Uber - Lifestyle platform, Driving EV adoption, Mopeds are coming - SAI Newsletter #37
Happy National Day for those in China!
A shorter version of the newsletter this week since China is officially on ‘National Day’ holiday through next Monday. I did see a few interesting articles that I wanted to share and comment on but none of the long reads that I sometimes incorporate.
For those in China, enjoy the balance of your holiday!
GM is entering day 19 of the UAW strike in the US which analysts estimate that GM has lost ~$1B since September 18th, when the strike began. Most of GM’s Mexican plants which aren’t unionized, and where many of their most profitable vehicles are assembled, have continued to run full shifts but the work stoppage in the US will begin to affect part availability for those Mexican plants and will likely force those plants to shut down as well within the next week.
GM’s main goal for the new contract is to reduce their labor costs, which when compared to other, non-union US assembly plants, are more expensive to run. GM has stated that cost savings from the new contract would be mostly used to help fund R&D for autonomous and electric vehicles, what GM management has bet their future on.
The UAW’s goals are the EXACT opposite of GM’s. They’d like the OEMs to hire MORE full-time workers at HIGHER wages and guarantee jobs. The UAW also feels that many sacrifices were made back in 2009 when GM entered bankruptcy and now that the company seems to be firing on all cylinders, GM should share more of their spoils.
Once the Mexican plants go down, there will be a lot more pressure on GM to close out the new contract so it’ll be interesting to see if there is any movement on it once we get past this week.
The UAW leadership needs to show that they’ve negotiated some tough ‘wins’ for their rank and file so how GM packages and positions any concessions could help the UAW sell the new contract to its members.
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 about how I look at the issues. We will mostly divide our articles into these buckets: AI, Mobility/Ride-sharing/Ride-hailing/Bike-sharing, OEMs, EVStartups, Investments, and Other.
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The Sino Auto Insights team
For my long-time readers, one of the tenets of my newsletter is that there is plenty of innovation coming out of Asia (China & Southeast Asia) right now and that Western companies would be wise to pay attention.
In past newsletters, you’ve also likely seen me write that the pendulum has swung and that what’s happening here will (and has already begun frankly) influence the US and EU transportation & mobility sectors. One just need to look at the investment commitments the US and German OEMs made to EVs to see that this is indeed the case.
Another recent example is the pivot that Uber is trying to make with their ride-hailing app. In order to create stickiness, produce more consumer data, and ultimately monetizing opportunities, Uber has decided to try transform their app into more of a lifestyle ‘platform.’ For those of us that live in China and/or are familiar with the tech scene here, this sounds very much like a ubiquitous ‘platform’ that most everyone here uses - WeChat.
Simply put, anything that you want to do, be it post to social media, order a product or service, repay a friend, rate a restaurant, hail a ride, chances are you can do it within the WeChat platform. It combines all the features of Facebook, Instagram, WhatsApp, Paypal, and other popular Western platforms into one SuperApp. Whether this is good or bad for the consumer is a discussion for another time since WeChat knows where you are, what you buy, what you like, who you talk to, and likely any secrets you’re trying to hide! And we’ve been using this for at least the last 5 years.
The old adage that China just copies and can’t innovate is a fallacy that is being pushed by fewer and fewer Western media outlets. The reality is, innovation in China and the rest of Asia is moving at a blinding pace and the level of competition here is BRUTAL, just ask Ebay, Uber and Amazon.
I won’t say that Uber is copying something that’s been done in China, but there’s already a lot data out there that shows how a platform can make money. Whether Uber can make that pivot profitably remains to be seen.
There are ALOT of pictures floating around the interwebs of the shared bicycle graveyards in China. Bikes that have been confiscated, or broken bikes that can’t be repaired all piled together high in a gigantic mess of wheels, baskets and pedals. As the article outlines, it’s good to know that many of these abandoned, broken or unused shared bikes are now getting some attention and being properly recycled and disposed of including the electric parts that are hazardous and dangerous.
For the EU and the US, as the initial versions of the e-scooters are replaced by updated, improved, and more durable e-scooters do we know what happens with the old e-scooters? Are they properly being disposed of or are they just being piled up like the shared bikes in China?
Luckily, there aren’t near as many abandoned e-scooters as there are shared bicycles but if no one’s paying attention to this in the EU and the US, we are likely going to see the same types of graveyards there as well. Once that happens, the consumer/taxpayer will likely have to help subsidize the solution to a problem we never asked for and shouldn’t have to help solve.
EV / AV
Optimus Ride’s business model looks and feels eerily similar to Navya, EasyMile, Coast Autonomous and May Mobility and outside of some marketing positioning I am not seeing a HUGE difference in what problem these services solve. Now the market isn’t mature so there is room for a few of these companies to thrive and grow since, with the exception of Navya, most of these companies are still in proof of concept and/or pilot phases.
That being said, it could be pretty challenging for any of these companies to compete with Waymo, Argo, Cruise, Aurora etc. should they decide that this could be a lucrative market segment which could become more and more likely as pressure from investors to grow revenue increases. If we look at Navya’s situation, the limited market opportunity may be one of the reasons for its share price struggle, that and the poor management.
Navya is one of the pioneers in this space and major players in France and the EU. They IPO’d last year around the July timeframe with a ~€7.00 with a market capitalization of €190M. They’ve since fired their CEO and founder for missing his revenue target by a mile and earlier this year announced they would pivot their business and begin to license their technology in addition to building and deploying their own shuttles. Also, Navya stock is trading at ~€1.00 with a market capitalization of €29.1M.
One way for these companies to grow while playing defense is to move more quickly to roll out these pilot programs, or another way to put it is to ‘blitzscale’ the market. This would take A TON of capital, which in this environment could be difficult to raise, and a lot of ground level grinding though and as we see the WeWork train-wreck unfolding before our eyes, this could also be a way to put yourself out of business.
In a headline that shouldn’t surprise anyone, the combination of the HUGE variability in technology and lack of data, quality and reliability in EVs, has created residual values for EVs that trend towards ¥0. The exception would be a Tesla, which in general retains ~70% of its value after 1 year.
If that isn’t enough, adding incentives or discounts to the EVs in order to sell them in this challenging EV market, one that fell 4.7% in July and 16% in August, will weigh the residual values down even further, although I don’t know how much lower than ¥0 you can get.
This will disproportionately affect the EVStartups negatively since we know customers aren’t as willing to pay full freight (subsidies reduced in June) for an EV that has similar specs to an ICE, specifically if they’re from an EVStartup with no real track record of staying in business.
I think what may get lost in all this is the fact that the mid-high end, where most of the EVStartups like NIO, WM and XPeng play get dragged down by the lower end vehicles from BYD and Geely whose actually quality and reliability is NOT the best.
This is something that only time, consistent quality, great marketing and a higher acceptance of EVs is going to fix.
Some of the largest cities in the world are not waiting around for their federal govts’ to tackle pollution in their cities due to congestion from ICEs. Cities like New York City, London, and Shenzhen have all put policies in place to help push the adoption of EVs in order to reduce pollution.
Commercially, Amazon & FedEx are doing their part to push the adoption of EVs as well. Their recent announcements to switch or add 1,000’s of electric delivery vehicles to their fleets in the next few years is also a first BIG step towards reducing pollution in the cities that they operate.
These ‘early adopters’ will likely put pressure on other cities and companies to fall in line, shortening the time it will take to reach that pricing and acceptance ‘tipping point.’
LAST MILE MOBILITY (< 4 wheels)
BOLD STATEMENT ALERT: I am declaring that next year, 2020 will be the ‘Year of the E-Bike & Electric moped.’ Companies I am just learning about or am currently tracking are poised to execute on some bold plans. Companies like Niu - Revel’s partner in NYC - and Gogoro, who just announced a smaller more manageable electric moped – the Viva, a smaller moped that would be perfect for some international markets.
E-scooters have paved the way and created a certain amount of acceptance for a lot of consumers in the US for new types of ‘last mile’ transportation options, while mopeds have always been a preferred mode of transport in a lot of the EU and most of SEA.
With the Uber’s, Lyft’s, and Didi’s trying to move closer towards profitability by increasing fares and decreasing the affordability to many current ride-hailers, it will create an optimal environment for these electric bicycle / moped services to take some of that ‘last mile’ share away from the e-scooter / ride-hailing guys and start to become major players in the space.
Let’s see where we are with electric mopeds and shared moped services 1 year from now.
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.