SAI Weekly #47 - The final newsletter of 2023: The Year in Review

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After a brief hiatus, we are BACK.

During this brief hiatus a few things happened that are worth noting for the city of Detroit, one that was great and one not so much.

First the good news – the Detroit Lions are NFC North Division Champs for the first time in 30 years. Detroit City Dan Campbell is the real deal and has taken the Lions from laughingstock with no GRIT to Super Bowl contender in just three years. The ENTIRE city / state is pumped for the playoffs and are hopeful with what the Lions may be able to accomplish. Big test this weekend with a trip to Dallas though.

The Detroit Pistons lost a record breaking 27th straight games this season. This record is going to sting and is similar to the Lions going 0-16 back in 2008. My family just happened to attend that game, so we are now a part of history – and not in a good way.

There will be some of the week’s news peppered into this Year in Review newsletter. I also reserve the right to add to this list as I continue to review this year’s newsletters and get my predictions for 2024 sorted out.

THE YEAR IN REVIEW

The world has finally woken up to China EV Inc and the alarm bells are sounding from Brussels & Stuttgart to Detroit. But til now, it’s only the US govt that’s done something about that threat. It’ll be EU’s turn in 2024, but their decision will be much, much more complicated as any aggressive moves against imports and investments could cause repercussions for EU companies doing business in China.

Without further ado, we must start the Year in Review with the company of the year and it’s NOT Tesla. It’s BYD’s world, we are just living in it.

• 301, 378 sales in November 2023.

• 170,150 BEVs, may outsell Tesla this year in BEVs alone.

• 131,228 PHEVs.

• Biggest brand in China, will outsell VW brand.

• Entered 60+ markets.

• 2nd largest battery maker in the world - 15.8% share.

• Passed Ford in September to be the 4th bestselling auto brand in the world.

• 10th largest automaker earlier this year.

• Hits 6 Million passenger vehicles produced in November.

• Launched 2 new brands.

• I visited BYD in Shenzhen in April, was really impressed (and felt bad for their competitors, specifically the foreign automakers who have no idea how to be competitive yet in the EV space) after test driving 6 of their vehicles.

Here’s a Bloomberg article by friend of SAI, Danny Lee that predicts that BYD will outsell Tesla THIS YEAR in EVs alone.

-   Tesla starts a global price war – For anyone in the EV space that doesn’t know that Tesla started a China price war eventually extended to other parts of the world, you’re not really paying attention. That price war has made EVs much more affordable in the China market.

-   US EV market blows up / How impressive the growth in China has been. The demise of the US EV market has been greatly exaggerated. The US market will go from 2022: ~800K -> 2023: 1.1-1.2M while China will grow from 2022: 6.7M -> 2023: 8.5M

Will there be growing pains as the entrenched special interests lose out on the cash cows they’ve been milking for dozens of years? Of course there will be, but for those thinking that EVs won’t become a thing sooner rather than later, that genie has escaped that bottle already. Further, it took China’s programs to boost EVs & batteries about 10 years before momentum really started to accelerate. Even then, Tesla was needed to give it that one final push.

The US already have Tesla pushing the market forward and the legacies do NOT want to get any further behind if they know what’s good for them.

More importantly, Tesla & China EV Inc aren’t slowing down anytime soon, so if the global legacy automakers aren’t able to keep up, they’ll get left behind.

-   China EV Inc still in a holding pattern for the US market but not anywhere else. EV exports should be close to 2M this year. Nissan has joined Ford, GM, Volkswagen and Stellantis announcing that they’ll be shipping China made vehicles, both ICE and EV, to the rest of the world in 2024 and beyond.

China Auto Inc has more than 9 brands that have entered the US’ neighbor Mexico. BYD has entered >60 markets.

-   NIO still dialing in their strategy. Hiccups throughout the year resulting in an across-the-board price cut for all its products as well as a house cleaning that took out about 25% of their global workforce hasn’t helped NIO grow their sales as investors and analysts would’ve liked.

…but swapping became a thing, not just for NIO and Gogoro (GGR) either.

With NIO signing Changan and Geely to use their swapping technology, swapping has O-fficially grown into a ‘fueling’ option for China. When combined with Stellantis announcement that it’s going to partner with Ample (Silicon Valley based battery swapping startup), we are starting to see the embers burning more brightly for swapping around the world.  

As for GGR, they’ve begun to build electric scooters in India a HUGE market opportunity for them. They also plan to have more than 100 swap stations set up by mid-2024. Gogoro’s scooters are priced in the premium market, but they’ve licensed their swapping technology to Hero, India’s largest scooter manufacturer so that likely means that Hero branded electric scooters with GGR’s swapping tech are on their way. That’s in addition to Foxconn built, GGR branded electric scooters first for the fleet market, but eventually including private passenger sales later in 2024.

-   Li Auto and EREVs, who’d have thought? Well Akio Toyoda kinda did.

• Li Auto: Market cap (as of 12/28) – $38.85B, Approximate # of vehicles sold in 2023 – 326K.

• NIO: Market cap (as of 12/28) – $15.74B, Approximate # of vehicles sold in 2023 – 142K.

• XPeng: Market cap (as of 12/28) – $13.46B, Approximate # of vehicles sold in 2023 – 120K.

• GM: Market cap (as of 12/28) – $49.58B, Approximate # of vehicles sold in 2023 – TBD.

• Ford: Market cap (as of 12/28) – $49.42B, Approximate # of vehicles sold in 2023 – TBD.

• Rivian: Market cap (as of 12/28) – $22.54B, Approximate # of vehicles sold in 2023 – 52K.

• Lucid: Market cap (as of 12/28) – $9.75B, Approximate # of vehicles sold in 2023 – 10-14K.

-   China EV, Battery, Chip and AV Inc represent at Munich IAA. Chinese companies from each of those sectors had a strong presence in Europe for the Munich IAA. As the US remains seemingly closed for business to Chinese tech, EV and battery companies, they look to find growth elsewhere.

-   Porsche’s panic. Sales through Q3’23 are down more than 12% in China and includes a 40% drop in Q3’24 alone. For now, Porsche management isn’t ready to panic, but they’re close. They plan to firmly plant themselves in the premium segment and not cut prices even if that means losing even more sales.

Through September, sales reached 60.7K units. The US sold more units in the same timeframe (64.5K). 2024 looks to be even more challenging as domestic Chinese EV brands begin to ramp marketing and production efforts for their shiny new products. And most of them have no qualms about cutting price. If we see continued sales declines, my bet is that they’ll pull out that red pen.

-   China economy delicate. There are a number of articles out there pointing to weakness in the Chinese economy, so I won’t to any one in particular. What I rely on most to determine how everything is there are my friends, colleagues and contacts in China that I still speak with on a daily basis.

One thing that’s for certain, foreign direct investment has effectively fallen off a cliff which means international companies aren’t bullish right now. That should also mean the price war will continue well into 2024, my guess would be into the summer.

-   (In my best Bud Fox voice) EU legacies LOVE China EV Inc. Stellantis acquired 20% of LeapMotor for €1.5B while VW Group acquired 5% of XPeng for $700M. They both plan to ‘borrow’ each’s technology to improve their in-house brands as well as export those same brands back to Europe.    

China EV Inc still loves USD. Expect IPOs (traditional and via SPAC) to continue in 2024 by Chinese EV / AV companies at the least. Think Zeekr and WeRide as two high profile companies that want some USDs.

#FAKENEWS

-   There was a 2024 prediction from someone about battery fires caused by China EV Inc becoming a BIG thing and let me first say, that’s a pretty uninformed prediction because not all batteries are created equally. Ternary batteries (that use nickel, cobalt and manganese) are more volatile and run hotter, so those batteries have a bit higher chance of catching fire and staying on fire for long periods.

That said, China EV Inc primarily uses the LFP chemistry which allows for a lower price at the expense of range and charging capabilities. So – IF there was any epidemic of battery fires from China EV Inc, which I would deem VERY, VERY unlikely, the cause would likely be from an engineering / manufacturing flaw and not some general weakness of the battery or chemistry.

To hammer home this point, this was pulled from the most recent Top Gear (Jan 2024 edition) magazine article titled ‘EVS ALWAYS CATCH FIRE:’

‘The Swedish Civil Contingencies Agency (MSB) reported 23 fires in 611,000 EVs during 2022, or 0.004 per cent in a year, which makes it 20 times less likely to happen than ICE car fires, which burned 3,400 times in 4.4 million cars, or 0.08 per cent. MSB has also recently proven a new way to extinguish battery fires fast.

EV FireSafe, funded by Australia’s Department of Defence, has managed to verify fewer than 500 electric car battery fires. Ever. Out of 20m EVs worldwide. That’s 80-odd times rarer than an ICE car fire. If it were a frequent risk, it’d be reflected in insurance premiums. It isn’t.’

Will there be more battery fires – in an absolute sense, YES. But that’s because China will have sold almost 9M EVs domestically and exported >1.5M to international markets by the close of 2023. But once normalized, I think we’ll find that ICE fires will outnumber battery fires in 2024.    

CHINA EVs & MORE (CEM)

9am ET on Friday, tomorrow. Join us. This’ll be our 2023 Year in Review episode so do NOT miss out on what Lei and I have to say about 2023. What we remember and what we thought were newsworthy and important to the sector.

If you’d like 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. It’s an opportunity to ask any questions and have discussions with Lei and I so if are itching to know more about something, join us tomorrow morning!

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

-   Autoline After Hours. I had the pleasure of joining Sandy Munro (#teardowntitan), Joe White from Reuters, and host John McElroy for the final Autoline After Hours of 2023. We talked a lot about Cybertruck then shifted gears into a more general discussion about BYD, the legacies challenges in 2024 and beyond and of course China EV Inc’s place in the global automotive landscape moving forward.

A lot of answers may surprise you so don’t miss this terrific discussion.

-   Forbes. Here’s a sneak peek of my 2024 predictions as told to Russell Flannery from Forbes. One of two of them are already looking dicey but for more details on the current list or if you’re interested in a more comprehensive list, tune into the first China EVs & More of 2024.

TESLA

-   A refreshed MIC Model Y in 2024? That’s the current word on the street according to Bloomberg. Annual refreshes don’t move the needle anymore in China if you want to stay in the top EV sales bracket. And it’ll take more than new rims or a refreshed infotainment UX to get people’s attention too. Tesla is figuring that out the hard way. Because China EV Inc has collectively put a bullseye on Tesla’s back in China and although it wasn’t one brand, they’ve put Tesla on the defensive in its most important market.

2024 promises to be another pivotal year for Tesla as their sales growth will likely slow even further unless they’re able to launch refreshes for all their vehicles or launch that long-rumored Model 2 for the end of CQ3’24. That seems like a tall task. Price cuts for products 4 & 3 years old aren’t going to cut it in 2024, I promise you that.

BIGGEST NEWS OF THE WEEK GET SMARTER

-   Vinfast’s first US dealership. It’ll be in North Carolina, a hotbed of EV adoption in the US (NOT!). But it’ll be close to its first US factory although there’s no guarantee it opens its doors in 2025. There are way too many variables that go against it for me to believe that there won’t be major roadblocks Vinfast will need to avoid in order to have enough capital and demand for that factory to get to Job #1.

-   Chevy Blazer sales paused due to, you guessed it TOO MANY software bugs. I hate to say I told you so but… Here’s what’s really alarming though – the fact that they thought the bugs were fixed / non-existent enough that they gave it to car testing journos. At Apple, we used to call the final version of software that was shipping the Golden Master. This should clearly have not been the Blazer's Golden Master.

One of them, Kevin Williams documented in excruciating detail how his Blazer loaner was a MAJOR fail. What was supposed to be a weeklong review ended in less than 2 days. I think he even felt kinda bad about it so rather than grade it straight, he categorized it as a DNF. Things at the General are going from worse to who’s in charge at a very alarming speed.  

Meanwhile, Apple rolls out its latest CarPlay for Porsche and Aston Martin. As if to throw it in GM’s face. From the Verge article:

‘Instead of simply taking over the infotainment center and small segments of the in-dash areas, it seeks to overhaul all displays of the given vehicle.’

GM has a lot on its plate, but to think that ANY automaker can get good enough, fast enough at software development such that they can compete against titans Apple, Amazon, Google, Alibaba, Tencent, Huawei is really within the next 5-7 years is naïve at best and mismanagement at worst.

Do any of the CEOs at these legacies have regularly scheduled (read: weekly) software design reviews or check-ins or have their immediate direct reports keeping tabs on all the bugs and patches as they’re scheduled to go out? That’s the level of determination and detail that’s needed by leadership if it has any hope of getting within 5 years of competing with the likes of Tesla, NIO and yes, even BYD on digital.

A quick for instance. Edmunds reported that it’s long-term Chevy Blazer EV spit out 23 fault codes at the dealership. 23! If I were Mary, I’d setup daily calls with my team to get updates. If not two times daily. Bugs can be patched quickly, IF you know what you’re doing.

-   Sodium ion battery powered vehicles are now in the wild. One from Farasis and the other from Hina. If Farasis sounds familiar it’s because Mercedes invested >$125m in them back in 2020. Sodium ion batteries are low range low priced batteries so it’s no surprise that the vehicles they are powering are small lower priced EVs manufactured in partnership with SOEs with prices lower than $15K.

BY THE NUMBERS

-   $662M. That’s how much Ola Electric is hoping to raise in an IPO next year. This would value Ola Electric at north of $7B. An astronomical number!

-   600K. That’s how many vehicles Huawei backed Aito brand targets sales will be in 2024. They will have 4 products on sale in 2024 so simple math says that they need to sell 50K units a month or if each product pulls equal weight, 12.5K each / month. The only companies so far hitting consistently above 50K units / month are Tesla and BYD. Good luck with that.

INTRODUCING

-   The Xiaomi SU7 sedan. This was just unveiled by Xiaomi last night and the exterior looks great – the interior is kinda blah. Here’s the rub – it’s a sedan. China is like the U.S., a crossover / SUV type of country so launching a sedan first is a bit of a headscratcher.

For those wondering, it’s about the size of a Tesla Model S.

For those that aren’t familiar – Xiaomi is a technology / lifestyle brand. Many folks will incorrectly tell you that it’s China’s Apple – it is NOT. Apple plays strictly in the premium space while Xiaomi plays in the more mass-market technology space. They made their bones by shipping Android based mobile phones and moved into technology focused home and lifestyle products.

They moved into that space by acquiring small Chinese tech startups and rebranding them while also pulling them into the Xiaomi closed ecosystem which now includes smart TVs, computers, air purifiers, rice cookers and much, much more.

Photo courtesy of CNEVPOST 

-   The Jiyue 07. This will be Jiyue’s 2nd vehicle after the 01 crossover / SUV. I was able to get a peek at this in April, but I hope to get more than that the next time I stop into the Jiyue Robobase.

Photo courtesy of Car News China

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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

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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.