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Tesla crushes Q1, To LIDAR or NOT, WeRide going BIG - SAI Newsletter #14



An update for those interested in how life has changed in China during coronavirus.

First, my family and I were all reunited on Sunday after our mandatory 14 day quarantine, my wife and two boys actually quarantined for 16 days since their quarantine was reset after they’d moved from hotel to home 2 days into their original quarantine.

As we took advantage of our new found freedom a few observations:

-          I received a QR code that can be scanned in order to ‘prove’ that I completed my quarantine. It’s stamped in real-time whenever its scanned so that it’s always up to date.


-          Everywhere you go, whether it’s a mall, an apartment complex, restaurant, coffee shop – your temperature will be taken before you’re allowed to enter. You’re funneled to designated entrances with tents set up where you ‘check-in’ and this could mean just checking your temperature to in some cases also leaving your mobile number & name as well.


-          Some apartment complexes have strictly limited who can and cannot enter and for those folks who don’t live in the complex, visitors need to be collected by residents or those who work inside the complex.


-          Many restaurants limit the # of people / table. In our case on Sunday at lunch, our family of 4 were required to sit two / table and we could NOT sit directly across from one another.


-          People everywhere are wearing masks.  


-          Beijing is MUCH more strict with their coronavirus policies and processes than the rest of China.


-          Rumblings and notices that school may eventually start back up but not Beijing yet. When the kids are physically back attending classes is a clear indication from the govt. that things are about as ‘normal’ as they’re going to get.

As the western countries begin to gain control of the situation locally, how they will manage testing, contact tracing and general monitoring to ensure there are no further outbreaks remains to be seen but I think there will be a TON of resistance to these types of checkpoints implemented in the US. Right now, it’s still too early for me to tell you whether this is overly cautious or very necessary. If there are no other major outbreaks though, the Chinese govt. will take it as a ‘WIN.’

Beijing traffic, notoriously one of worst in China, has increased significantly the last few weeks but is NOT back to normal. Places that took 40-60 mins (only 1-3km away) to get to BC (before coronavirus), now may take 20-30 AC and sometimes less depending on time of day. Bottom line is that traffic is heavy but bearable – and will likely ramp up along with pollution when more folks head back to their offices to work.

Bicycle sharing is def on the upswing as there’s still hesitation with the safety of ridehailing - something I predict will become a new norm, weather permitting of course. Even if the # of daily rides increases, still not sure these companies can reach consistent profitability as standalone businesses since customers are pretty price sensitive and  the intense competition for riders puts a ceiling on prices.

For a more formal deep dive on China getting back to normalcy, that tracks across different sectors, Technode has written a good summary with all the latest data.

IN THE NEWS THIS WEEK:

-          Renault is calling it quits with Dongfeng, one of their main China JV partners as their sales slow to a trickle. They’ll continue on with their other JVs in China including selling EVs in the market.

-          Sales for passenger vehicles in China surge – in of all places, Wuhan. March should mark the beginning of a return to growth in auto sales in China as the pent up demand finally has a place to go. -          AutoX makes a big splash, opening Asia’s largest robotaxi ops center in Shanghai. They will launch a robotaxi service in Jiading district later this year and also use the facility as a data center for its previously announced 100 vehicle fleet of autonomous vehicles.

TRENDING ON SOCIAL MEDIA:

- Michael Jordan, after 8 LONG years, wins his trademark lawsuit against Qiaodan Sports and is now prohibited from using the Chinese translation of Jordan’s last name Qiao Dan.

PRODUCT / SERVICE INTRODUCTIONS:

-          The Angell e-bike – if price and weight are the two big deterrents for e-bikes seems the Angell has solved the weight issue. Price, that’s another story. Cool design if you’re looking for a minimalist city dweller. Function follows form on this one. Ships in May to most EU countries.

This weekly newsletter is a collection of articles I feel best reflect the happenings of the week or important trends that have effects on the automotive and mobility sectors here and in the US, I also provide a point of view that I hope educates and sparks debate.

The  Sino Auto Insights team

EVs Tesla’s BEST Q1 EVER. (www.electrek.co) Tesla’s CQ1’20 global sales of ~88K were its best ever. ~18K of those were sold in China alone. Impressive enough even before you factor in how the coronavirus cratered vehicle sales for pretty much ALL other automakers in China. March represented the first month that the Chinese economy began to awaken from its slumber, with Tesla moving~10K (of the 18K) units alone last month, representing ~25% of ALL EV sales in China! Social distancing didn’t stop Tesla in China as they launched contactless test drives (see video intro’ing the service here) using remote access as people sat in the test vehicles watching video tutorials on the monitor that prep them for taking the (likely) Model 3 for a spin. Other OEMs you can bet are taking notes, but as most other OEMs also have to deal with dealers who carry their inventory, reaching customers and selling cars isn’t as cut and dry for those players. If Tesla can perform this well in one of the most difficult global markets in recent memory, the addition of the Model Y to their product lineup (potentially) before the end of summer is going to put Tesla in a position to ROLL ALL their competition this year – leaving many of them scratching their heads. Three potential showstoppers. 1. Vehicle quality/reliability, 2. manufacturing issues – we know Tesla will have some, but how well they’re managed is what’s important here, and finally 3. having enough parts to build to demand. If these three things can be ‘managed,’ not sure if there’s anything their competitors can do to stop them. #Tesla #crushingit #bestmonthever #bestquarterever #thingsarelookingup #Model3 Spotlight on WM Motor. (www.cleantechnica.com) As the Chinese economy emerges from the shadows of the coronavirus, NEVs will be an important bell whether and the strength of their sales could be an indicator of how quickly the overall market will rebound. With the Chinese govt. having already announced that NEV subsidies will be extended through 2022 the environment is still friendly towards NEV sales and adoption. This could bode well for companies like WM Motor and other EVStartups, specifically the ones that were able to manage their cash burn while still focusing on sales and introducing new products. As WM launches their 2nd vehicle, a six seat SUV called the EX6, their product lineup growing 100% will likely lead to additional sales for them. I’ve written before that WM (and the other EVStartups) holds an advantage over many of their domestic competitors since first of all, they don’t compete directly with Tesla for customers since their products are positioned more for tech embracing but budget conscious consumers. Second, their decision to invest capital and build their own factory (likely at a HUGE discount via tax and land subsidies) seems pretty wise in hindsight as companies like NIO struggle with profitability due to the high costs of producing via a contract manufacturer. There are plenty of Chinese language interviews with leadership from these Chinese EVStartups but I chose this article because of the straight forward Q & A between the interviewer and Rupert Mitchell, WM’s Chief Strategy Officer. If you want to learn more about WM and the overall market, take 4 minsto read the article. The NEV sector, across multiple price points, is going to get pretty crowded pretty fast so if WM can get a bump in sales (from market growth + launch of their new product) and maintain it as new competing products launch, they could have a very bright future. #WMMotor #EX6 #Weltmeister #EVStartup #subsidiesstayfornow AVs LIDAR – Is it necessary or not? (www.forbes.com) Disclaimer – I don’t have a horse in this race and have not deep-dived the pros & cons of LIDAR being a part of any autonomous vehicle (AV) HW / SW stack. What I do know is that outside of Tesla, EVERY AV startup swears by LIDAR usage as being essential tech for providing an accurate ‘picture’ of the road to AVs. When I read articles about LIDAR, in this case how large the market is for them, without ANY acknowledgement by the author that the world’s largest EV company says they’re an unnecessary & expensive (read: useless) piece of hardware,I scratch my head. If Tesla is right, wouldn’t eliminating them from your BOM save you thousands of dollars? Wouldn’t that alone be worth testing out Tesla’s theory? Which brings me to cost - Velodyne may be the OG for LIDAR, but there are hungry Chinese startups looking to undercut Velodyne’s premium pricing to gain share. Velodyne actually sued 2 of them, Hesai and Robosense, for IP infringement. The outcome of the lawsuits have not been determined but when I was down in GZ last year visiting with WeRide the COO told me that they were localizing ALL their hardware and happened to have Hesai on every single one of their AVs. This likely means that many LIDAR companies could potentially be shut out of the China market as companies mitigate the unpredictability of the US govt. I’ve had numerous, vigorous debates with folks about this very topic but if any of you readers can educate me on why LIDAR is or is NOT necessary, I am ALL ears. #LIDAR #thecaseforLIDAR #Tesla #savingmoney #anicetohave WeRide boldly claims that it will offer a fully driverless robotaxi service by 2021. (www.kr-asia.com) I had the pleasure of meeting with Zhang Li – COO of WeRide (formerly known as Jingchi) who’s being interviewed for this article, and could sense back then that he had confidence in the WeRide team but this takes it to a whole other level! I love this BTW. Good for WeRide to have the confidence to throw this out there! Having ridden in one of the WeRide robotaxis open to the public down in Guangzhou, I know firsthand how far they’ve come in a short period of time.They’re a small team, around 300 employees at the time of my visit, and till now have raised a pretty modest amount of capital when compared to the piles of cash a few of their competitors have raised. That said, I am confident that they’ll have plenty of interested parties when the time comes to raise their next round so they should have no problems keeping that machine running for the next couple of years.WeRide’s proclamation and 2021 date should put additional pressure on the other Chinese AVStartups like Baidu (Apollo), Pony.ai, AutoX, Didi, etc. to show some progress.   My plan was to try out each of these pilot robotaxi programs this year and as domestic travel opens up will get back to visiting these companies – and of course give you all thoughts on my experience. Will also track WeRide and update you all on their progress as well. #WeRide #Guangzhou #boldstatement #robotaxiy2021 #competitionisheatingup CORONAVIRUS Coronavirus accelerating adoption of automation at the factory level. (www.economist.com) I had a great discussion with Hal Hodson of the Economist about how we should see more automation adopted at factories around the world at an even quicker pace as companies try to avoid future disruptions to production. For manufacturing in some of the South and Southeast Asia countries, hourly wages are still such that automating the factory wouldn’t be cost effective but more recently in China, where labor costs have increased fairly significantly, it’s become a viable, cost effective option. In the US & EU, two regions that have strong unions representing factory workers, significant automation could be a non-starter unless the automation coincides with a significant increase in employee safety.   2020 could represent a renaissance in factory design as hygiene at the plant, real-time monitoring, and factory layout are all areas that could be 're-thought' in order to balance employee safety with manufacturing efficiency. #automation #factorydesign #hygiene #noworkstoppages #morerobots Clear skies around many of the world’s normally most polluted cities – will it last? (www.theguardian.com) There have been a few of these articles, with pictures included, that talk about how the ‘shelter at home’ directives from local & national govts. have led to clear skies in many of these cities, specifically in India where it’s taken over for China being known to have some of the worst pollution in the world. It’s not just the cities with normally terrible pollution though – LA has noticed it as well. Is this something we think is going to stick when these cities are able to fight off the virus? For places like India and parts of South Asia, not likely but there could be a great deal of pressure from citizens of these newly ‘clean air’ cities to expect their govts. to do more to maintain the clear skies translating intonew and increased opportunities for private enterprises & startups to help these cities combat that pollution. Whether that’s adopting new policies on private vehicles, making public transport more convenient, or launching clean energy initiatives – this could lead to a higher set of expectations from citizens of these polluted cities. And now that the genie is out of the bottle, it could be all but impossible to put it back in. #clearskies #shelterinplace #nopollution #nocarsontheroad #genieoutofthebottle

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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