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Tesla is BACK in the News, India's Turn to Build, 🇨🇳 Consumers & 🇨🇳 Brands - SAI Newsletter 25



Surprise, surprise. Tesla is BACK in the news. I spoke with CNN’s Michelle Toh yesterday about it in the post below so I won’t get into too much up here but at least there was one week without drama, right? Not much up top today except for a couple of administrative items. This week’s 🇨🇳 EVs & More – Clubhouse room will be Thursday night, 8:30pm EST, sign up for it here. And for those that can’t catch the Clubhouse room. We try to post new podcasts, which are recordings of the room every Wednesday. Please bear with us as we get our cadence down and improve the quality of the podcast. It’s been a learning process for Lei and I, with I believe some additional challenges for me since I am here in Beijing. As always, I appreciate feedback about the newsletter, which has received a good number of new subscribers over the last couple of months so welcome to the new readers! Lei and I also appreciate constructive feedback on the podcast and suggestions on future topics as well! Now, onto the news. TESLA NEWS - Tesla recalling some, err I mean virtually ALL of their Tesla Model 3 & Ys. Maybe this is semantics or perhaps it isn’t but ‘recall’ seems to be a pretty strong word that the media is using for what’s happening here. If Tesla is ‘recalling’ all of these vehicles the car doesn’t necessarily have a flaw or a software bug as much as there is a design change to a current feature. Now, this design change was likely requested by the State Administration for Market Regulation or otherwise why all the fuss? The OTA patch could’ve just been sent over with a brief communication update to customers and no one would likely be any the wiser. This makes me wonder if MIC Tesla’s run on different software than the rest of the world and if not, will this patch be sent to ALL Model 3 & Ys globally but without all the fanfare? Unless required by the local authorities wouldn’t it make more sense to run every vehicle on the same version of the same software? Will dig into this further and send out an update as I get more educated. I still see strong growth for Tesla for the remainder of the year, specifically starting in late August / early September but that’s only if they can avoid further controversy. I don’t think there’s that much of it in this case, it’s just that the media is latching on to that ~300K number which, for sure, is a BIG one. I will say this though, the China Passenger Car Association (CPCA) upgraded its 2021 NEV sales forecast earlier this month to 2.4M units (for reference, that forecast was 2M units at the beginning of 2021) so if China is to hit that number or even come close to it, they’ll need Tesla to sell at or around 500K units in China. They seem to pretty bullish on Tesla’s ability to do that this year. IN THE NEWS - China’s dominance as manufacturer to the world of mobility may be getting its first true competition. For many years now, China has taken on the title of ‘manufacturer to the world’ for just about everything from consumers products to high tech products but at long last, India has decided that now is the time to step up to compete with China in an attempt to play a larger as manufacturer to the world. With officially the 2nd largest population in the world (some believe India has more people than China), the dire need to eliminate suffocating pollution in its cities, and goal of lifting more than a billion people out of poverty, India looks to be using the same playbook that China did to move its own country forward. A big first step towards that goal is to compete against China in the manufacturing of e-bikes. Hero Cycles, a subsidiary of Hero Motors, the world’s largest motorcycle manufacturer, took a BIG first step by shipping its first batch of Indian-built e-bikes to the EU. The jury is still out on the cost, quality & reliability but that should all improve over time, especially since certain Chinese exports like e-bikes get large tariffs slapped on them that Indian products do not – Advantage: India. India, IF all the different competing factions in and outside of government can come together, due to its sheer size, demographics and capabilities will be a formidable competitor to China as well. Until now, China’s ability to make everything cheaper than anyone else has helped catapult them into becoming the world’s 2nd largest economy in the span of just over 30 years. They’ve also used this superpower to dictate to countries their terms for doing business, but with India starting to come online, foreign direct investment increasing in both SEA & South Asia, we’re starting to see a shift in the balance of power away from China. This won’t happen overnight, and there will be some (likely many) missteps along the way and India’s first priority is to get past the pandemic but if ALL 1.4B people can push in the same direction we WILL begin to see a competition between the two most populous countries in the world sooner than we think. - The Lucid Air – Finally, a real Tesla killer? First, let me say the Lucid Air LOOKs great! Now I capitalized ‘looks’ because I’ve heard from multiple people who’ve seen earlier prototypes that told me that upon closer inspection there were some pretty rough edges that needed to be smoothed out. And we’re talking as late as Jan / Feb of this year. They’ve since opened a flagship store in NYC and are doing a money and PR tour with the media so my assumption is that those edges have been smoothed out. I say money tour because they plan to merge into a SPAC to go public in the next few weeks. Second, this is EXACTLY what Elon wanted. Potentially viable competitors to shine a light onto the sector and raise the level of design, innovation, and most importantly increase the number of products and accelerate the adoption of EVs. Elon, well done. ‘Mission Accomplished.’ Not only are their companies like Rivian & Lucid in the US but where the rubber meets the road, here in China. There’s no doubt that Elon & Tesla inspired Li Bin, He Xiaopeng, Li Xiang, Li Shufu, Lei Jun, Wang Chuanfu, and many others here. That’s not to mention folks in India and SEA. Not only that, but the legacy OEMs have put self-imposed deadlines on when they’ll make the switch to EVs complete and permanent. Finally, to a larger extent what we’re really seeing is a renaissance in transportation & more importantly mobility. That’s what’s happening here. An entire sector globally looking at itself in the mirror and saying ‘We can do better.’ I’ve stopped using the word ‘automotive’ because it’s limiting and backward-looking. I think most of the legacy OEM CEOs would agree and would rather be called mobility ‘service’ providers as well, but they’ll need to earn that moniker. - More and more Chinese consumers are buying domestic brands. This should worry the foreign brands that do business here. A lot. As I’d alluded to in past newsletters and presentations, the younger Chinese consumer, or digital natives as they are called, are much more open to domestic Chinese brands than their older counterparts. Digital natives generally were born after 1990. That means that they grew up having a mobile phone, social media, and a mostly digital lifestyle. They also grew up with Xiaomi, NIO, Huawei, Tencent, and others that shaped their feelings towards Chinese domestic brands being as innovative and ‘cool’ as foreign brands. In the mobility space, companies like XPeng, NIO, Didi, Meituan, and others should get a pretty fair shake if and when these digital natives decide to go mobility shopping. These EV & mobility companies know just how to reach them too, and that’s normally via an influencer, through their social media, or some other platform on their mobile phone. The legacy automakers do NOT currently have that competency, and the digital natives can clearly spot poseurs so the ‘fake it till you make it’ strategy has a number of risks. This is why you’re seeing companies like Tesla, and Ford, in particular, investing in design and R&D locally. That dedication & commitment to the local Chinese market is not only appreciated, but it’s also genuinely reflected in the product or service design. That’s why for those companies that look to succeed in the future in China, South Asia, or SEA, they’ll need to make the proper commitments to the market and be here, and do it early. Otherwise, the consumers in those regions will just pick a domestic brand, and be very happy doing it. - The benefits and risks for multinationals associated with doing business in China. Nike has recently been caught up in a protest of sorts from Chinese consumers who were upset about their stance on using not using Xinjiang cotton for their products. There were also other companies that were embroiled in the controversy but the most notable, by far, was H&M. Their online shops were basically closed on the major platforms and most folks avoided going to their physical stores. The headscratcher was that an older social media post that was brought back from the dead, was the reason that people got fired up. In what seemed to be a reminder to companies of the power that the Chinese consumer and the Chinese govt. wields should these companies fall ‘out of line’ with how they’re expected to conduct themselves. And therein lies the rub. The Chinese market is SO large, second of course only to the US, that the benefits of being a player here far outweigh the risks of being alienated from it. Until you are, that is. Then, all of the investments you’ve made, all of the people you’ve hired locally, your partners, your entire supply chain is in jeopardy of disappearing, just like that. There are likely a handful of companies globally that could fight back and their customers would remain loyal through it all, but not many. And as Chinese companies, like those that want to sell cars into the US & EU, begin to expand outside of China, the pendulum will likely swing in favor of a more level playing field everywhere. Oh, and I mentioned how India is trying to finally get everything together to try to compete with China right? Well, they’re a VERY long way away from being able to do that but we were seeing some green shoots prior to Covid. As long as they can quickly pick themselves up and recover from the pandemic, likely with a lot of help from their western allies, we could see them pick up where they left off. India is likely the only other country that, if it reaches a tipping point, could make for a formidable competitor to China’s dominance if only due to its sheer size. As for H&M, I was just there yesterday and the foot traffic seems to be back. I even bought a few things, on sale of course. TRENDING ON SOCIAL MEDIA - E-bikes, and e-bike sharing will be a thing. Have you all gotten tired of me saying that, especially my earliest readers? So I’ve probably shown you the growing popularity in a few past posts but now we’re starting to see it converted into e-bike sharing as well. It helped that the state of New York finally approved e-bikes for use in the state (unbelievable that wasn’t the case) so you’ve started seeing many more gig economy workers using them to deliver food. The downside for the sharing is that it’s quite expensive, at least in NYC where a 45 min ride will cost you $ .18 / min capping at $3 for non-members. But trust me when I say this, e-bikes are MUCH safer than say electric kick scooters since everyone still knows how to ride a bike, although the e-bikes go about 15MPH. I think at some point, the operating costs will lower enough bringing the price down, eventually overtaking e-scooters as the preferred micromobility ride of choice. To be frank, I had an opportunity to help try to launch one in Detroit but the numbers didn’t work out and my part was a bit undefined so I took a pass. I’d be open to helping someone who has a more sound business plan and a defined role for me to play in commercializing so for those looking to launch into Detroit, get in touch, I think I can help… - Was there a tech war between Apple and Microsoft (MS) before? All I remember, after Bill wrote Steve a $150M check to bail Apple out in 1997, was Apple coming out with hit after hit after hit, and MS not so much. It wasn’t until Ballmer left and Nadella came in that MS stock price really began its growth spurt. As for Apple vs. MS, I try to be as objective as I can about all the companies I follow and mention in any posts or this newsletter, highlighting the good AND the bad. But if there is one company that you could call me a fanboy of, it’s the one in Cupertino. I still remember my employee number and if I ever decide to go back (perhaps for Apple Car?!?), I’ll get it back! As long as they make them, I will ALWAYS have a Mac, although currently, my 2019 MBP is constantly too hot so the fan is ALWAYS running. Other than that, the OS is pretty bulletproof and the integration into the rest of the ecosystem, the user experience, IMHO, is TOPs much of it because of the closed system and ‘best in the biz’ HW + SW integration teams. For the accessories, I do tend to swap out other brands, specifically mice and keyboards, that’s where Logitech, another company I spent some time at, gets my cash. They too have some of the best designers and HW + SW integrators in the biz. There I said it. I admire MS now because I believe that Satya Nadella is a world-class business leader who successfully pivoted MS into being a services & cloud company. I am not the only one that thinks this, of course, just look at their share price. As for these behemoths doing battle in the future, well give me some popcorn and a front-row seat. I can’t wait for the fireworks show to start! GET SMARTER - The hearts of a swimmer and the hearts of a runner are different but both better than a non-athlete. The left ventricle of the heart works like a sponge with oxygen-rich blood that wrings out and pumps it out to the rest of the body. The left ventricle of an athlete is almost always larger than that of a person that’s sedentary because of the athlete’s need to fill their muscles with oxygen more intensely due to the physical activity. Now, when you compare the left ventricle of a runner to a swimmer’s, you find that the runner's left ventricle filled with blood earlier and untwisted (pumped blood out) more quickly during each heartbeat. That’s likely because swimmers are mainly in the horizontal position that could be the reason since a runner’s heart has to fight gravity to get blood back into the body. The bottom line is that the human body continues to be the most fascinating machine ever produced and there is so much more to learn about it that will help us understand other parts of science. JUST THE NUMBERS - 2035. That’s the year Volkswagen brand has stated they will stop the sales of ICEs for the EU market. I am predicting that it will eventually be much sooner since there will be pressure from other automakers and since VW would NOT want to spend marketing € € for two separate powertrains in the region. - 1,680. That’s the number of partners that joined Foxconn’s MIH Consortium Alliance. This includes both HW & SW suppliers who wish to collaborate on an open-source platform to share ideas and bring new products and features to market faster. I don’t know, that number seems pretty intimidating and cumbersome. How will this all work? If we look at this statistically using the 80 / 20 rule, about 300 companies will contribute the most, still a MONSTER number while the rest piggyback off of their work. Maybe something good will come out of this alliance but I just went from curious to doubtful about it. Admittedly, I know very little about it and part of it is because they’re making it up as they go along as well. - 4,000,000. That’s the number of vehicles Great Wall Motors is targeting to sell in 2025. That’s from sales of 1,111,600 and an increase of A LOT. On top of that lofty goal, of that 4M, 80% will be NEVs. It seems there are a few folks in China with some pumped-up egos and large ambitions. Let’s see who has the business chops to follow that up with deed and not word. —— 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


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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