Tesla's share price, the quietest AV company, solving the 'last mile' - SAI Newsletter #5
Officially, much of China is back to work although most are prohibited from going into the office and are working remotely. I am also working remotely, just from the US. Still trying to get a decent cadence going with work and personal life since my original plan didn’t include plane tickets being cancelled and having to reschedule trips and meetings. So for those in China or working with colleagues in China or who are supposed to be in China, there’s still a lot of uncertainty they’re dealing with, especially if they have kids, so remember to take that into consideration when you’re dealing with them.
I don’t have any problems keeping myself busy in Detroit though since it was slow the last two weeks due to Chinese New Year but as people start plugging back in to try to create some semblance of a routine it’ll be interesting (and tiresome) to keep going on a 20 hr. cycle.
Finally, I had a good chat with CK Tan from Nikkei Asian Review about Tesla’s potential manufacturing challenges as it gets its Shanghai Gigafactory up and running at full speed. You can read it here.
IN THE NEWS THIS WEEK:
- The global car industry will feel the effects of the coronavirus throughout most of the year likely by reducing 2020 vehicle sales in China by millions, yes with an ‘M.’ Hubei province, which Wuhan is the capital, makes up 9% of total China auto manufacturing capacity and it’ll be some time before that area is up and running at or near capacity. This will affect BOTH ICEs and EVs.
- Apple further invading territory that used to be exclusive to the automakers. This time, Apple has created an API in iOS that would allow you to start your car using your iPhone or Apple Watch.
- Ford and GM reported earning this week with both reporting reduced earnings from the previous year but for different reasons. For GM, it was mostly due to the 40 day strike that cost it about $2.6B in earnings while Ford had difficulty launching its 2020 Ford Explorer. Both reported contracting sales in China, which could be a major challenge for them in the future due to the continuing challenges of that market.
- Shout out to my boys at Evoke Motorcycles, a Beijing based electric motorcycle startup that have announced plans to sell their two bikes, the Urban & Urban S into the EU & Australian markets. At their price point of ~$8K USD I think they’ll find that they’re going to keep Foxconn, their contract manufacturer, pretty busy.
- Bird acquires another e-scooter business in the EU. Now that WeWork ruined for everyone not having to be profitable in order to be a unicorn, Bird is pushing for profitability with their operations, the problem is, in the excel spreadsheet I am using, I just don’t see a reasonable timeframe that that’s going to happen, whether or not they add another 40 cities.
TRENDING ON SOCIAL MEDIA THIS WEEK:
- Lotta bling and tech stuffed into the new 2021 Cadillac Escalade just revealed this week. It’s starting at around 80 G’s too.
- Muddy Waters is at it again, this time their target is Luckin Coffee.
- Uber vs. Lyft: Same same but different. As someone who toggles between both services, this is a good 1:30 mins. spent learning about how they differ.
- Uber loses a mind numbing $8.5B in 2019 BUT promises profitability by the end of 2020.
- NIO raises $100M USD on convertible notes but with the coronavirus on top of the already struggling auto market, is this too little too late?
This weekly newsletter is a collection of articles I 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, I also provide a point of view that I hope educates and sparks debate.
The Sino Auto Insights team
I don’t intentionally cover Tesla every newsletter but they ALWAYS seem to be in the news, this week it’s all about their share price and whether its warranted or not. Let me just say that IMHO it is NOT warranted and that spike in price is likely a combination of irrational exuberance and FOMO.
BUT having said that, the share price seems to be more and more a reflection of Tesla’s competition and their inability till now to come up with viable competitors for Tesla’s products. That and the fact that none of the OEM’s CEOs is Elon Musk.
Case in point, and I mentioned these products in earlier newsletters, the Porsche Taycan and the Audi E-Tron. These are VERY poor attempts from the VW Group to put products on the road that can compete with the Model S & X. That’s not to say these aren’t great vehicles, just not great electric vehicles.
Now, I DO believe that the OEMs are incentivized properly enough now to focus more solely on viable EVs that will make things interesting and importantly they have the resolve, experience, scale and capital (in most cases) to develop some amazing products. AND this is what Elon wants!
EVs are (or will become) a growth market, right? That means that Tesla can sell boatloads of their vehicles while the OEMs can ALSO sell boatloads of their EVs and not have to fight over their own customers, at least not till the market matures substantially.
If / When that happens, you’ll likely see a more compelling case for their share price. Till then though, those guys that took a HUGE bath continuing to short Tesla stocks probably need a BIG HUG.
Aurora, based out of Pittsburgh is likely THE one AV startup that you’ve heard the least about but don’t let that fool you into thinking they aren’t to be taken seriously because I’ve been told by multiple folks that I respect that Chris Urmson, Sterling Anderson, and Drew Bagnell are cold blooded assassins and could be the most formidable team GLOBALLY when it comes to being the best to get autonomous vehicles to market.
Notice I didn’t say first since I think that’s definitely not one of their motivations. They must seem to think so as well since they’ve till now not agreed to any formal investments by any of the major OEMs nor had many marketing/media events unlike a Cruise, Argo or Rivian.
As I documented in a past post about WeRide in China, the AV business is pretty unforgiving and those that play in it will need A LOT of runway and capital if ANY company is to eventually come out the other side with a viable, profit-making business.
I wasn’t able to meet with them when I was in Pittsburgh last week but I’ll be following Aurora more closely since I think they could be the ones that are left standing once it’s all said and done.
LAST MILE / CITY SOLUTIONs
There are lots of smart people around the world collaborating on new ways to address their city’s challenges with traffic congestion and pollution. As someone who lives in China, let’s make very clear here that ‘traffic congestion’ and ‘pollution’ are relative terms and generally speaking cities in the west don’t deal with those issues to the degree that many in Asia do.
Things have gotten A LOT better in Beijing over the last several years but tackling the low hanging fruit was always going to be the easy part. The real problem solving begins when you’ve hit 80% on the 80/20 rule and now you’re trying to address the 20% that’s left over.
Having said that, the ONLY way that each city will be successful, a ‘success’ that will be defined differently in each individual city, but in my opinion is defined as providing the most vulnerable, least affluent people affordable, reliable, convenient and safe transportation.
Last mile solutions for those people don’t start when they enter the city though, they start where they live, likely in far-away places (since they can’t afford to live in the city) so I hope that when all these smart people get together to provide ‘city solutions’ to the ‘last mile’ problem they start from out there as well.
In honor of Google Maps 15TH anniversary, an artist in Berlin created ‘fake’ traffic jams by carting 99 mobile phones around the city with Google Maps activated to show that although a real breakthrough 15 years ago, Google Maps and by extension, many of the services we rely on currently in our daily lives still have quite a ways to go in order to provide the information we want while still filtering out the white noise, incorrect / artificial inputs could lead us astray or even worse, put us in danger.
In the wrong hands this could be pretty problematic and illustrates that how even after 15 years, Google needs to remain diligent in order to protect its users. If we take a step back, it shows how challenging it is for ALL tech companies to stay ahead of the people trying to game their systems.
Those new to following the relationship between the world’s two largest economies, the bifurcation of the US & China technology ecosystems is something that has been going on since China decided to block Facebook, Google, et al from the China market.
As the article also mentions, the stakes have gotten even higher recently after the Obama administration left and Trump became Pres of the US. There are still no CLEAR lines drawn when it comes to tech that the US can / can’t sell to Chinese companies so this uncertainty is forcing many Chinese companies, like Huawei to develop ‘out’ US tech in order to eliminate that uncertainty. This ‘protectionism’ also includes investments in US tech startups as well with an all-encompassing black box of a committee (CFIUS=Committee on Foreign Investment in the US) deciding on which investments can and cannot be made by foreign firms (read: Chinese).
This being an election year, depending on who is elected President, the US could continue its more confrontational stance and I’ll go even farther to surmise that its more likely than not if Trump is reelected.
As it relates to autonomous vehicles, there could be a future where some of the main HW/SW systems including the AI, battery (management) & mapping could definitely be regional with the largest players in China and the US competing for the rest of the world (ROW) markets. Currently, the EU doesn’t have any real horses in those races IMHO.
We’re a long way from that for now but if you’re working at a multinational firm in the technology space with a decent chunk of your revenue coming from the Middle Kingdom, your Risk Management team is definitely keeping close tabs on the politics and policy of this relationship, but if they aren’t what are they waiting for?