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Tesla Dethrones Toyota, BYD is the New Toyota, Introducing the L7 - SAI Newsletter 6


For some reason, many in the media are talking about some weather balloon that made its way from China to the US – it’s really dominated the news for the last few days. All kidding aside, this points to how dicey the US/China relationship is going to be in 2023, especially as the US looks at more sanctions for Chinese companies and further freezing Chinese companies out of the chip fabrication supply chain. In the past, the Chinese govt would retaliate by just making things more difficult for foreign companies in China but now that Chinese vehicle exports, specifically EVs are on a major rise, it’s not that simple. If you’re wondering, China overtook Germany in 2022 as the world's #2 exporter for passenger vehicles behind Japan. China exported 3.092M vehicles last year with Belgium (a port for the rest of Europe) and the UK being two of the largest takers. That’s a 55% YoY lift. Germany exported 2.61M cars last year. Breaking this down even further, EVs accounted for 679K of the ~3M. And the mix in 2023 is likely going to be even heavier EVs. You see where this is going, right? And it’s only a matter of time, say 2-3 years at most when they’ll overtake Japan to be the #1 exporter. But is this really surprising? Not if you’ve been paying attention. Therein lies the rub though, most countries have NOT. A really interesting if not quite accurate article appeared on my feed this AM – of which I then forwarded on to many others here in Michigan. It’s this Newsweek article that talks about how Michigan is bidding to become the next Silicon Valley. As someone who’s lived in arguably two of the world’s most important innovation centers (Beijing & Silicon Valley) and now having been back here the last 5 months meeting with people and organizations on a daily/weekly basis, what I can tell you is that this notion that Detroit and Michigan can’t get away from its past isn’t accurate. This article really highlights some of the progress being made to help make that HUGE pivot to EVs. We aren’t building apps here – as anyone who closely follows the sector or this newsletter knows, building cars in mass quantities is really hard, so hard there's a name for it - manufacturing hell! So although we may seem slower at innovation, sometimes it’s just more complicated! There’s a difference between being nostalgic vs. using our storied history of helping people and things move around the world as a foundation to build on how we will define how the next generation of people and things get around (and let me add we’ll have failed if those new ways aren’t rooted in being affordable, convenient and ‘clean’). One of the reasons Sino Auto Insights is establishing a presence in Detroit is because we believe that there’s a HUGE opportunity for Detroit & the state of Michigan to be a major player in the future of mobility. We know we can help with that. And here’s a fact – the folks in Detroit/Michigan have no desire to be the next Silicon Valley. What we’d/they’d rather do is help create and catalyze a revolution in the mobility space so that the city/state can claim its rightful place as a global leader in mobility and transportation. That’s the goal. And that’s not limited to vehicles with 4 wheels either. Do we have a long way to go, sure. But the Inflation Reduction Act has invigorated many folks here as more and more get on board to looking at transportation outside the lens of what has defined this state and this region over the last 100 years – the automotive sector. There is a lot of hard work ahead of us to make that goal a reality, but I promise you, our ‘Glory Days’ are still ahead of us. Jumping off my soapbox now. :-) A few events that are worth mentioning. I will be a guest on Autoline After Hours with John McElroy talking about China and EVs tomorrow from 3-4pm ET. For those that would like to join, you can do that by clicking on this. It’ll be me, Mike Dunne and John chewing the fat for an hour or so so grab your popcorn – should be informative and entertaining! I’ve also worked with TechTown Detroit over the last couple of months to help plan an event celebrating the achievements of Black leaders in the mobility space for Black History Month. It’s an in-person event (remember those?) scheduled for the morning of February 16th – details and signup are here. For those that’ll be in Detroit, I look forward to seeing you there! CHINA EVs & MORE Lei and I will have our live show tomorrow – 4:30pm ET via Twitter Spaces. For those wondering, 3pm ET is still when we’ll normally host the live show but the last couple weeks I’ve had a conflict so apologies to those that aren’t able to join the (temporary) new times this and last week. We’ll try to be back at our normal hour in the next couple of weeks. Promise. For those that 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 you think will make the show better. Also, if there are any companies/questions you have, you can let us know. TESLA - Another feather in Tesla’s cap? Dethroning Toyota as a top seller. The Tesla Model 3 (78,934) and Y (87,527) were the best selling vehicles in California in 2022. Full stop. No ‘EV’ qualifier in that statement. And they did it by besting last year’s champ, the Toyota Camry (55,976). Consequently, the Toyota RAV4 (59,794) outsold the Camry as well. This also makes them by far the best-selling sedan and crossover/SUV in CA. It's not smart to underestimate the reigning champion – at least in the US & EU. INTERVEWED/QUOTED - The Economist. I had a chance to catch up with Henry Tricks for his piece on the new ‘Toyota’ – BYD. I am pretty sure that I wrote in a newsletter a few weeks back or during one of the recent CEMs that I said that BYD is the new Toyota so it was apropos to speak with him for his piece. Definitely worth the read. And the best part – he quoted me swearing! Haha I am likely one of the few interviewees commenting on EVs for the Economist that has gotten to do that! NEWS THAT GOT OUR ATTENTION THIS WEEK - 5 Chinese carmakers to look out for? The world according to Car and Driver. They did NOT consult me on this list and it shows. 3 out of 5 ain’t bad? Human Horizons aka HiPhi and XPeng wouldn’t be the two brands that I’d highlight but this article is part of growing attention being paid to Chinese EV companies or collectively what I’d termed China EV Inc a while back. NIO, Geely and BYD were safe and may I add correct callouts. Geely and BYD specifically since they already ship in the ‘millions’ of vehicles each year. - BYD is entering the US! To build a 543MWh energy storage system in Vegas. I know, I know, BYD is already in the US building electric buses! This is just another example how China EV Inc is slowly creeping its way into the US. Time isn’t on the US legacy’s side on entry so their game needs to be tight when they do arrive. Let's hope the folks in Deaborn, Auburn Hills, and Dearborn are tirelessly working to provide us with viable competitors to the upstarts. We will know this very soon. - How good are Chinese suppliers in the EV era? One just got vetted and given the thumbs up by Toyota. Robosense will be providing LiDAR to Toyota’s joint venture vehicles with FAW in China. How much of this has to do with Chinese supplier in China, I’ll try to find out but it’s nonetheless a BIG win for Robosense. I say this because it’s an opportunity to impress the customer via quality, responsiveness, innovation, pricing and supply which could lead to working with Toyota outside of China. Getting approved by an OEM as a supplier is a still pretty onerous and dare I say, archaic process so being on a major OEM's ‘approved’ or ‘qualified’ supplier list is normally an advantage for those suppliers. TRENDING ON SOCIAL MEDIA - The vehicles eligible for the $7.5K Inflation Reduction Act (IRA) tax credit just got expanded and will now include the Cadillac Lyriq, Tesla Model Y, VW ID.4 and the Mustang Mach E. A big win for the OEMs whose crossovers gets that benefit and something that makes a lot of sense. Criteria that’s too narrow doesn’t really move the sector forward. Now let’s see if this gooses sales for these automakers. These cars BTW, are all >$45K which means they aren’t affordable to the average car buyer unfortunately. - Chinese customer satisfaction (CSAT) for NEVs has reached a tipping point. CSAT for NEVs beats CSAT for ICEs by 1 point according to a survey conducted by China Association for Quality (81pts vs. 80pts). Two NEV brands stand out for their CSAT scores: BYD & NIO. The main drivers for the CSAT scores: Perceived quality, continued improvement in brand image and quality & reliability satisfaction. If I am a foreign automaker that sells in China, this should reinforce why I should be worried. Especially if I am a European automaker who is expecting to have those same vehicles begin to sell in volume in my home markets. - Google is doing its part to make the CX of charging better for EV buyers in the US. But are the charging service providers, payment providers and OEMs doing theirs? Not according to Marques Brownlee. This process needs to be as easy as filling up your tank with gas. It needs to be frictionless from start to finish – who is going to step up to ensure that this is the case? It’s the OEMs who suffer from poor charging CX (customer experience) so I am not sure why they don’t want to own that process at least until there are enough chargers and a simple enough of a process to get it right. - When form doesn’t follow function. Does the e-tron that Audi uses with it’s EVs have any meaning? No it doesn’t. It’s an awkward term to put at the end of each EV name so they should head back to the drawing board for it. Oh, and they should make sure the new term doesn’t have any negative meaning in other languages.

INTRODUCIING - The Li Auto L7. Li Auto has leaned heavily into the Russian Matryoshka doll method of vehicle design. They do NOT nestle into one another but do look almost identical, just smaller versions. If we’re keeping score, there is now an L9, L8 and L7 which are 7, 6 and 5 seat SUVs. A reminder that these are extended ranged electric vehicle (EREVs) where the gas motor doesn’t power the wheels but recharges the battery that then powers the wheels. I’d test driven the Li One which was unceremoniously EOL’d due to the cannibalization caused by the L9 launch as well as the L9 and I definitely saw a significant improvement going from the Li One and the L9. I’ll have the opportunity to test drive the L7 & L8 later this year and will report back on vehicle dynamics since they are both smaller than the L9 but interiors I anticipate being quite similar with the exception of the number of available seats. Trim packages for the L7: Air (¥319.8K/$47K), Pro (¥339.8K/$58K), Max (¥379.8K/$55K) versions that range from -¥399.8K (~$47K - $59K). L8 trim packages: Air (¥339.8K/$58K), Pro (¥359.8K/$52K), Max (¥399.8K/$58K), Trim package for L9 Max (¥459.8K/$68K) If you’re confused about the overlap in pricing, so am I. Deliveries for the L7 & L8 begin in March / April so we will likely see the production versions at the Shanghai auto show.

BY THE NUMBERS - -38%. That’s how much car sales plunged in China in a CNY shortened January. Even NEV sales fell by 6.3% - not time to push the panic button yet but definitely discouraging numbers that will likely push the central govt to provide some form of incentives to boost sales in the coming months. How much of the market shrinking was due to the subsidies being eliminated is impossible to tell but 38% is NOT a tiny %age. - 66,051. That’s how many cars Tesla sold in January, the split of domestic to exported isn’t out just yet but the price cuts seemed to have worked as expected since this is an 18% increase from their anemic December number. How lasting will the price cuts be is hard to tell but February should give us a much clearer picture of the market and Tesla specifically. ___________________ 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 automotive and mobility sectors here and in the US, 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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