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Tesla Price Cuts, China Battery Inc #1 (and it's not close), Japan Joins In - SAI Newsletter #01



 

The first newsletter of 2023 – I’ll take it slowly since I have been busy 2023 business planning but there is SO MUCH to cover! I’ll do a post-mortem on a few of the more notable EV companies below but it shouldn’t be too surprising which companies are making the difference. Also, I am supposed to be in Las Vegas right now for CES but decided to sit this one out due to other work commitments and the amount of travel I’ve just penciled into my calendar this year. Let’s just say there will be a few stops in Europe and Asia planned since the world is completely opening up. For those wanting to see my BOLD 2023 predictions, you'll have to wait until next week since I got through this newsletter before I remembered that I needed to add them! Overall, despite the challenges throughout 2022 in China, to hit 6.7M NEVs sold is quite an impressive feat and China more than doubled up the US & EU sales numbers combined. A reminder that China sold ~3.7M Most notable sales numbers for 2022: Tesla: 1.31M – Still the champ in BEVs. This is a 40% lift from 2021 numbers. Quite an accomplishment from Tesla but far from its 50% growth target even with COVID weighing on its most important manufacturing and sales market. What we are seeing is what I’d predicted over a year ago. 2- & 3-year-old products that are giving way to newer, cheaper, better-appointed and frankly better-looking vehicles in China. Tesla has milked those two products for about as long as it could and the MIC Model Y still has some legs and should sell decently at the beginning of 2023 but without any major updates, 2023 is looking to be a tough sell for Chinese consumers in the market for an NEV. This on top of what analysts are forecasting to be a challenging beginning for vehicle sales globally. Further, December - the last period in Q4, usually one of the strongest periods of the year for Tesla domestic China sales disappointed and likely was the big reason Tesla wasn’t able to get >40% growth. Tesla sold just <56K MIC Teslas in December, that’s down >44% from November ’22 and down ~22% YoY. The burden of older product along with increasing capacity to ~1.2M units at ShanghaiGiga, Berlin/AustinGiga coming online this year, while Zero-COVID strategy wreaked havoc on its most important market - ALL key roles in what many see as a disappointing year-end sales number. BYD: 911K – #2 with a bullet! And closing in on the top spot. There isn’t any type of controversy really in China regarding the BEV vs. PHEV since they use the acronym NEV = (BEV + PHEV + FCEV). When it comes to NEVs, there’s only one game in town and that is Build Your Dreams aka BYD. In 2022, BYD sold a total of 1.86M, a 208% lift YoY, an enormous number. These numbers include commercial vehicles BTW. Doing the math, that means that BYD sold 952K PHEVs. Consequently, instead of talking about it, BYD spent 2022 being about it. They even discontinued production of all their ICE vehicles. That means that they are now ONLY producing PHEVs & BEVs. BYD also overtook VW Group to become the 3rd most valuable car company in the world behind Toyota and of course Tesla. Both of those companies’ valuations are headed in the wrong direction while BYD is on its way up. That should continue into 2023 and beyond as BYD eventually overtakes Tesla for the global BEV sales crown – it wouldn’t surprise me if that happens sometime in 2024 as Wang Chuanfu has openly communicated that BYD’s sales goal for 2023 is 4M units. The REST NIO: 122,486 That’s a YoY lift of 34% from 2021. Many look at that as a disappointing growth rate – as do I. Of all the China EV Inc, 2022 seemed to be the most challenging operationally for NIO. They could never really sustain any momentum off of the excitement it built up for itself through carefully timed announcements and product introductions. They doubled their vehicle lineup in 2022 though and now have one of the strongest in the market with the ET5 being their high-runner going into 2023. Bin Li challenged his team to do better, be more efficient and agile in an internal letter to begin this year so he knows they need to be sharper operationally if they’re to compete with the big boys on the global stage in 2023. XPeng: 120,757 What seemed to be a reason for optimism going into 2022, did not turn out that way as aging models (G3, P7) and soft demand for what Team XPeng was hoping to be their high-runner, the P5 to ending the year with a bit of an anti-climatic new G9 product launch, management is likely really looking forward to 2023 where they will be in a hurry to launch two new products and a refreshed P7. It’s important to remember that comparing the sales numbers of XPeng vs. NIO & Li Auto is like comparing apples to oranges since they play in totally different segments, with the exception of XPeng’s newly launched G9. XPeng plays in a much more cut-throat, competitive market. More than 90% of all NEV sold in China are <¥300K or ~$44K at today’s FX rate so XPeng had to compete with many more SOEs, many of who don’t play by any rules and aren’t beholden to western investors that want to see monthly/quarterly hockey stick growth. Li Auto: 133. 246 This is a YoY growth of 47%. A VERY respectable growth rate, especially when you consider that Li Auto still had only one vehicle to sell for much of 2022. Then when it eventually launched the L9 to accompany the Li-One, both EREVs BTW NOT BEVs, the L9 effectively cannibalized sales of the older, cheaper Li-One. Give credit to Li Auto for pivoting so quickly as the Li-One sales fell off a cliff in what seemed like a New York minute. They also intro’d the L8 and began delivery of that towards the end of 2022 and were rewarded with sales of >20K in a month for the first time in December when both the L8 & L9 exceeded 10K sales. Li Auto will be launching the L7 in early 2023 so with that lineup, they should end 2023 with another pretty significant growth rate but will people be turned off because it’s not a true BEV? I think there are enough customers in China that aren't ready to go full-BEV for Li to continue to grow until they transition their product lineup over to BEVs but by then, will they be able to differentiate themselves in the increasingly crowded premium SUV segment, THAT could be an issue. News that we paid attention to this week: - In case you didn’t know this already: In the battery cell space, its China’s world and we are just living in it. Case in point – 6 of 2022’s Top 10 cell fabricators were from China combining for >60% share of the sector with CATL & BYD combining to make up >50% share themselves. - Norway is dialing down EV subsidies to promote more walking and biking. The Norwegian govt is still on for going all-electric by 2025, 10 years earlier than their counterparts in the rest of Europe but they’re also prioritizing alternate forms of transportation, specifically ones that don’t involve a private passenger vehicle whether it’s electric or not. - As we predicted, the US is watering down the requirements to be eligible for EV subsidies to appease the critics and those affected by the new law. These critics include foreign countries and US legacy auto. Be very careful of what you wish for. - BMW thought it was important to take the CES stage to share color-changing paint for its cars. That’s it. That’s the only thing I (or they) wanted to show you. Not that impressed with this post? Now you know how I feel about their reveal. - Japan is in. Japan has announced that it is going to work with the Netherlands and the US to restrict the shipment of capital equipment used in making the most advanced chips to China. If China wasn’t feeling isolated yet on this… - Tesla pulled out some BIG scissors to cut pricing in China yesterday – again, again. Prices have been reduced between 13-24% since September depending on the model. The starting price for a Model 3 is now down to <¥230K (~$33K) QUOTED/INTERVIEWED Just to show that Sino Auto Insights has a global reach, here are two articles published in the last couple of weeks (in their local language) that I was interviewed for. I am starting to see many more foreign media outlets begin to pay attention to whats beginning to happen to their local automotive markets. I am happy to help them and must say that this was the purpose for launching this newsletter and co-lab'ing with Lei on the podcast. Not enough people know what’s going on and for many, it’ll be too late when they find out. Handelsblatt: I spoke with Sabine Gusbeth at length for her spotlight on Jidu Auto and the overall move in China towards a more digital experience, one that will include software updates, autonomous driving and seamless integration with people's digital lives. It’s in German for those that Deutsche sprechen. DR – Danmarks Radio: This Danish piece by Philip Roin (with some of my help) gives a good overview of how China became the global leader in batteries and EVs and how Denmark, which doesn’t manufacture any cars for themselves has embraced some of the brands and exported vehicles that began entering their market just a few years ago. TRENDING ON SOCIAL MEDIA - Eastbay is O-fficially closing up shop. For those of us that lived to see the latest Eastbay catalog when we were kids, this is a huge hit to our childhood memories. The Eastbay catalog was used by kids in the 90’s all over the US to keep up with the latest kicks. I used the catalog to show my parents which shoes I wanted next. I would beg them to get them for me and of course, they never would. My friends would bring the catalog to school and we’d all look at it during lunchtime talking about which shoes we liked and which ones we thought we ‘whack.’ - Cadillac wants to race F1. They’ll be putting a team together with Andretti Racing. Wonder if they’ll have an American driver behind the wheel? - Stellantis won’t be manufacturing many cars in China but it WILL begin to manufacture aircraft in the US. Stellantis is effectively investing in Archer by providing them with up to $150M of services in order to move closer to production. Production is set to begin in 2024. Stellantis has been working with Archer since 2020 on strategic initiatives and was a previous investor in Archer in 2021. BY THE NUMBERS - 80%. That’s how many trade-ins for the Kia EV6 weren’t a Kia. The lack of viable EV products in the US is forcing many EV customers to consider brands they normally wouldn’t had they been looking to purchase another ICE. And therein lies the rub – The customers that abandoned those brands might never come back. This of course creates more opportunities to convince more customers to switch - for the manufacturers that are earliest out with their newest EV products that is. - 977. That's how many ET5s were recalled due to the risk of fire if there is a front collision. This is a physical recall so car owners will need to head to a service center for the fix. - 2024. That’s when Aurora CEO Chris Urmson thinks they will have unmanned, autonomous long-haul trucks on the road in the US. With one of their biggest competitors sidelined and tight on capital, the chance to grab a piece of the huge, $900B US trucking market for Aurora just got that much bigger. INTRODUCING - The Lightyear 2. It’s an electric vehicle partly powered by solar panels. Lightyear is boasting a range of 500 miles for the crossover which should hit the roads sometime in 2026 at a price of just $40K. - Afeela. That’s the official name of the EV brand from the Sony Honda mashup announced last year. There was a preview of its first product this week at CES although the vehicle won’t be delivered until 2026 and little else was revealed outside the number of cameras & sensors the vehicle will have - 45. The brand name is derived from ‘feel’ or what is going to be emphasized in the vehicle. Uh… ok? -------- 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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