• Tu T. Le

Tons of investment pouring into EVs; Ford & VW mashup news - SAI Newsletter #2

Updated: Jan 31, 2019



All,

Thank you for those who sent over feedback on the new format of the newsletter. I will try to incorporate some of your suggestions in future newsletters so stay tuned.

As CES has wound down and we've moved onto the North American International Auto Show (AKA Detroit Auto Show) this week, I cover a few items that were announced last week and one major announcement from Ford and VW. Other than that let's get right to it.

My name is Tu Le and I am the founder and managing director of Sino Auto Insights. 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 U.S. I also provide a point of view that I hope educates and sparks debate about how I look at the issues. We will mostly divide our articles into these buckets: AI, Mobility/Ridesharing/Ride-hailing/Bikesharing, OEMs, EVStartups, Investments, and Other. If you know of anyone who would like to sign up for this newsletter please have them visit: www.sinoautoinsights.com. Thanks for reading.

The Sino Auto Insights team

OEMs

VW leading the way in investment on developing EVs for the world …and China specifically. ( www.reuters.com)

Over $300B is forecasted to be invested into EV development collectively by global automakers over the next 10 years. The VW Group, who are still trying to put the ‘Diesel-gate’ scandal in the rearview mirror has committed to $91B (~30% of total) of that total, with much of it dedicated to developing and launching vehicles for the China market.

VW’s new-ish CEO, Herbert Diess, has grand plans for the company including trying to maintain VWs dominance in the global market again, namely China and the EU.

A couple observations on VW, $91B is, without question, a princely sum but after you consider the number of brands they need to feed, over 10 and counting if you include JVs and any future service brands they will ultimately launch, that sum might seem a bit less large.

The contrarian might look at this and think, that many brands are 3-5 too many and that management’s focus may be scattered. There is already a lot of overlap between the SAIC & FAW VW brand product portfolio and that’s before the main differences between vehicles in the near future will be mainly the software and its battery.

Let’s hope, and for now, assume that Diess knows more than anyone else about why making that type of financial commitment will put the VW Group in the best position 15 years from now. #$300B #withaB #VWinvestment #China #EVs


Ford and VW agree to …not so much. ( www.nytimes.com)

With the North American International Auto Show (Detroit Auto Show) as a backdrop, VW and Ford announced that they’ll work with each other on some vans and trucks for the U.S., European, African and South American markets.

With all the recent issues both companies have had to or are facing; sales declines, engineering scandals, leadership turnover it would make sense to proceed cautiously but neither have the luxury to move slowly. Both companies seemed to be fully committed to an ALL EV future, mostly via SUVs, so if we peel more layers of the onion is there really more room for future ‘synergies’ between the two?

They probably both have memories fresh in their minds of the of the Daimler & Chrysler merger that was a disaster for both Daimler & Chrysler, so much so it had to be undone years later. I know this isn’t a merger, nowhere close but the issues with culture, management style, strategy when combined with fear, need for control and bad decisions that caused the DaimlerChrysler merger to fail, could ultimately be why they are being prudent with their relationship and how much they want to work together. #Ford #VW #mashup #notsomuch


EVs aren’t that popular in the U.S. (duh!). ( www.nytimes.com)

For those that track the daily news coming out of this sector, that’s not a big revelation. What the article doesn’t really touch on is that in order to really create the economies of scale necessary to succeed as a global automotive manufacturer, lots of things need to be shared namely vehicle platforms, powertrains, interiors, etc. across vehicles and platforms that are sold in multiple regions.

All the moves and investments that the OEMs are making in China will have a ripple effect on other markets like the U.S. and the EU.

They may be slowly introducing them to the American public, but if GM, VW and Ford collectively launch > 80 EVs over the next 5 years here in China you can bet that many of them, rebadged, localized, or slightly massaged will make it to other markets. It’s just not feasible for these guys to invest in that many different platforms so let’s see how they end up marketing rebadged vehicles originally launched in China to their U.S., markets.

#EVs #notinMurrica #lipstickonapig #USmarket

Partnerships AREN’T easy. ( www.bloomberg.com)

Cruise’s ability to work directly, as co-workers, with the folks that are designing, developing and integrating their software into the vehicle that will be manufactured in-house should, theoretically, allow for tighter integration, resulting in a better user experience. Theoretically.

If Apple used a partner to design and develop the hardware while they developed the software themselves for their products or vice versa, I can assure that we wouldn’t have the same type of integrated seamless experience. Think generally, Wintel and Android phones.

These guys don’t even have a viable product on the market, yet they’re already facing questions about spinning themselves off? I guess as long as the founders and original investors get their piece, it doesn’t matter if what they’re trying to produce works or not, let alone well.

#CruiseAutomation #GM #WallStreet #IPO #spinoff

Mobility

E-scooters pose a risk of injury …to pedestrians not riding them. (www.washingtonpost.com)

China had similar issues with the bike-sharing when it first launched and their solution was to limit the number of bicycles on the roads and designate areas in each city where bikes should be parked. Each municipality had similar, but not the same exact solutions to the problems and I don’t believe these scooter companies operating in the U.S. and the EU, where salaries are much higher, can hire hordes of employees to help them transfer their scooters en masse from one high traffic location to another which also happens now in China.

Unfortunately, these are all band-aid type solutions to a problem that needs strategic direction from each city, based on forecasts and actuals of what’s happening in their city, flows of traffic, high traffic times, public transportation usage, parking structure locations, and costs, as well as many other considerations.

Oh, and special interests should have their say but as part of the larger conversation where collective goals are agreed to and all suggestions point to moving closer to those goals. One major goal for ALL cities should be to make it easier for low-income folks to get around. Alternate transportation should NOT just be for people that can pay for it since it needs to work in concert with the entire system. I am stepping off my soapbox now.

#e-scooters #healthhazard #noparking #menacetosociety 

AI

The next step forward for AI. ( www.hbr.org)

A really interesting article that highlights tackling AI from a top-down approach can arguably result in AI system as good as using a bottoms-up approach currently en vogue, without the terabytes of data needed to ‘teach’ the AI system how to react when confronted with all the scenarios it will encounter, such as autonomous vehicle edge cases that are very likely life-threatening, but much less data available.

I’ve never really subscribed to the ‘data is the new oil’ narrative that’s pushed by folks like Kai-Fu Lee since without even digging that deeply you could find flaws in that analogy like data is not scarce and not controlled centrally by few entities.

Breakthroughs in this alternate approach to AI could hopefully lead to technological breakthroughs from upstarts that don’t have access to the capital nor data necessary to take that bottoms-up approach method. Maybe there can be some sort of classification for types of AI usage and corresponding accuracy rates necessary for AI systems can take over for human interaction.

An example would be using a Roomba to vacuum your house vs. Level 5 autonomous vehicle driving on our highways. A Roomba could clean the house with 85% accuracy and not endanger anyone’s life while an autonomous vehicle with an 85% accuracy rate would not be allowed on the road. #datanotoil #topdownAI #bottomupAI #AI2.0

Baidu moving closer towards WORLD DOMINATION. ( www.techcrunch.com)

Baidu announced during CES, ‘Apollo Enterprise,’ specifically targeted to mass market vehicles. Seems they’ve also segmented their product lines into the most frequent scenarios an autonomous vehicle may encounter; parking, highway driving, etc.

130 partners worldwide sounds like a pretty solid set of companies offering up their data for you to make your AI better and better. Best part, free is a pretty compelling reason for partnering if I were one of their customers.

Challenge is that you’re potentially ceding the customer experience to Baidu. Some of their partners have no choice, some are flatly just making a mistake. #Baidu #ApolloEnterprise #130partners #givemeyourdata #youownmyuserexperience


Investment

AutoX wants to be a player in the autonomous vehicle game. ( www.scmp.com)

Not sure what their valuation is, but if they’re raising $100M it’s likely north of unicorn status. This is marketing, right? Delivering groceries is totally different than being able to deliver people from location to location? How would they defend against new entrants?

I don’t know anything about their ‘secret sauce,’ what makes them a more compelling solution than any of their competitors including Baidu, but it seems like a ‘Me too’/FOMO money play here.

They’ll likely have no problem raising it I am sure since there’s still capital for early stage, smaller rounds of investment in 2019, that and the fact that I know they have a pretty capable team working to get them this money.

#autox #$100M #investment #grocerydelivery


Technology

Collaborative driving is the new, new thing. ( www.wired.com)

As more and more companies begin to realize that fully autonomous, level 5 systems are still quite a ways away, especially if we consider laws and policies needing to catch up with technology some companies are focusing their efforts on the middle ground.

Similar to Tesla Autopilot and Cadillac’s Supercruise, these Advanced Driver Assistance Systems (ADAS) will likely become more and more commonplace as automakers make ADAS available on a range of vehicles, not just the luxury carmakers.

There’s a lot of opportunity here since the technology, software is already mostly available and ready to go. As the article mentions, like any customer adoption challenges, the user experience will be one of the main drivers in how fast these systems become mainstream.

#ADAS #bridgetolevel5 

EVStartups

Byton is going to come out swinging! ( www.scmp.com)

The title of this article is clickbait but the article does give us a quick update on Byton’s timing and reinforcement that they’re marketing their M-Byte as a ‘smart device’ on wheels. With 5 total screens in the vehicle, the tech, in the vehicle at least, may support their claim although some of the features and abilities will undoubtedly be in beta once the M-Byte starts rolling off the line towards the end of this year.

Although I think their tech is going to be waaaaay over the head of many of its traditional potential customers, give them credit for swinging for the fences with their first product. It’s definitely not a safe play and if they’re able to execute without any major hiccups, their aggressive pricing and feature set could shoot them to the front of the line with regards to Chinese EV brands that are redefining the segment.

This combined with all the other offerings in the market should force Tesla to revamp its lineup in order to jump back in front of the competition, so let’s see what the ‘OG’ has up its sleeve over the next 20-48 months. #Byton #M-Byte #smartdeviceonwheels #5screens


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.


China: +86 13 811672141

USA: +1313 290 3880