Search

The US Wants in on EVs in a Big Way, GM & Ford Now Getting 'Street' Cred - SAI Newsletter #3



Photo by Qingbao Meng on Unsplash Since the calendar turned to 2021, it seems like there’s been a non-stop stream of news coming out of the mobility/EV/transportation sector! There was NO let up this week so let’s get straight into it. Biden makes a move to get the EV sector jumpstarted in the US by announcing that the US government will be eventually replacing all of its current fleet vehicles with EVs. There are currently about 645K vehicles in the governmental fleet, of which just over 200K are passenger vehicles with the balance being trucks (likely a combination of commercial and passenger). A pretty bold statement since Biden probably knows there will need to be infrastructure in place for all those vehicles to be useful. And with the truck lean on that fleet it should be good news for GM, Ford, Rivian, and Lordstown who all are planning or will soon be launching electrified trucks and SUVs. I guess the US is starting to feel left out of the EV conversation, especially now that the EU made their presence felt in 2020 by outbuying their China counterparts 1.4M units vs. 1.34M units. We should see continued growth in both regions since individual EU countries are spending boatloads to incent their citizens to consider EVs for purchase, dumping ICEs and diesels along the way. Unlike the EU, the Chinese govt. is continuing to wean people off subsidies and incentives in order to take a step back to see if the market take over. Let me re-phrase – The Chinese government has pivoted towards EV infrastructure and hydrogen fuel cell technology growth. In summary, EVs are here to stay and adoption will be accelerating quite significantly in the next 5 or so years especially if the US can get do its part to partake in the adoption. In addition, most private enterprises seem to be completely bought in, even if some of the management on some of the companies have not. TESLA IN THE NEWS - “…NO! I am better looking.” And the debate rages on, now between John Krafcik – Waymo CEO, and Elon about whether LiDAR is a necessary component for achieving Level 5 autonomous. This is in addition to Krafcik stating that Tesla is not really a competitor to Waymo but for this post, let’s stick to the LiDAR debate. It’s not just the LiDAR but the entire machine learning system that’s different so I don’t want to oversimplify this and have you all infer incorrectly that if Tesla straps on a few LiDAR sensors to their cars then they’re just like everybody else now - That is NOT the case. Let’s all start with this fact though. Currently, Tesla’s Full Self Driving system (FSD) is NOT autonomous. It’s L2. It’s ADAS ..technically. Can Tesla get to L5 with their current system, Elon is betting BIG that it can. All (well, most) of the other players in this space and we’re talking globally, who are some of the smartest in the biz, are either sheep or know something that Elon doesn’t. The side that’s right gets to keep strolling along doing what they’re doing, picking off the customers of the other side as they jump ship they’re on the Titanic and OWN the market. If Tesla’s right, that’s HUGE. For the other guys, it’s not as big a deal since that side is pretty crowded and competitive. I have spoken extensively with advocates of both sides and I have my opinion but man, I still don’t clearly definitively have the answers to what are the ‘necessaries’ and what are the ‘nice to have’ components both from a hardware AND data standpoint. I guess that’s why we have this century’s Betamax vs. VHS ‘standard’ debate. Those subscribers WAY smarter than me, please reach out to convince me that one is indeed clearly better than the other. - Great peak (video) of how Tesla rolls it’s battery cells. Think ‘How Duracell batteries are made.’ Notice, you didn’t see one person or employee in that 50 sec. video BTW. - ‘Production Hell’ for Lucid Motors per Peter Rawlinson – ‘No thank you!’ Seems that everybody’s picking on Elon these days. Heavy is the head that wears the crown. That means they’re all jealous of the market capitalization and want to take him and Tesla down a few notches. That’s great entertainment and hopefully a healthy dose of innovation at affordable prices as well! It also plays well into Elon’s game-plan of course. Lucid’s current head of Manufacturing Peter Hochholdinger, who happens to be ex-Tesla, says it was just poor planning. Doesn’t Elon know the Marines's 6 Ps? IN THE NEWS - The Taiwan govt. is now getting involved in the chip shortage. Germany, the US, the EU, and Japan have all made overtures to the Taiwanese government asking for help with the auto chip supply issues. The most recent pressure campaign came from the German economic minister in a letter to the Taiwanese economic ministry in an effort to push TSMC into pulling auto chips to the front of the production queue. I see a HUGE opportunity for some foundries that can quickly switch over their production lines and contract manufacture out to TSMC some of their capacity. This is likely a capacity issue in the long run and not just a lead-time issue as it is now. Looks like TSMC is going to be working through Chinese New Year… - Tough situations like this one in Tremery, France will likely be less publicized if the unions, OEMs, and municipal governments where their factories are have anything to say about it but a spotlight deservingly needs to be shone on these challenges that almost ALL significant OEMs and tier 1s will face. Tremery, where diesel engines for passenger vehicles were manufactured are now switching their lines over to electric motor manufacturing, that’s good, right? The problem is for the workers since electric motors have 20% of the # or parts that a diesel engine does. That means less staff is needed to produce the same number of engines in the long run. Here’s part of how we got here. First, there’s overcapacity up and down the supply chain for auto manufacturing all over the world. Some of it is due to constraints from union contracts that protect workers but most of it is from poor planning driven by poor demand forecasting from the OEMs. The uncertainty of passenger vehicle’s annual sales volumes is reduced by building a lot of extra capacity. That’s a rule in supply chain management, you reduce the risk of having a shitty forecast and hence stockouts by building more inventory. That drives cost though so every company normally has an optimal equation for the amount of inventory you should carry against a (%) of acceptable risk of stockouts depending on their particular balance sheets. Automotive capacity is a similar concept WITHOUT the ability to decrease capacity easily. In other words, they can’t have a sale in order to reduce capacity on a whim, unlike the tech sector which uses CMs and have that flexibility. The other side of that though is that underutilized capacity has high costs as well but once you add that capacity, it’s easier to manufacture cars and sell them at cost or even a loss than to temporarily shut the plant down since you’re already paying for the plant and likely still need to pay the workers and want to keep that capacity just in case demand spikes. There was always going to be a reckoning in the sector when the OEMs publicly acknowledged that the EV/ride-hailing/micro-mobility era was upon them. The fact that all these eras kinda hit all at once due to COVID-19 makes the situation to ‘right’ size even more existential. And the overcapacity at the OEMs makes the cuts that need to be made even more dramatic (and significant). There seems to have ONLY been one legacy automaker that’s openly acknowledged that smaller is better and that’s Mary Barra’s GM. GM got ‘it’ better and earlier than some of their contemporaries. Great article by Mike Colias BTW and one that the other automakers need to read and send to their teams. Don’t get me wrong, they all knew this was going to happen they were just hoping that would’ve been able to be ‘managed.’ I’ll probably get a few pings about other automakers that have right-sized and will do some research on my own to update everyone next week if I find any other notable exceptions. - GM, Ford finally getting some ‘respect’ from the Street? Relative to Tesla & the China EV cos., GM & Ford have absolutely been undervalued for a long time. It seems ‘the Street’ and the auto analysts that cover them are finally acknowledging that. Let’s be clear here though, these auto analysts, although they carry a ton of sway with investors, have largely missed the boat on a lot of the changes going on in the sector. AND they have really ‘zero’ visibility or understanding of the Chinese EV sector and how much influence it has over the US & EU markets (read: Germany). - Next level EV charging: While you drive. If the world can afford it. There are already startups that are working on static wireless charging, ie. in parking garages, so this takes that concept a step further. Here’s a chicken and the egg question for everyone. If there are ONLY these three choices in the world, what will come first: fast charging – like heading into a gas station and be filled up in <5 mins, batteries with 2-3X current range, or dynamic charging (charging while driving)? What would be your preference? - Nvidia, one of THE most important and unlikely tier 1s in the biz. This article only scratches the surface of how Nvidia become such an important player in the automotive space. Overall, it’s a great Silicon Valley success story. These guys innovate. That’s their thing. I know because I dealt with them on a weekly basis a long time ago. If you don’t believe me, google ‘Nvidia Bitcoin mining.’ TRENDING ON SOCIAL MEDIA - Faraday Future (FF) is back in the news, this time with a new dance partner. That new dance partner is none other than Geely, who is looking to sign on to be FF’s contract manufacturer. Geely has recently kept the journo’s pretty busy with their flood of big announcements over the last month or so. Not many details about the yet to be finalized deal but unless Faraday can secure funding, that’s all this is will be a rumored partnership. - 50 companies to look out for in 2021 according to Bloomberg. Interesting list that does NOT include any EV or legacy automakers. See a decent share of Chinese companies though and a couple of transportation-related companies. - VCs have poured $40B into autonomous vehicle startups but who is betting more than others? Here’s a list of the most optimistic. - I want to have a yard full of tall grass so I can mow it with this OVER THE TOP lawnmower inspired by the Air Jordan XI’s …of which I have three pair but just don’t tell my wife! I am NOT a Mansory (German auto customizer) fan but this thing is AWESOME. JUST THE NUMBERS - 7 trillion dong. Or ~$300M USD is what Vingroup – Vietnam’s largest publicly listed company is trying to raise in the local capital markets to fund their ambitious Vinfast auto manufacturing subsidiary. Vingroup used to be known as a real estate developer but has pivoted (think Evergrande) to what they think is another potentially lucrative sector. Vingroup’s largest shareholder also happens to be its chairman who is also Vietnam’s richest person - Pham Nhat Vuong. You’ll see more of Vinfast down below. - $150M round of investment closed by UISEE, a Chinese autonomous vehicle startup based in Beijing. This round was led by a state-backed VC fund. You know one way to almost guarantee that you’ll be a viable player in an emerging technology sector in China – get backing from government agencies and SOEs. UISEE seems to be currently focused more on the commercial side but will be launching pilots in partnership with state-owned automakers later this year. I don’t know a ton about these guys so I better get to work! - $12.2B of operating profit for VW Group last year or almost half of what they earned in 2019 and not near enough to help them fund the ~$90B they announced they'd invest into digitizing. - $1.5B of investment is being proposed by Governor Newsom, the Gov with the best hair in the biz! This will largely go to building out a larger EV charging infrastructure for California AND helping lower-income Californians afford a NEV. This isn’t important because of the amount but because in the auto sector, what California does most of the US follows since car companies don’t want to manufacture two sets of vehicles – one set for California and one for the rest of the US. This + what the Biden administration has proposed should put the US on the path towards sustainable transportation in 2021. PRODUCT & SERVICE INTRODUCTIONS - Bianchi, traditionally a legendary Italian road bike designer/manufacturer is getting into e-bikes. A new line called the E-Omnia (meaning ‘everything’) and will incorporate a family of bikes that should cover just about every use case, hence the name Omnia. Bosch seems to equip almost all medium-to-high end e-bikes with a motor so no surprise here that Bianchi is using them as well. Designs aren’t too distinct so not sure what their ‘secret’ sauce is going to be. - Peugeot launches an e-bike called the eC01 Crossover. It’s a step-through urban bicycle that joins a line of other e-bikes launched by Peugeot late last year. This kinda looks like any other e-bicycle out there and for about the same price: ~$4K. It could be a hit in France though where Peugeot has strong brand recognition. - Vinfast twice in the newsletter! This time they give us a peek at their EVs they’re planning to launch creatively called the VF31, VF32, and VF33. They’ll be sold in the Vietnam, EU, and North America and will be taking orders for them later this year. Wow, ambitious but really is there any other way to be in this sector? They’ll have a decent number of technological goodies and abilities but the proof is in the pudding as we say. Not bad looking in the pics that’s for sure. —— 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

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.

22 views0 comments