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UAW raises stakes on Ford, Li Auto's 3M units and the LG & BYD IRA end around - SAI Newsletter 38



 

The UAW strike for Ford just intensified. In a big way. After Ford stood firm on its current offer to the UAW. 8.7K workers walked off the Kentucky plant lines yesterday hitting Ford where it hurts the most – it’s largest factory that builds the F-Series Super Duty, Expedition and Lincoln Navigator.

There’s more. This factory generates ~$25B annually which is >20% of Ford’s annual revenues. Ford had to anticipate this was coming but maybe not so soon? Fain likely sees that pushing the strike into the holidays could turn public sentiment toward the automakers so he’d rather end this sooner than later by increasing the intensity of the conflict.

The automakers have, in my opinion, conceded quite a bit already so is it the commitment from the US Three that the battery factories will be union shops that’ll get the deal over the hump? That’s something GM already agreed to. But I could see how Ford would balk at that.

In the past, the UAW would select one automaker, negotiate with them and then force-feed the deal to the other two but this strategy to negotiate with all three at the same time makes for a complicated mess for Fain and team, especially when GM, Ford and the US operations of Stellantis ALL have different hot buttons, motivations and likely decidedly different showstoppers (aka non-negotiables)..

I still anticipate this strike going past hall-o-ween but ending before Thanksgiving. When the Lions will bring MI together all at once to celebrate that most American of holidays.

As for the past week, I spent a few days in the Bay, always enjoy my time visiting there. Since I had meetings on Friday, I decided to stay the weekend for an oyster bake at Baker Beach hosted by my friend to watch Fleet Week which is the annual Blue Angels airshow when they fly over the Golden Gate Bridge. The weather couldn’t have been any better. It was actually pretty seasonably warm in the Bay, specifically in South Bay, my old hood.

I was able to catch up with a couple of ex-Apple colleagues that still work there. One thing that stuck out was that even as Apple went from being the underdog that everyone rooted for vs. MS / Dell / HP etc. to now what some consider to be the Evil Empire – the work ethic and pressure there doesn’t seem to have really changed.

One comment that stuck out to me because I had flash backs from my time there. The attention to detail that Apple has instilled in its employees. That’s largely driven by Tim Cook who is a data freak and someone who’s not built like others. He barely sleeps and is atom splitting smart. Just as there were ‘Steve’ stories you’d hear as an employee there, there are now ‘Tim’ stories. My conversations with my friends reinforced how difficult a mountain the OEMs have to climb just to have a chance to compete with Silicon Valley. And it makes me fearful that at least a few of them won’t be able to.

On Sunday, I sat on a panel that talked about China trade and manufacturing for the Cal Berkeley China Summit. A few people approached me at the conference to let me know they were big fans of the pod and newsletter. Insert cheesy grin.

After the panel, I spent about an hour talking to people who were interested in my experience in China and my take on what’s going on here and in Europe, what I really thought about BYD, NIO and others and so many other things. The irony of Silicon Valley folks knowing more about the global EV sector than their Detroit counterparts was not lost on me.


I had selfish reasons to attend the Berkeley China Summit as some of the earlier panels focused on AI so I got to listen in as entrepreneurs and investors in the space talked about how they saw the future with AI being a big part of it. I also grabbed a selfie with Tiger Mom herself – Amy Chua.

Finally, while there I was intro’d to a number of mobility startups, most of them in stealth so I can’t tell you too much about them. What I can say is that they see mobility as I see it. As broadly as possible without the constraints of 4 wheels or an engine.

QUOTED

- Marketplace (NPR): I was interviewed, along with friend of Sino Auto Insights, Ilaria Mazzocco, who is a senior fellow at the Center for Strategic and International Studies to get our takes on the EU probe and whether it has any teeth. They also asked us how the EU / China got here and could this possibly lead to an escalating trade war between the EU & China. Have a listen if you haven’t yet.

GET SMARTER

- 300 exaflops. That’s how much the Chinese govt wants to increase the country’s computing power to by 2025 from 220 now. This is TOTAL power BTW, not speed. That’s a 30% increase in less than 2 yeasrs and a nod to the US which has recently banned China and Chinese companies from acquiring the most advanced chips coming out of American chip companies like Nvidia & Qualcomm. This raises the stakes for both sides and with this goal, China is telling the US govt that you ‘can’t hold me down.’

That means that companies like Horizon Robotics, Black Sesame, SMIC and other should ALL get a major boost in valuations and investments as they each audition to be China’s answer to Jensen Huang’s juggernaut.

This all to help train machine learning and AI tools as the US also races towards a large embrace of AI technology. As Jensen Huang recently said, ‘Software is eating the world, but AI is going to eat software.’

- Remember when I said that partly dictates many legacy OEMs global strategies? Case in point, GM just launched its own application programming interface (API) to try to make it easier for software developers that want to build tools and apps on its platform.

From the article: “The overall effort is intended to speed the development of SDVs.”

SDV = software defined vehicle, a term you all know I hate and think is a completely inaccurate, but used ad nauseum by journos nonetheless.

The key here is that GM wants to bring connected / smart EVs to the US market sooner. This points back to Mary saying that 20-25% of their revenues in 2035 would come from services. That can’t happen at all without help from the SW developer community. One important question, do most rank and file Ford / GM / Stellantis employees even know what an API is?

It’s something that’s going to likely and unfortunately increase and speed up the chance of their getting laid off.

BIGGEST NEWS OF THE WEEK

- The US govt. is getting some things right with the tax credit. In an attempt to get even more buyers in EVs, the US govt, starting in January will allow you to receive the $7.5K tax credit right at the POS or point of sale. That instant gratification they’re hoping will incentivize people that may be on the fence about purchasing to not wait since currently, you need to report it on your taxes in order to get that credit. It also is available on leases too for those that are commitment phobes.

“Topping the list of reasons is the sheer number of cars: There are over 2.2 million registered in New York City, according to the Department of Motor Vehicles, and many more that drive into the city each day from elsewhere. Many of them are now vying for the city’s roughly three million free parking spots.”

These are the types of challenges that scream for solutions either via alternate mobility options, the elimination of car ownership or moving out of the situation and going to a place that’s more affordable and pleasant overall. And that’s why I do what I do.

There are better ways to do this and better ways to utilize my time than being stuck in a traffic jam wasting what precious non-working time I have that’s not with my family. I plan to find the entrepreneurs that come up with the better ways and get them attention, customers and investment. Jumping off my soapbox now.

- Ionway. The JV between VW’s PowerCo (the battery division) and Umicore, a materials company that will be responsible for supplying PowerCo with battery materials (read: rare earth metals). but is this just another layer in order to get to China? It seems VW hasn’t learned its lesson and continues to add layers.

CHINA EVs & MORE (CEM)

Back to our normally scheduled programming – 9am ET on Friday. Join us if you’re free. Actually you should schedule it in as a meeting so you don’t miss it!

If you’d like to join the live show, follow me on X: @sinoautoinsight and at 9am at the top where the Spaces rooms show up, you should see our show. It’s an opportunity to ask any questions and have discussions with Lei and I so if are itching to know more about something, join us tomorrow morning!

If you can can’t join the live show, I invite you to listen to our recorded China EVs & More episodes at this site. And as always, we appreciate any feedback that will make the show better.

BYD

- LG in cahoots with BYD to do an end around on the Inflation Reduction Act (IRA). LG and BYD announced a joint venture in Seoul that will produce battery cells, primarily LFP cells, for the US and European markets. With the IRA putting both South Korean and Chinese companies at a distinct disadvantage when it comes to supplying US based OEMs, this is their way of trying to get more affordable vehicles (by using LFP cells) while still dipping into the subsidies provided by the US taxpayers for locally / friendly countries sourced cells.

Will the US govt bite on this or will they alter the fine print on the IRA to exclude these types of arrangements from being eligible?

TESLA

- Tesla pulled out it’s scissors again. This time in the US after Q3 sales missed analyst expectations. This is Tesla’s global strategy and seems to be their ONLY one. God forbid they actually launch a new product or at least a true variant of a product that’s already out! How about a Model 2.5 by turning the 3 into a hatchback?

If a Model 2 doesn’t come out by next summer, I am really going to be wondering why they used all their engineering resources to get that Cybertruck to market when they could’ve been used to pull ahead the Model 2 launch.

I suspect that they need to get the single piece front and rear chassis (gigapress) right so that they can get that M2 price low enough to put real separation between it and the M3, which now starts at$39K. With the tax subsidy, that’s $32K in the US! I’d say the M2 needs to be at or below $25K (with tax subsidy) for people to want to think they should just buy an M3.

- 4680 breakthrough, but too little too late? This battery cell was announced in 2020. We are turning the corner on 2023. How significant this battery still is in the grand scheme of things, especially since it’s supposed to cut battery costs by 50%? Does that still hold?

If it does, the combination of savings from the single piece front and rear chassis + savings from 4680 would mean curtains for a bunch of EV startups (both in the US and China) and some OEMs but China Battery Inc has been able to sharpen their pencils in that timeframe so this advantage from Tesla’s 4680 battery tech isn’t going to distance them from their Chinese competitors too much.

What it could do is move the leverage from those Chinese battery manufacturers that supply Tesla over to Tesla’s side more, right where they like it.

BY THE NUMBERS

3M. This is what Li Auto has openly stated its sales target is for 2028. They sold less than 150K vehicles last year but should get to close if not surpass 400K sales this year. Still, that means that Li Auto would need to grow at 50% CAGR to get to 3M in 2028. And that would seem to be the easy part.

They’d need enough products, have each of those products be hits, build enough factories and have those factories online before the end of ’26 at the latest and then have them all running at near capacity. And then build enough retail locations, hire enough people and hope the Chinese economy does NOT falter. Because this is sales in China ONLY.

And then finally have enough money to still invest in the R&D to support making amazing products. The key to this is that it’s based on the belief that the China passenger vehicle market will hit a 90% take rate for NEVs by then and that Li Auto will be a Top 5 automaker in that market. At 22M last year, that would mean that China would be buying 20M NEVs in 2028. (Insert mind blown emoji here.)

I guess this isn’t any bolder of a statement than Elon’s 20M by 2030 though.

600 / year. That’s how many eVTOL Archer aircraft can be built annually once the first phase of their Georgia factory that they’ve just secured financing for will be able to build. Factory is scheduled for completion next year with the first aircraft rolling out in 2025. I CAN’T WAIT.

47 square miles. Waymo is expanding its paid autonomous vehicle service in SF, which already goes 24/7 and already covers major parts of the city in order to generate more revs and hoover up more data (obviously).

I’ll be back in SF mid-November and am currently on the waitlist so hook a brother up!

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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 global automotive and mobility sectors. We also provide a point of view that we hope educates and sparks debate.

The Sino Auto Insights team

 

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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