The Demise of E-Scooters, Open Sourcing 5G, US Gig Economy Layoffs - SAI Newsletter #17
Had a blast participating on the supchina & View from the Peak US China series virtual panel on China EVs last night with Neil Thomas and Ilaria Mazzocco from MacroPolo, and Rupert Mitchell from WM Motor. It was my first virtual panel but I thought we had a good flow and insightful dialogue. I received a good number of LinkedIn connection requests, emails, queries and general positive feedback so thank you for those that logged in. What’s becoming crystal clear to me is that the result of China flattening the curve, quickly locking down the country and closing its borders, not to mention implementing mass testing and contact tracing programs in an aggressive way over a short period of time, will be an economy that’s been spared the levels of unemployment (~20%) and economic struggles that we are seeing in the US. The US STILL isn’t out of the woods either as it stills struggles with containment, sheltering in place, and cooperation between the local and federal govts, even as many states begin to slowly open back up. Do NOT let anyone tell you differently, testing isn’t anywhere close to where it needs to be and that in concert with contact tracing is the ONLY way the country can safely open back up without the risk of another outbreak that could paralyze the country. Short of finding a vaccine I the next 6 months, I am convinced that’s the ONLY successful way forward for the US. I hope people there really begin to come around on this. China should be concerned with the US and EU’s recovery as well, since a prolonged recovery in those two regions will just cap & limit the ability for China to recover fully. Finally, let someone who’s spending weekends out with friends, eating, drinking and finally enjoying being out and about, ME – Let me say that these news articles that says the China economy is really struggling since people aren’t out is not seeing what I am. This isn’t to say that the economy won’t struggle a bit but I was out on both days this holiday weekend and there were A LOT of people out and about. I think there’s A LOT of RMB on the sidelines here wanting to be spent. As noted in this WSJ article, we may be some green shoots from the China auto sector and that’s much sooner than most analysts anticipated. That’s GOOD news. During my two week quarantine here in Beijing, I was able to record a podcast with Oscar Ramos, a partner at Chinaccelerator on the ‘Brutal EV competition in China’ that I am anticipating over the next 24-30 months as new products are introduced and Tesla tries to firmly establish itself as the Alpha here in the China market. Since I am a mentor for the Chinaccelerator program, we also discuss how startups in the mobility space can break through and be noticed by OEMs and Tier 1s. The link is here and I hope you take the time to listen. Feedback would be great too!
IN THE NEWS: - Bold move of the week: Jim Farley putting his money where his mouth is. Purchasing ~$1M in Ford stock to reassure investors about his confidence in Ford’s turnaround. - Intel acquires Moovit for $900M and plans to combine it with Mobileye – creating a HW / SW mashup that could compete against the likes of Waymo, Uber and the automakers. Their platform will also address getting people and things from Point A to B via a multi-modal solution. - Paris’ local govt. is fast-tracking transforming some of their boulevards into bike lanes while streets are less crowded due to coronavirus. This points back to the Singaporean opinion piece from last week. Seems some cities ARE taking advantage of uncrowded streets to transform how the city and its people move around. I was just in Paris back in November so I am excited to make my next trip to see how its changed. - Fellow Vietnamese American immigrant Thuan Pham, after 7 years, steps down from Uber as their first and only CTO. This guy has been through it all at Uber and I bet he has some crazy / scary / funny / terrible stories to tell about his tenure there. - Another commercial autonomous trucking startup has raised funds to get some robot trucks on the road. This time Inceptio has raised $100M from G7, and logistics firm GLP both from Singapore. TRENDING ON SOCIAL MEDIA: - Uber is looking to bailout Lime, a company they’d previously invested in – this time it’ll be on the cheap, potentially at an 80% discount. Uber is gathering chess pieces to create the ultimate multi-modal mobility platform it seems. Will the numbers finally with the addition of Lime, especially if they can’t get the physical driver out of the equation?
- How about an espresso machine in the shape of a Porsche flat six engine that uses real components from the engine to make your morning coffee! For a bargain basement price of ~$11K, this can be all yours!
- 74 of the BEST basketball shoes EVER! Love this list – it brought me back to being a kid heading to the mall every week to peep the newest kicks that just got put out on display. PRODUCT / SERVICE INTRODUCTIONS: Pushing the design, innovation and technology envelope. Please let me introduce you to the Verge TS. Pretty sweet, especially its rimless rear wheel design. — 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
Now to be clear when I write ‘digital’ above, do I mean, media, marketing, technology, systems, etc.? My answer – YES. As in all of the above. This isn’t to say I am that well versed in the finer details of major German companies but I’ve spoken with enough people here that work for them that I know the struggle is real.
Many prominent German, auto related companies located here in Beijing have tried to push their headquarters, whether that be in Munich, Stuttgart, Gerlingen, or Wolfsburg, to embrace a more tech and software focused future with little success. This isn’t much different to what’s going on inside the companies in Dearborn, Detroit or the surrounding burbs.
Leadership teams need to change, as in adding more folks, preferably from outside the company, that can and will challenge the status quo and drill into the culture the fact that building cars is not the future of the sector. Some of the old guard needs to step aside and if they don’t should can be requested to. Embrace change, encourage moving faster, accept more risk, make bolder decisions. The rest of the world (read: Asia) is not going to move any slower.
The coronavirus allows for some extreme decision-making and the time is now for those changes. Credit to Herbert Diess who sees the need to fully embrace going digital AND electric. VW Group’s existence depends on it. He knows if they lose their leadership position in China, it weakens their position in the rest of the world as well.
The DAX, like the Dow or NASDAQ, is not the ultimate measure of a company’s ability to do business now or a good judge of how they will do it in the future. But I’d call it a decent indicator.
LAST MILE MOBILITY
So before I get everyone confused. Bird, Lime, Spin, etc. those guys all use electric (kick) scooters. Revel uses electric mopeds, some people also call those scooters as well though so for our intents and purposes, Scooters = electric (kick) scooters.
Now that that’s been clearly explained, let me just say e-scooters’ very short-lived existence in many cities all over the world is likely over with coronavirus just accelerating their demise. Lots of good insights made in the article but I think it’s a bit rich that they needed a VC to tell us that e-scooters never made a lot of economic sense from a business standpoint since many of us saw that from the get - REGARDLESS OF HOW MANY RIDES / user / month.
I think pretty much none of them will survive as standalone businesses and will get scooped up by some other mobility provider (see Uber & Lime) for pennies on the dollar (in paper value anyway) in the hopes of rolling that service up along with their others to try to create a compelling multi-modal platform and one stop shop for people and things to get around. That’ll include parking as well when needed btw. Maybe Bolt has figured out a better way?
Just as Lime is getting bailed out and Bird is laying off 30% of their workforce, Bolt has decided that they can do it better and more importantly – profitably. This could just be a case of we have cash to deploy so we will use it now and try to get to critical mass or ‘bust.’
They’ve developed their own electric (kick) scooter that they think saves them money in maintenance and repair. Funny though because those two things don’t get more people to ride them which I think is ultimately the issue here.
I will keep an open mind and an eye on Bolt to see what becomes of them and their new 45 markets over the next 18 months. Will this tough time make them more resilient or push them closer to Lime and Bird’s current situation. One thing that they do have going for them is the backlash many cities, some in the EU, towards passenger vehicles and the pollution, they emit crowding city centers pushing them to limit access to those vehicles hence opening up more space for those e-scooters.
Some Silicon Valley darlings are all feeling the effects of the coronavirus on their businesses, enough so that all of them have announced layoffs. Uber (by 14%), Lyft (by 17%), and Airbnb (by 25%) will all try to rightsize as their companies lose as much as 70% of their business when compared to last year.
The lingering effects of the coronavirus will likely force these companies to adjust their business models to this new normal, searching for ways to boost their revenue while exploring products and services that could create new streams. As I’d mentioned in the intro, I think China’s economy, although beaten and battered, is not as far gone as the US’. I didn’t think Didi would need to, and it’s just been confirmed that they don’t plan any large staff cuts.
Didi also announced that they reached profitability without elaborating so let’s not confuse this with their current business model being solid enough for them to push themselves into consistent profitability without some further tweaking. The move back towards car ownership could be a HUGE gamechanger depending on how long that sentiment lasts.
Let me be as succinct as I can be about this article. I think EVERYTHING that was outlined in it will be implemented in one way or another in the US, EU and other parts of the West.
To summarize the article:
- Caps on restaurant capacity, try 50% of capacity for a long time.
- Permanent social distancing measures, like no crowding lines. Say minimum 1m (about 3’ for the Americans) apart. Some offices and restaurants may put physical separators in place between tables / cubicles.
- Temperature checks. Everywhere you go. Malls, work, restaurants, schools, grocery stores. Everywhere.
- Contact tracing. This will be the most controversial and most sticky to implement. We can’t beat the virus without it though.
- Hand sanitizer, disinfectant wet naps, be at the ready where-ever you go. Including your backpack or purse. I bet you that someone is developing moisturizing hand sanitizer as we speak. It’ll cost you a mint too I bet.
- The 2nd controversial post-coronavirus habit – wearing masks. It’s never been THAT strange to travel around different parts of Asia and see people wearing masks so not that big a deal. It’s not and shouldn’t be that big a deal in the West, but unfortunately people are making it out to be. They should get over it.
Prepare mentally for this new lifestyle because even if your local area only implements a few of these safety measures, if you’re a traveler, the places you go to, especially abroad, will likely have most if not all of them as a requirement to enter.
31 mostly US companies (with a few EU & Japanese companies thrown in) have banded together in an effort to create a true alternative to Huawei’s current 5G market dominance. This organization was also created to push away from proprietary, disparate HW / SW systems. Think of it as open sourcing 5G with the goal of making the entire system perform better without drop-offs in performance as you move from one region to another. This should also open the market up to smaller, ambitious, players that previously were boxed out due to the large barriers to entry.
A genuine solution should take the power out of one party and disperse it throughout the system so that not one participant has gatekeeper abilities. Standardization should equal simplification should mean, in theory better service at lower prices. This sounds too good to be true so I’ll have to see it to believe it. There are other organizations, that have also been assembled to tackle the 5G opportunity without much progress so we will have to wait and see if this one is the difference maker.
What I do believe wholeheartedly though is that competition does indeed breed innovation.
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.