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Tesla in a Sharing Mood, ADAS vs. AVs, Tech Folks at Auto Cos. - SAI Newsletter 28



It’s been a pretty rainy few days in Beijing and there’s been some severe flooding in cities like Zhengzhou that turned into tragedies as pics and videos of people stuck in subway stations that are half-filled with water float around the local interwebs. This along with the backdrop of what seems to be minor to major outbreaks in the US, UK, Vietnam, and other locations including Tokyo where the Olympics are supposed to kick off in a couple of days. With all this seriousness going on around many parts of the world, I hope you’re all able to stay safe and can enjoy some of your summers. Not much up top today although I do want to draw your attention to a WSJ article that highlights some of the issues foreign automakers not named Tesla are having generating sales for their EV products. I had a nice long chat with Trefor Moss and gave him my thoughts on the why’s, who’s, and how’s so I invite you all to have a quick read of that article you’ll find here. I wanted to highlight a few young sports phenoms that caught my attention over the last couple of weeks for their feats that I think are worth following from now on. First is Shohei Ohtani, the do-it-all baseball player from the Los Angeles Angels. All he did was participate in the home run derby and the next day pitch an inning and in that same game, batted as well. When you get props from other players, you know what he’s doing is a big deal. The other person is Collin Morikawa who won the British Open and became the first player to win two majors on his first try. There’s a lot of confidence in that humble kid. Finally, Giannis Antetokounmpo for leading his team to the NBA World Championship. All three of these young are studs and seem to do it all while staying pretty humble. Lei and I will have our Clubhouse room this week, Thursday 8:30pm EST for those interested in joining. Appreciate all of you that have checked it out and to all the loyal followers who we speak with on about a weekly basis. We think Clubhouse may be ‘over’ so we are looking at trying out Twitter Spaces and will you all know if/when we make that move. Now, let’s get to it! TESLA NEWS - Tesla Superchargers for EVERYONE? Yes! No other details outside of the fact that the charger sharing will likely begin in the US before the end of the year and then be rolled out to other countries, China and then the EU perhaps? IN THE NEWS - Evolution vs. Revolution – Does ADAS beat AV in the race to Level 5? This article talks about the possibility of ADAS providers (mostly traditional tier 1s in the auto space) beating the current crop of AV startups at launching fully autonomous vehicles (L4/L5). There’s no doubt that they have beaten them to the punch on generating revenues. The number of vehicles with ADAS features is exploding and the market is forecasted to grow from $32B in 2019 to $142B by 2027 (according to Precedence Research), the latest example being XPeng launching one of the first mass-market vehicles with a <$30K price that would come standard with LiDAR. Technology is getting cheaper which means that it can be accessible in more than just the high-end, luxury cars, and companies like XPeng and others are out to prove it. This is important, specifically for the China market because ADAS features imply ‘safety,’ and it’s one of the top 3 features Chinese consumers look for when vehicle shopping, the other two being connectivity & range. With advancements in technology + the ability to collect data on thousands of vehicles, the thought is that the ‘slow & steady’ ADAS market will eventually get to the level of autonomy needed to get vehicles to L4/L5 without the crazy amounts of investment needed by the AV companies as well as getting paid to provide these features to the OEMs. This makes a ton of sense, but for ADAS providers, finishing that last mile to L5 will be the toughest hurdle for them to overcome. The expectation and requirements (read: the law) is that drivers are still engaged when using L2 which is where all of the ADAS features sit. It’s too early to tell whether it’ll happen but a good indication of who’s winning will be whether the AV startups in the next few years, get into selling ADAS features as well. - In an effort to break from dependence on China supply, legacy automakers are trying to engineer a reduction on their dependence on rare earth metals that, in this case, are used to make powerful magnets that play a role in the range of an EV. This particular element called neodymium, in which China controls 90% of the supply could wreak havoc on production and costs if there were any disruptions, natural or man-made, to supply. This continues a trend that lines closely with batteries that use cobalt (>40%), lithium (>50%), both metals that China has outsize control over. One of the other metals that is needed for EVs is nickel, where Indonesia controls about 30% of the world’s supply. Hence Tesla looking at opening a Gigafactory there. Look for movement towards SEA and in particular Indonesia as these EV startups look to expand outside of China. Indonesia is also, after all, SEA’s largest passenger vehicle market. - Will the China Evergrande Real Estate Group’s debt woes mean curtains for the China Evergrande New Energy Vehicle group? China Evergrande has always been able to get itself out of the debt burdens that have plagued them since forever and there were always rumors swirling around that Evergrande started the EV business to gain more access to cheap capital and land for its real estate business. Having said all of that, the EV group is already >$8B in on investing on products, people, infrastructure, and manufacturing to get 9 EVs built and launched within the next 5 years. So let’s assume they’re serious about making these EVs even if we haven’t seen any roadworthy prototypes yet, at least with my own two eyes. China Evergrande New Energy’s plan was always bold and not likely to happen in the way or timing that they’d described it, but the latest drama with their big brother real estate business makes a hard-to-believe plan even dicier to achieve. I currently don’ think China Evergrande Real Estate is yet in any real danger of defaulting on its debt, but if it did it could create a domino effect on the rest of the EV market when it’s on track to break lots of sales records in 2021. - The poaching from tech has begun and it’s about time. I’ve preached since the early days of this newsletter that the trigger or indication for outsiders that the OEMs are getting serious about mobility and EVs will be when they begin to put tech folks in positions of leadership. It’s going to be lumpy, meaning that some companies will pivot to onboard tech leaders faster than others. Case in point GM & Stellantis who’ve poached folks from Lyft, Amazon, and NIO to join their ranks and lead their teams. I also would’ve like to have seen GM put folks on the management team and not one of their new businesses unlike Stellantis which made ex-Amazon hire, Ned Curic their CTO. We will see MUCH more of this as we see some strategies from OEMs that were announced 2-3 years back begin to stall. Think VW. There will be desperation to ‘right’ the ship and that’ll take the shape of reorgs and new hires. Mark it down, you heard it here first. - For those China watchers that are only paying attention to the flashy Li Auto, NIO, and XPengs of the world, you’re missing out on one of the major EV movers and shakers and we’re not just talking about the China market. Of course, I am referring to the Warren Buffet backed BYD. A vertically integrated BYD that can call on Apple and the city of Los Angeles as its customers. BYD design chips, they build their own batteries, build electric buses, and of course manufacture electric vehicles. Those electric buses I mentioned, well they build some of them in LA WITH union workers. BYD is valued higher than GM & Ford and they continue to expand sales into regions like the EU. We should expect to see more of them in the private passenger vehicle segment since their vehicles lean towards the more affordable side. So add BYD to your ticker follower and pay attention to their moves, I know more automakers and analysts are. TRENDING ON SOCIAL MEDIA - This off-road Porsche 911 Turbo S is absolutely BONKERS. The conversion by Marc Philipp Gemballa, called the Marsien, has a price that’s NOT for the faint of heart but there won’t be too many of these roaming the earth if you happen to have the ~$600K needed to own one of them. - Grubhub will use Yandex slow-moving autonomous delivery vehicles to deliver food on college campuses. This seems like a brilliant idea until it’s not. I can totally see drunk, belligerent college kids, I was one myself at one time, not being so nice to these things later in the evening after they’ve had a few adult beverages. Great potential pilot for brand and use case awareness though! - Lei Jun, Xiaomi founder & CEO is named Forbes China Best CEO for 2021. Other notables include Wang Chuanfu (BYD founder & CEO) at #3, Wang Fengying (Great Wall Motor CEO) at #8, and Zhou Jia (CATL CEO) at #30. GET SMARTER - Do you want to learn more about some of the innovation going on in Southeast Asia (SEA)? Listen to this podcast with Grab CEO Anthony Tan. He’s turned Grab from a ride-hailing platform into a business services platform that provides numerous services to people and businesses with more than 25 million monthly active users across 8 countries in SEA. It’s one of SEA’s most well-known and at about a $40B valuation, one of its most valuable. The level of complexity of the SEA market is immense so to be able to do what Grab has done is quite impressive. JUST THE NUMBERS - 6. That’s the number of versions the XPeng P5 launched with last week. If you think that’s overkill, you’re right. With Tesla’s aggressive pricing practices and other China EV players pricing their products at or around 200K RMB, XPeng had to do the same or risk losing out on a sale to one of their competitors. The downside to this is that it can be quite confusing for potential buyers who may just as well head to a competitor because their pricing is much easier to understand. Of the 6, the four uplevel versions come equipped with LiDAR, so perhaps they’re using the tried and true automotive pricing strategy of affordably pricing the entry level versions in order to grab some attention and once the customer is in the store, upsell them to the more expensive versions? The challenge here is, with so many variants, it may seem more like they’re not sure what customers actually want. - 17.6B. That's how many views BMW, the #1 automaker on TikTok has since the app launched. Incredibly, Merc is #2 (@ 9.1B views) so outside of China at least, the Germans are leading the way in their social media campaigns. Rounding out the top 5 are

  1. BMW - 17.6B views

  2. Merc - 9.1B views

  3. Lamborghini – 8.3B views

  4. Tesla – 7.2B views

  5. Audi – 7B views

- 372MPH. That’s how fast the latest Maglev aka ‘bullet’ train that was developed in China goes. Once in use, it could shorten the train ride from Beijing to Shanghai, which using the current bullet train, from 4.5hrs to 2.5 hrs. It’s targeted to come online within the next 10 years which in China actually means <5 years. CC. Secretary Pete. - $1.25B. That’s how much Swiggy, an Indian food delivery startup raised in Series J, at a $5.5B valuation. Once India is able to get past its pandemic woes, which admittedly could take some time, the tech race between the two most populous nations, will really begin to heat up. Right now, there isn’t any competition since China is dominating Asia with its tech giants and their seemingly endless amounts of capital. One of the things that India has going for it besides being as large and as HUGE an opportunity as the China market is they can act as a counterbalance to China’s current dominance in so many markets. It’ll take some time but we will slowly start to see FDI reduce in China and start to gain momentum in India much of this due to the overheated startup valuations in China, and the still immature India market. Take it from me, the next 25 years in the Asia region will be much like a heavyweight fight! QUICK HITS - DeepRoute, a self-driving startup in the WeRide, Pony, and Apollo vein that’s partnered with Dongfeng, has launched a pilot robotaxi service in Shenzhen that will consist of 20 cars and will roam around about 124 miles of public roads. - Meituan has relaunched its ride-hailing service. This is obviously a play to take advantage of a weakened Didi although I’ve heard through friends that the service has been a bit of a mess since relaunching a few weeks back. I have not tried it yet but will likely in the next couple of weeks. Will share my thoughts once I do. - Rivian delays the delivery of their launch vehicles to initial customers again. Sites ‘cascading’ issues that stem from the pandemic including alluding to a shortage of chips. This is their second delay but I am wondering, how many vehicles are they trying to produce here? Perhaps a few thousand? It seems they are getting into ‘manufacturing’ hell. INTRODUCING - The INEOS Grenadier. A rich guy’s way of getting back at Jaguar Land Rover for halting production of the beloved original Defender. No word on whether JLR is upset about its absolutely identical features and look but between the new Bronco, Jeep, and Defender, not to mention used Defenders that are still on the road, I am not sure how popular this SUV is going to be. We won’t know until at least 2023 either. —— 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.

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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