What a difference a week makes. My first prediction didn’t take long to come true. A few hours after I pressed send on last week’s newsletter, Tesla slashes pricing on its M3 & MY models for the US & EU markets. And it’s hilarious watching the Tesla STANs twist themselves into pretzels to try to explain the ‘why.’ The equation is simple: old product + more competition = slowing demand But that’s not all because they really don’t have any new product coming online either unless you count the Cybertruck (which still may not make it to production until late '23) , which should boost the US market a bit but not the other major markets. Combine that with a bunch more capacity that also came online in 2022. This means a potential for a lot of idle capacity so the only way to try to keep utilization rates higher, slash prices. The price cuts should really help them in the US & EU markets but not so in China – THE linchpin region for Tesla and most other automakers that sell in any type of volume there. This likely won’t be the last cut either. Look for more towards the end of the year when legacies are aiming to launch new product into the US, EU and China markets. Tesla will likely try to blunt the impact by cutting again so for Tesla buyers – CAVEAT EMPTOR. One piece of local news that caught me off guard. Trevor Pawl – the Chief Mobility Officer for the state of Michigan is stepping down from his role after 3 years. I don’t know Trevor well but I always believed he was like me – a true believer. And he's a grinder, I’d see him everywhere participating in conferences advocating for the state of Michigan. He will be missed. INTERVEWED/QUOTED Financial Times. I had the pleasure of speaking with Ed White of the FT to chat foreign legacies in China and their faltering sales. A number that stands out – 81% of all EVs sold in China in 2022 came from domestic Chinese brands. That should FREAK the legacies out and is a BIG reason why VW and GM, two of the foreign legacies that rely on the China market for a good portion of their profits (50% in VW Group’s case) are doubling down with more EV product launches and large investments. Click this to read the article. Caixin. I spoke with Ward Zhou for his deeper look into the final sales numbers for the China market with a look into what analysts are forecasting sales to be for 2023. All, myself included, think the days of near 100% growth are over but it could still hit a respectable 35-40%. I am on record as saying we’ll get past 9M this year so for now I’ll stick to that – most other analysts seem to be more conservative. Another great article with a lot of data so for those that want to deep dive – you can do that by clicking here. CHINA EVs & MORE We will host our live Twitter Spaces today at 3pm EST. Look for the Twitter Space room from Lei around that time. For those that can’t join our live Twitter Spaces room (shame on you!), the China EVs & More podcast is available wherever you grab your podcasts from. Most of our back pods are posted and the descriptions will be able to tell you what we discussed that particular episode. NEWS THAT WE PAID ATTENTION TO THIS WEEK: - BYD in the US? Yes, but not so soon. As I’ve documented in past newsletters and on the China EVs & More podcast BYD had planned to make a big splash at CES a few weeks ago but due to the ongoing tensions between the US & China, they decided to pump the brakes. Friend of Sino Auto Insights Nori Shirouzu writes a great piece for Reuters that effectively confirms what I’d heard about the change in strategy. But BYD isn’t making this decision in a vacuum either, as many China EV Inc weigh when to enter the US, that’ll have influence on when BYD enters as well. But they also need to consider resource allocation since they’re already in 35 countries and counting, most of them entered within the last 2-3 years. My guess is BYD waits out this year and makes a big splash in 2024. They’ll need to make a big splash since it’ll be the culmination of a lot of thought and consideration. Unless other China EV Inc throw caution to the wind and announce entering this year forcing their hands. - Commercialization of AI (read: autonomous vehicles) likely to move faster in China vs. the US. I’ve been back now about 5 months. I can count on 2 hands the number of cities that are testing/piloting L4 capable ‘robotaxis’ here. In China, there are multiples of that number. There are a few things going on here. First, with China’s top-down approach, once they make a decision to move forward, it becomes a national policy that’s implemented locally. The cities and provinces still have a say but they’re also looking to be branded as an ‘innovative’ city so not a lot of disagreement between the two sides. In the US, AV pilots are approved at the state level, federal has nothing to do with it. There are also exponentially fewer AV startups trying to be first, so the competition isn’t as robust or cutthroat although I’d argue that China AV Inc in the US is also doing a lot to push our homegrown companies. I’ve been told several times that top to bottom the teams in the US are ‘better’ with more experience, education and support. But China has the scale and the will to be the global leader. Their reach is farther too especially since there aren’t any notable US AV companies operating in China. Who will win? That’s still anyone’s guess but as someone who, in the past year, has been able to ride robotaxis in China and the US. China is closing in fast… - Mining rare earth metals for batteries is getting deadly. As Chinese companies expand into countries and regions that hold most of the rare earth metals needed to build battery cells for EVs, resentment builds up, especially when they import workers from China rather than employ locals. Case in point in Indonesia where there was a conflict at a Chinese nickel smelter (refinery for nickel) that left a couple of people dead. We can expect more backlash against Chinese investment into foreign countries, specifically poorer countries who believe they’re being taken advantage of – they are, it’s no different than western countries all throughout history. Other countries & regions to keep a close eye on: the Democratic Republic of Congo (for cobalt), Mexico, Australia, Canada and Chile (for lithium). TRENDING ON SOCIAL MEDIA - Didi is BACK in China, but are they still a major player in the mobility space? People I spoke with still like to think so and the service is still used by most of my friends but getting more users now that they’re back on the app store could be a challenge. The Chinese govt literally clipped its wings for >1.5 years which in China may as well be a lifetime. Can they build that momentum back up, we’ll have to wait and see but I don’t see them being as powerful or as global as they were pre-smackdown, which is a shame. - Volvo is building a minivan. Technically, they would probably prefer me to say MPV but they’re throwing their hat in the ring to go against a brother, Zeekr and a few others including Buick and BYD’s Denza brand. This is a lucrative market in China, so this makes sense but it’s a bit out of character IMHO for Volvo. Let’s see if they use their ‘safety’ positioning for this product. And exactly how much is carryover from the Zeekr 009? Is this basically a reskin? - China shrank last year. By ~850K people. The last time that happened was 1961. India is probably already the most populous country in the world but 2023 may be the year its O-fficial. There are A LOT of serious, structural issues that the Chinese govt will have to deal over the next 50 years that will take a lot of effort to fix. It’s also a big reason why many economists shifted their belief that China could overtake the US in GDP eventually. Many believe they now can not. BY THE NUMBERS - 10%. That’s how much share EVs had in the global market in 2022. A few other stats: US – 5.8% (from 3.2% in 2021), Germany – 25%, China – 19%. Global sales of cars (ICE+ EV) = 80.6M - 13.7M. How many cars were sold in the US in 2022. It’s worst sales number in >10 years and -8% YoY. So the chip shortage DID indeed affect SOME automakers. GM was the only major automaker to report a YoY gain and took the top spot back from Toyota for sales leader in the US. - 41% The %age of European companies that have relocated some of their operations from China to Vietnam. The shift is real but it’s impossible for most manufacturers to completely replace China as a stop in their supply chain, specifically for the companies that do major business there. This is based on a European Chamber of Commerce (Vietnam) survey that was released last week. India, a growing market that will likely replace China as the most populous country in the world in 2023 is another hot relocation spot and that’s not going to change. _________ 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.