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Tesla's Investor Day, CATL - Source of Pride & Worry, WM Motor Barely Holding On - SAI Newsletter 10



 

An update on one of last week’s posts about McDonalds continued investment in China. McDonald’s in China is 80% owned by state-owned CITIC Group with the remaining 20% owned by McDonald’s. I was reminded of this and thought I should clarify. Ownership wasn’t mentioned in the WSJ article I referenced either. Also, our latest MAX episode with Silvio Angori, MD & CEO of legendary deisn consultancy Pininfarina has just posted. He talks designing an L4 steering wheel and pedal-less robotaxi for Holon and shares his thoughts on China EV Inc. Don't miss it! Now, let’s get right to the news. CHINA EVs & MORE We are scheduled for Thursday, March 9th, 3pm ET this week. Will update on topics on Twitter so stay tuned for that. Join us if you want to ask questions and / or interact with us. 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 will make the show better. Also, if there are any companies you want our thoughts on, let me know. TESLA - Tesla is at it again with the scissors in the US market, this is the 2nd time this year that its Halo sedan and SUV, the Model S (-$5K) & Model X (-$10K) got haircuts. This on the heels of their (effectively) global price cuts for the Model 3 & Y this year as well. Tesla’s entire vehicle lineup is in desperate need of refreshes and the launch of the Cybertruck will only really help one market this year so the questions is, can the rumored MIC M3 refresh targeted for later this year, can it rescue Tesla from pulling out those scissors again and again? We’ll have to wait till the end of this year to find out. - What I took from Tesla’s Investor Day. The numbers just jumped out at me. We talked about it a bit during last week’s China EVs & More (Episode #106) that’ll post tomorrow so don’t miss it! The $175B in further investment in capacity, their reiteration that 20M by 2030 is their sales bogey, 40% factory footprint reduction & 50% manufacturing cost reduction. If Tesla gets close to ANY of those numbers, then it’ll be curtains for a number of the weaker OEMs. On top of that, they will code (SW Dev) EVERYTHING themselves so they’ll not only bring most everything in-house but they’re saying they’ll do it better, faster and cheaper than their competitors. And they won’t have to share any of their spoils with ‘partners’ like most OEMs will have to do by having carveouts for their HW / SW stacks, carveouts their partners will fill which likely means data and revenue sharing. Legacy Auto, are you paying attention? Taking notes? Aren’t you supposed to be the manufacturing gurus? Why aren’t you coming up with these revolutionary new techniques to build vehicles. Remember also that this isn’t just Elon-speak and bluster like much of his FSD chatter has been. They’ve proven that they can reduce manufacturing costs by a lot. Tesla created a single casting for the Model Y rear that eliminated 69 parts and a bunch of welding! Money in their pocket. They didn’t rest on their laurels though – they are now rumored to be on Gen 3 for their Gigapress. But that’s not all, that casting is using an alloy that was co-developed with the SpaceX team. Who’s going to be able to keep up with this? Most OEMs can’t even get OTAs figured out yet. The OEMs will make a ton of excuses why they haven’t been able to do X, Y and Z but the bottom line is that if they can’t do things differently and build the plane while they fly it, the future will be even more painful than they can imagine. With Tesla focusing on building out capacity, developing the 4680 cell and single piece front/rear castings, Elon made a conscious decision to NOT invest in updating the vehicles, likely thinking that SW updates would appease current and attract new customers. That may very well be true for the US & European markets, but they failed to consider how fast the China market moves hence the seemingly endless price cuts. Once they launch a Model 2 and an even more affordable Model 1(?) for the Southeast / South Asian markets, will anyone be able to stop them? A focus on global product planning is likely already underway. Remember way back when I said that Tesla, in order to take share would consider selling their cars at almost cost – well if they wring out ~50% of manufacturing costs, they’d undercut the entire, global automotive sector. Legacies, between China EV Inc and Tesla, you have one chance to get EVERYTHING right – don’t piss this time away because that window you’re trying to jump through is closing quickly, more quickly than you can imagine. INTERVEWED/QUOTED - CGTN. I was interviewed for one of CGTN’s digital pieces and shared my thoughts on the battery recycling space that’s just about ready to spin up globally with the 800lb gorilla being JB Straubel led Redwood Materials leading the way. I posited that as rare earth metals become a political tool, recycling batteries would become national and energy security initiatives and not just climate and zero waste driven ones. NEWS THAT GOT OUR ATTENTION THIS WEEK - NIO launches swapping in a 5th European country. For those not keeping score, those 5 countries: Germany, Netherlands, Norway, Sweden, Denmark. Li Bin said that rollout of charging has been slower than anticipated – Welcome to Europe! I think he’s going to find a similar speed once NIO officially enters the US. The bottom line is – Will swapping work outside of China and who will be the partners to help them get more charging infrastructure, both superchargers and swapping stations, rolled out. - CATL, a source of pride and worry for China’s President. One of the goals that the Chinese govt had back in 2009 when they began investing and subsidizing the battery, EV, raw materials and chips sectors was nurturing those sectors so that they could field leaders in the space. Well – with CATL, mission accomplished. CATL is the 800lb gorilla in the battery space that seems to supply everyone. When combined with BYD’s share, they command 50% of the market. If we are looking at the LFP chemistry where 80% of all capacity investment is being made, forget about it – China Battery Inc are about the only game in town. That’s what is so concerning to the European, Japanese, Korean and American automakers. This also worries XJP, especially now that the Inflation Reduction Act (IRA) is law in the US. CATL has to balance quality, pricing and customer service in order to keep their foreign customers while also investing heavily into R&D to make sure their costs and innovation remains among the most competitive, otherwise they could get left behind with a quickness. With so much investment in the battery space, I think we’ll see some important alternate technologies developed by startups beginning to emerge in the latter part of this decade. And I am certain that’s one of XJP’s main concerns, having too much capacity with nowhere to sell it. With protectionism like the IRA in place, dumping becomes more difficult. I still think there will be some scrutiny on the Ford CATL transaction, especially now that rhetoric continues to ratchet up from both sides and if the deal is ultimately scrapped, which I don’t think will happen since Ford needs CATL as much as CATL needs Ford (for entry into the US market at least), it could put a dent in all of those other China Battery Inc that want to continue their growth trajectories in the 2nd largest market in the world. Also remember that the 3rd largest passenger market in the world – India is also going through its own diplomatic challenges with China so large, friendly passenger vehicle markets outside the US/EU are few and far between. TRENDING ON SOCIAL MEDIA - New York City gets strict on electric bicycle batteries. This was inevitable and foreseen. For the longest time in China, whenever I went to any parking structure, most of them being underground below a high-rise, I’d see a sign that prohibited electric bicycles & mopeds from being parked underground due to the possibility of battery fires. Shift attention over to India, we have seen some tragic accidents occur recently as people who live in MUDs or Multi-Unit Dwellings, take their electric moped up to their apartment and plug it in for recharging causing major fires. Unregulated batteries are a major concern for India and were for China so for NYC to prioritize their regulation was a prudent move. I believe electric bicycles will become very popular all over the world by the time we hit 2030. Cities globally have started to figure out that cars pollute(d), take up precious space that could be used for so many other more important initiatives and are more for the wealthier demo so why should they be given priority? That’s right, they shouldn’t. - Vinfast goes on its IPO tour and CEO says that by September they’d be the only EV maker with products in all of the market segments, A (small car) – E (BIG SUV). No surprises about her bullishness about Vinfast’s prospects but one peculiar statement she made was that US Vinfast customers that leased vehicles through their banking partner US Bank would still be able to take advantage of some of the Inflation Reduction Act’s subsidies. I will need to dig into that a bit more and will try to send an update next week on what it would qualify for. - Bits and bytes to power the new era muscle cars. The Big Three are taking different routes to making their ‘EVs’ cool – specifically their sports cars. Since Telsa is able to easily build cars that match performance of the traditional auto muscle cars like the Mustang, Challenger and Camaro – how will they differentiate themselves from the rest of the market? This is where it’ll be interesting and where I am hoping to work with some companies/startups and OEMs on the ‘how.’ But the key is generating ideas, executing on those ideas so they aren’t clunky and too complicated and then launching them to see what their followers and loyalists think. The other way that’s really important – identify startups early that are doing really cool stuff and snap them up! The more ideas (generated internally & externally by startups), better execution and reasonable pricing these ‘features’ are, the better chance that one or more of them will hit. Lynchpin to success is not giving up too easily or too quickly since on the tech side, it’s data and new versions that are the path to long-term success. It’s a different mindset for traditional automakers (see how quickly these companies abandoned subscription services) and that’s why pushing back on their version of conventional wisdom becomes existentially important. - WM hanging on by a string. I thought they would be one of the companies that would do well, but they’ve done nothing but struggle – with capital, decisions, management, products, basically everything. They may be the first high-profile casualty of the ever increasingly competitive China market during an economic downturn. - The Argo AI founders raise capital to start another AV company. It looks like they will specialize in trucking and ridehailing. The investor has not yet been ID’d and the name is still TBD. The startup will be based out of Pittsburgh and have recruited Brett Browning, Argo’s ex-CTO to join as well. The Argo band is getting back together! INTRODUCING - XPeng comes out swinging with a refreshed P7i sedan in hopes of boosting lagging China sales. It’s important to remember that the P7 was XPeng’s best seller in 2022 so a successful introduction is immensely important for XPeng. Some notable updates from the original P7: optional LiDAR, charging has increased to 175kW from 90kW, it’s quicker, and the silicon powering its infotainment have been upgraded with Qualcomm Snapdragon 820A chip while the ADAS systems will use Nvidia’s Orin X chip. The G9 & P7 were also consequently launched in Europe about a month ago so we will soon find out how they’re being received there too. BY THE NUMBERS - 26.5%. That’s the percentage that IC imports (by quantity) declined in China for the Jan/Feb period. That’s in addition to the 15.3% fall in 2022, which could be a combination of restrictions and supply chain issues. It’s no surprise that some of the leadership seem to be upset with the US. - 40%. That’s the tariff rate that Turkey slapped on Chinese imported EVs in order to give it’s own homegrown EV a chance to succeed. ___________________ 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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