Xiaomi purchased?

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