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TSMC Juggles Production, VW ID.4 Sales - Not Good, Gogoro & Foxconn Mashup - SAI Newsletter 24



This week I was able to visit a few local, Beijing-based companies that I’ve been meaning to meet with for some time. The first you’ve likely heard of - Baidu, in particular their Apollo self-driving group. For those that aren’t familiar with them, Baidu is one of China’s original tech giants, collectively named ‘BAT.’ To put it simply Baidu is China’s Google, and most of their revenue is generated through ‘online marketing services’ via their search tool. Think of Apollo as Baidu’s Waymo, not exactly a ‘like for like’ comparison but close enough for now. BTW, the other tech cos. in that acronym are Alibaba and Tencent. Over the last several years as Alibaba and Tencent continued to grow, Baidu was overtaken by newbie China tech giants like Meituan and Bytedance. Part of Baidu’s redemption has been to use their data gathering & analysis expertise to develop an autonomous driving system. The Apollo autonomous driving platform launched in 2013 and initially signed up over 100 partners. They made a bold move to make the software free to their partners in an effort to bolster the # of partners and hence the amount of data they could collect. As more companies, both startups and established companies, entered the AV space, the OEMs that initially signed with Apollo looked to develop their autonomous driving competency in-house. Apollo still boasts a large number of partners but they’ve also just announced that they’d also build their smart EV under the name Jidu. Apollo has taken a much more aggressive approach recently towards launching products and staying in the headlines. They’ve aligned with new domestic OEMs, with who they’ve partnered to develop their own robotaxis. Last week, they announced their partnership with BAIC EV brand Arcfox to build their Gen 5 robotaxi that will be priced at 500K RMB, or about $75K which they claim is substantially less than the current prices for robotaxis. That coincides with the announcement that they’d also work with GAC to develop one as well. I’d had the ambition to meet each of the AV players in China and try out their service but due to the travel restrictions because of Covid, it was set on the backburner. Pre-Covid, I was able to visit WeRide, WM Motor, and XPeng in Guangzhou but with the velocity of improvements and # of new announcements that have occurred since Jan 2020, I may have to make it back down to GZ again to pay them both another visit. Again, within an 18-month timeframe so much has changed with both of them. The other company I visited is an electric motorcycle startup called Evoke Motorcycles. I’ve been friendly with the founders, Sebastian Chrobok and Nathan Siy for some time and they’d also invited me to check out their operation. Seb and Nathan started Evoke in 2016 after frankensteining together one-off electric motorcycles for themselves and a handful of friends. I’d been meaning to visit them since before Covid-19 so this was the perfect week to reschedule. Since this newsletter has a very diverse audience it should bear mentioning that when I say motorcycle, I am talking about a proper standard motorcycle and not a small moped or scooter. It was important for me to learn more about the segment and check-in on their progress and it seems that in spite of Covid-19, they seem to be doing just fine. I am trying out new media formats and should be launching them in the next week or so. I will post more details about my visits using the new formats so you can learn more about those visits very soon so stay tuned! TESLA NEWS - Well, well, what do you know? Nothing exciting coming out of the boys in Fremont this week. At least nothing I’ll share. But it’s worth calling out. IN THE NEWS - New technologies lead to new dangers when that technology either goes wrong or is placed in a volatile situation. First responders will most assuredly need to retool and reassess how they deal with the outcomes of vehicle crashes and / or more technology that’s run on battery cells rather than petrol or diesel. When petrol was first adopted that was the case as well but first responders were able to adapt where now most car accidents don’t end with violent fires from the petrol leaking or combusting. Is there a special chemical or can one be developed that could safely, efficiently put out these battery fires that seem to burn forever or need ridiculous amounts of water to do so? If not, there likely will be one in the near future. For the chemists out there, I see a huge opportunity… - TSMC: Giving the auto sector and Apple some supply love. In that order. In an attempt to get their automotive customers caught up on supply, TSMC will allocate capacity to the sector and then Apple, likely their most important (read: profitable) customer of all. The rest of the consumer electronics and appliance companies will be pushed further down the priority list. This should mean we will see a flurry of manufacturing activity in CQ3’21 to ‘catch up’ production for some of the manufacturers that have been truly affected by the chip shortage. We know from past newsletters that some automakers have cried ‘wolf’ when explaining why their sales numbers were down in the early months of Q2. By the end of this year, it should be pretty clear who was truly affected and who was not. - Can VW really make the pivot to EVs? Not if initial sales numbers from the ID.4 in China are any indication. The numbers are really unacceptable for such an important vehicle and the ID.4 team, from top to bottom, should be looked at as being responsible for the failure. These are just initial sales numbers since the vehicle has only been in the market a couple of months but you better believe the internal VW team is FREAKING out. 10% capacity utilization at the plants!? Not only are they freaking out, but they’re also likely revisiting their 36-48 month product plan, at a feature level, to see what technology can be pulled ahead in order to try to compete with XPeng and others in the ~200K price range. There’s a double whammy on that. IF, and that’s a big IF, any of the tech features that only likely MEET the competitive requirements of the local market here can be pulled up, they don’t have the in-house expertise to execute it. Not on the SW side and definitely not on the integration side. Just to remind you what they’re up against, the mid-level XPeng P5s are going to come with 2 LiDAR as standard for <250K RMB! The folks in product planning in Wolfsburg shit the bed on this one. Make no mistake, the decisions for products in China are still basically being made there. They may tell you it’s decentralized but it’s not. Further, I might not have confidence in their abilities to analyze a market any more with such a bad miss. So far. Can there be an eventual spark in sales? There’s only MORE competition coming into the market and the fact that VW thought they could bring a knife to a gunfight; the only way sales really grow is if they put A LOT of money on that hood (in the form of monetary & non-monetary incentives) to move the metal, unfortunately. With a 200K starting pricepoint, any price reductions would likely be pretty insignificant and not move the sales needle much. Remember that Lei and I had spoken about the anemic ID.4 sales numbers in a recent ‘🇨🇳EVs & More’ podcast that you can listen to here, so this was kinda expected. The other company that needs a hug due to their sales (or more accurately, lack thereof) is Polestar with their Polestar 2. The sales the last couple of months for that vehicle are even worse than the ID.4 I’ve been told. - Ambition doesn’t only ride on 4 wheels. Gogoro (GGR) seems to have recently gotten much more serious about global expansion as they’ve just entered into partnerships to bring their mopeds & battery swapping to China & India. Yesterday GGR announced that they’ll work with Foxconn to expand manufacturing in order to scale to other countries faster. GGR is one of the best design and software integration shops in the mobility space out there but readily concede manufacturing expertise to Foxconn, a smart move IMHO. With that said, companies like Fisker, Byton, Faraday, and yes GGR are making a huge assumption on Foxconn’s ability to leverage their expertise in consumer products into 2 & 4 wheel products. That’s also a BIG LEAP IMHO. Building an iPhone would be one small piece of the car building process. There will certainly be growing pains for Foxconn as it’s going to be a much more complicated manufacturing process with a whole different set of customers (with different expectations), suppliers, parts, and production processes. I am not saying that Foxconn can’t or won’t get it. I am saying that it’s going to take time. Will that time be on Fisker’s, Byton’s, Faraday's, or GGR’s dime, your guess is as good as mine. - In an announcement that should surprise no one. Swedish battery startup Northvolt and Chinese-owned, Swedish brand Volvo have announced a partnership to co-develop and manufacture batteries for Volvo. Volvo will make Northvolt their exclusive battery manufacturer for the EU region. They’ll open an R&D center in Sweden to jointly develop battery technology. Volkswagen is Northvolt’s largest shareholder so layers of complexity are starting to build. Question: If Northvolt & Volvo jointly develop a battery breakthrough will it be shared with other Northvolt customers? TRENDING ON SOCIAL MEDIA - One of the reasons I didn’t watch Formula 1 is that when I was a kid, it wasn’t very accessible. I am certain that’s why F1 doesn’t resonate with many Americans as well. Also, motorsports not only has to compete with NASCAR, but 4 other major sports that have millions of watchers each week in the US. That said, NASCAR was never something that resonated with me either because, admittedly having a very basic understanding of the sport when I was younger, watching cars turn left 4 times on a track for 500 miles wasn’t the most interesting use of my time. Also, I couldn’t just jump into a race car and race my friends in the park-like I could with basketball or football. Since Formula E has come out I have been much keener to pay attention and try to find a team to root for. It’s something that really just starting to gain traction and so I can know everything others know. And my passion for mobility and clean energy vehicles is also addressed with Formula E. I see flying drone racing or in this case EVTOL in the same light. There’s no complicated history to study or learn about, just a fledgling league that could be our generation’s NASCAR. In fact, it could be better. I’m down to watch this and encourage my boys to do the same. GET SMARTER - The most educated countries in the world according to Newsweek. #1 is no surprise to me but #2, 5 & 6 are, but perhaps that has more to do with my ignorance of the world. The US is #11. Not sure what to make of that either… JUST THE NUMBERS - 2,627. That’s how many cars Borgward who’s rumored to be declaring bankruptcy sold in the first five months of this year. Anemic. And how the mighty have fallen since 2019 sales equaled >54K units. Who would’ve thought a coffee chain could pull an automotive brand down. That coffee brand of course is Luckin. Another scandal-ridden brand. - $1.1B USD. That’s the amount that’s targeted to be raised with XPeng’s HK secondary listing which should happen later this month. As Li Xiang stated earlier this year, ‘More money is better.’ Now, in about 2 years’ time when the grace period for not meeting US accounting standards expires, would XPeng delist from the US exchange and just remain on the HK exchange? PRODUCT & SERVICE INTRODUCTIONS - Meet the Pelikan E-bike. Modular design for the active and diverse lifestyle. Form in this case was prioritized equally along with function. It’s a concept so the production cost is likely way too rich for my blood. I did mention this ad-nauseum in past newsletters that the popularity of e-bikes globally would open up innovation and new design that would lead us into a new era of two-wheeled mobility. —— 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.

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