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SAI Newsletter #5 - September 5, 2018

Updated: Jan 29, 2019




A bit of housekeeping as we will be moving this newsletter to Tuesday delivery.

Lot’s going on with the NIO IPO announcement and the continuing challenges for Elon, Tesla and Didi.


If there anything specific you’d like us to track, please let us know. If you know of anyone who would like to sign up for this newsletter please have them visit: www.sinoautoinsights.com.


Thank you for reading.


The Sino Auto Insights team

Mobility

Let’s not hope this is just empty rhetoric from Didi. (www.reuters.com)

$20M seems like a pretty small investment when it comes to the safety of its passengers.


OEMs

So, Ford will not be exporting the Focus from China after all. (www.detroitnews.com)

This was probably a blessing in disguise for Ford under the guise of ‘tariffs forced our hand.’ Ford is in trouble and we have yet to see anything significant to make us think the management team is has a viable plan to lift the company. Sales have fallen off a cliff in China so once they refresh their current lineup with the reinforcements in 2019, they’ll see a bump in sales but the competition is only getting tougher. Ford has a big mountain to climb so we hope this stealth mode they’re in just means that they’re behind closed doors, head down working on some awesome new, innovative products, services and partnerships that’s going to blow everybody away.


Hongqi at Pebble Beach Concours d’Elegance. (www.jalopnik.com)

These cars are great! We see modern versions of these Hongqi (红旗) parked in front of the Beijing hotels like the Shangri-La in CBD whenever there are large, important meetings. Although the tech and systems have been upgraded for current times, these cars don’t look much different from their earlier selves.

If you take the time to carefully look them over, you’ll see design cues reminiscent of other American, European and Japanese cars since they’ve probably Frankenstein-ed elements of each to make these Hongqi, but all put together and in person, they look pretty cool nonetheless.


GM’s production bottleneck will be a ‘showstopper’ for its EV dreams. (www.wsj.com)

Although this article specifically details GM’s challenges with its battery manufacturer. This problem is going to be repeated by other manufacturers that sell into China. The quality levels of many of the Chinese automotive battery manufacturers still haven’t met the necessary requirements we are told.

Unless R&D, quality and production improve significantly over the next 12-14 months, we see this issue derailing many other manufacturers that are planning to launch vehicles in the next couple years.

Furthermore, this forces foreign automakers to qualify two suppliers for batteries. One for China and one for the rest of the world. Having spoken to the foreign automakers selling their vehicles in China, they seem to be the most frustrated about this and the manufacturers that they have to choose from because they fear that the issues GM are dealing with will also happen to them. This becomes a public safety issue if EVs are put on the road in large quantities, without the required quality and reliability and we hope the proper attention is paid to this and the battery companies step up their game.


Light electric vehicles

Vespa finally putting their horse in the race. (www.engadget.com)

The potential market is too big, their name too famous, to expect anything less. We are interested in learning more about the hybrid frankly since that could be a brilliant move on their part to separate themselves from the competition. With range anxiety reduced, will this be a big seller? The price point frankly, if anywhere close to the $7K-ish that a petrol Vespa costs, could be the biggest deterrent on sales.


One for the lower end of the moped market. (www.electrek.co)

With valuations of Bird and Lime (shared scooters) in the billions of dollars, we are predicting many new entrants to the electric scooter / moped market in the coming year or two. The established players are beginning to refresh their dated products or converting them to electric (see Vespa), so competition is just starting to heat up!


EVs

How to get the most out of the center mounted horizontal display in your Tesla Model 3. (www.thedrive.com)

A couple observations here. Tesla currently sells 3 difference vehicles. The Model S, X and this is their Model 3. Let’s assume that their Model X & S are as impressive and have more and better hardware due to their higher price points and positioning in the market. The next observation is that these are two car geeks talking and the its take them about 20 mins. (the length of the video) to generally learn most of the functionality of the center mounted touchscreen.

Now think about your mom, grandpa or anyone for that matter that isn’t that tech savvy. Remember this is the de-contented, least expensive vehicle in Tesla’s lineup. Do you think your technology challenged family and friends would be able to navigate themselves in an acceptable manner within the short period of time?

We say this not because the interaction design is lacking because as far as we’re concerned it’s best in class. Unless EVERY car manufacturer is willing to take the time to either train each customer on how to get the most out of all the features they’ve just spent at least 400K RMB on or post videos online as tutorials the complete transition to a completely digital interior in most vehicles will be is still a pretty long way away.


Byton positioning itself as the car or techies. (www.cnet.com)

We think the ‘autonomous vehicle is like a smart phone’ analogy is overused and not accurate. As I mentioned in the Tesla article, is the amount of tech in those Byton concept vehicles really that necessary by 2019 & 2020? I hope they know their customer very well and have designers working overtime to design how people will interact with all those displays.

Also, I would actually like an autonomous vehicle to be in stealth mode so that no one knows it’s an autonomous vehicle, not make it so obvious. These guys are using their limitations on design due to the lidar and radar and marketing it as a plus for the vehicle design. Fair enough. With that said, I think the sedan is a good-looking car IOHO (In Our Humble Opinion).

Finally, we hope they’re taking good notes from what’s happening with NIO so when it’s their turn to IPO they’ve removed complexity from the system so they can just concentrate on designing and building amazing vehicles.


NIO aiming to IPO before end of October 2018. (www.wsj.com)

Afraid NIO has so many things going on that mistakes, maybe big ones will be made. The management team should really begin to manage that burn rate if they truly want to launch another vehicle in 2019.


NIO will IPO soon. And will likely raise a large some of money. Despite the business challenges it is still facing. (www.bloomberg.com)

This sounds like a total nightmare. Now, the founders and investors will all be in the money once they IPO and some may become billionaires but let’s just summarize how challenging it will be for them to make their first RMB:

  • NIO does not build the ES8. They outsource manufacturing to Anhui Jianghuai Automobile Group (JAC) a Chinese OEM, who slaps the NIO logo on the vehicle once it rolls off the line.

  • They have stated that they may not be able to ‘successfully maintain quality standards.’ What?!

  • That same OEM partner, JAC has another partnership with VW. If VW needs more capacity for production of their joint electric vehicle, who do you think is going to get it and where do you think it’s going to come from?

  • JAC penalizes them if they don’t meet agreed to production minimums.

  • NIO can’t get its own electric car manufacturing license unless it has a plant. They can’t have a plant unless they sell 100K vehicles/annum.

We’ve spoken in prior newsletters about how these Chinese EV startups, as well as the media, like to paint themselves as a Tesla killer. Again, constantly repeating to anyone that will listen your target market overlaps substantially with Tesla’s does not make it true. Sorry.


#Didi #NIO #Byton #GM #Ford #Vespa #batteryissues #showstopper #Tesla #Model3 #Hongqi


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