The Coronavirus effect, Tesla's One Millionth, Dealers Need to Step Up - SAI Newsletter #10
A lot going on in the US over the last couple of weeks into the last few days and now it seems Americans are finally ‘waking up’ to the coronavirus hitting American shores. Two coronavirus cases have been identified in Michigan, there are likely many more though, which definitely creates a bit of unease for everyone here.
My family came here originally to spend a few weeks during CNY to visit family and decided to stay in order to try and avoid the worst of the coronavirus in China but it seems now that the worst of it for the US is still in the days ahead with China having likely effectively containing it.
With many scheduled conferences and meetings I’d planned to attend being pushed out or cancelled, it seems the private sector has done its risk / reward calculation and decided the risk now outweighs any reward from having their employees congregate to work at their offices. Most major sporting events have been postponed or cancelled outright and Disney is closing its doors – one of the true signs of how serious the US is starting to take this - sports and entertainment are being affected.
This newsletter and some of the other projects that I’ve committed to are helping me focus during this time of real uncertainty. Spending your time & energy towards anything BUT the coronavirus is probably the best thing if you want to keep your sanity.
Now onto the news.
IN THE NEWS THIS WEEK:
- Tesla produced its 1 millionth vehicle this week, a red Model Y for those wondering.
- GM cancels the Cadillac Lyriq electric vehicle reveal originally scheduled for April 2nd.
- We are O-FFICIALLY in a bear market. That was one helluva 11-year run that made many people, although not everyone, much wealthier.
- We knew this already, right? That there would be supply chain issues caused by the coronavirus?
TRENDING ON SOCIAL MEDIA:
- NBA games, MLB spring training and the NCAA tourney have all reacted to the dangers of the coronavirus by suspending games or cancelling tournaments in the case of college basketball. THIS IS A BIG DEAL.
- Rudy Gobert & Donovan Mitchell, starting center & point guard for the Utah Jazz (an NBA team) and Tom Hanks and his wife Rita Wilson were diagnosed with the coronavirus.
- This is why people dread the traditional ‘dealership sales experience’ AND why it will likely be obsolete within 10 years more on that though below in a deep dive. Pretty petty stuff.
- Fool me once, shame on you – fool me thrice, blame it on the tech stack? Robinhood - the asset trading platform startup unicorn that offers commission free trading – whose service has suffered its third outage in two weeks probably needs to chat with its CTO.
PRODUCT / SERVICE INTRODUCTIONS:
- Wunder Carpool launches in North America. This service works with companies to encourage their employees to connect with each other to share rides in order to reduce CO2 and traffic congestion. I can see these types of services gaining traction as long as the companies can convince individuals to prioritize the ‘greater good’ over their individual wants / needs.
- Swytch Technology electric bike conversion kit goes on sale. I’d heard about this company last year and was curious to see if their product would go into production and here it is. It’s reasonably priced at £399 / 499 (I guess) and seems not to be too difficult to install so if someone actually gets their hands on one, ping me since I’d love to know what you think.
- The Bird Product Development team seems to be stepping up their game by intro’ing the Scoot Moped in Austin, TX last week. Looks like they’re tiering their branding as well with this one moving to the ‘Scoot’ brand name. Looks comfy but as a shared ‘last mile’ mobility product how long will it last in the wild and how much will it cost to repair& maintain since anything just short of ‘bulletproof’ will make the service unprofitable (based on current pricing & usage of similar services). Specifically, the more moving parts & soldered connections, the higher the chance that something breaks down.
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
We could speculate about whether or not an electric Cadillac or Hummer would be able to compete with Tesla or any other EV that’s going to launch in the next couple of years since besides range & reliability I would argue, we frankly don’t really know what consumers want in their ‘ideal’ EV since there are still so few ‘real’ competitors to Tesla out there at the various price points.
Since price helps make products / services relative for comparison’s sake, what could and would be a GAMECHANGER for any company, let alone GM, is if it could produce exciting EVs that resonate with consumers more cheaply than Tesla. With the already significant volume, marketing and distribution advantage this would definitely put Tesla on their heels, a new role for them and Elon since they / he are almost always pushing the narrative. Elon has always said he would like more players in the space and in the next 18-24 months, he going to get his wish.
Cloudminds - with offices in Silicon Valley and Beijing – was blocked from sharing its US origin data / technology with its China office because it did not have the proper licenses issued for the IP.
Is this a warning for all the other Chinese companies and there are many, specifically the EV / AV companies developing & testing their AVs in the US? This could mean that the research being done and data being collected by their US operations would need to be licensed over to their China operations, something that they didn’t have to do previously creating a potentially ‘showstopping’ bottleneck for their business.
For those companies that see the US as a key market and want to do business here, this may not be that much of a deterrent but for those whose primary market is China they may completely reconsider their long term strategy (read: where their non-Chinese revenue should come from) and they’re definitely doing the calculus on closing all their ‘R&D Centers’ not located in China - the risk of closing their China ops of course is that the China team alone may not have the ability to produce a Worldbeating product.
According to the Financial Times, Waymo raised its $2.5B a couple of weeks back at a $30B valuation, a small haircut from Morgan Stanley’s estimate of $175B (now obvious WAG) in 2018. The main reasons for this reconciliation are:
- Morgan Stanley’s valuation wasn’t based on reality.
- Reality set in over that period about how much investment is needed in order to develop a true, gamechanging AV system.
- Reality about generating revenues sooner rather than later thanks to the reset in valuations of unicorns caused by the WeWork IPO mess. This is also likely why Krafcik’s note outlined a few notable revenue generating opportunities outside of the normal autonomous vehicle service like getting into the delivery space and the licensing of technology space.
This is still a pretty significant valuation that is the envy of most other AV startups out there and with Alphabet as a backer, they have one VERY big wallet helping them pay their bills.
With the coronavirus having potentially peaked in China and people beginning to slowly head back into the office, Beijing’s subway authority has decided to try to implement a virtual queuing system to avoid actual lines and crowds outside of the subway stations increasing the chance of a coronavirus flareup.
Seems like a great idea in theory and it makes alot of sense to launch it while the load is still small but short of adding many, many more trains during peak ‘to work / from work’ times, I don’t see this solving the crowding problem when load finally gets back to normal density as folks are back on the job …in the office. Maybe this is just a temporary band aid that gets them through until the virus is finally defeated? Maybe as they gather data from this pilot, they can course correct to account for the increased ridership? I give them credit for trying something different, even if it may not work out as well as intended.
Reilly Brennan does a good job here of detailing the challenges ahead for auto dealers and repair / maintenance service providers the form of lost revenue (35%) due to the transition from ICEs to EVs. Specifically suffering $1.3K in lost revenue over a 5-year period for each incremental customer switch to electric since this likely means that their already low margin business becomes unprofitable.
There’s also a great deal of insights with regards to tires (EVs go through tires faster than ICEs) and what he calls the ‘Visibility’ category and includes windshield wipers, washer fluids, etc. Those are increased revenue opportunities due to the trend towards windshields like the Model X, which he says costs ~$2.3K to replace!
One thing is for sure, the dealers still have a chance to pivot their businesses in order to rightsize their operations and make themselves relevant through new business / service models in order to recoup some of that revenue loss, especially now that the EV segment globally might take a 1-1.5-year coronavirus mulligan. If they’ll take advantage of it though remains to be seen. For those that do though, please contact me …I have a few, good ideas.
MARKETING / MEDIA
With the current nature of multitasking and short attention spans, should it come as a surprise to anyone who follows social media platforms that WeChat may be losing some of its shine to TikTok, Douyin (China’s version of TikTok) and Kuaishou, the short video platforms that many young folks in the US and Asia are using?
As a fledgling platform with new technology moves into the mainstream creating innovative ways to socialize that capture young audience’s attention, it has become harder and harder for incumbent social media platforms to keep their caché as the preferred tool for attracting attention to products and services (See also Facebook vs. Snapchat) and thus frustrating (not just auto) companies that are trying to reach young consumers.
This is why it’s SO IMPORTANT to have internal marketing (research) folks that keep a close eye on key trends in the marketing / social space. Better yet, have some social media ninjas on the internal team so that they can find the right agencies to help you find the ‘right’ platforms that can properly communicate your branding, positioning and spotlight your current & new products. It also makes it key that you KNOW who your customer actually is and know the ‘how’s, where’s, what’s,’ about content consumption so you can meet them there. Having the right platform but wrong messaging is also a common problem when trying to reach potential customers.
With that having been said and as the author points out, WeChat still has a stranglehold on payments and messaging. My prediction though is that within the next 5 years, WeChat will have weakened significantly due to emerging platforms that are able to steal a good portion of users away from WeChat …or WeChat will just acquire them and that will be that. Will you be able to identify that / those platforms and utilize them to elevate your products above the competition though?
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.