Understanding Tesla & Byton; Why Ford hired Jim Hackett - SAI Newsletter #7
Updated: Feb 28, 2019
Happy Lantern Festival all!
This officially marks the end of the Lunar New Year celebration so China will be open for business again starting February 19th.
As we accelerate into 2019, we’ll finally get a chance to see how everyone is going to react to the continued slowdown of the Chinese economy and a likely pushout of the March 1 deadline for trade negotiations between the U.S. and China.
Congratulations to Aurora ($530M), Nuro ($940M), TuSimple ($95M), May Mobility ($22M) and Rivian ($700M) who all recently made announcements about their capital raises. Even though the Chinese economy is slowing, there’s still a bunch of money being thrown around as witnessed by these large numbers being raised by these premium startups.
For you new readers, 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
I was interviewed by Linette Lopez for this deep dive on Tesla’s latest moves; layoffs, price reductions, etc. Linette tracks Tesla for Business Insider and is known for her thorough coverage which, in the past has gotten Elon’s attention.
In this case, Linette discusses how to interpret Tesla’s recent announcements as well as what it will take for them to succeed in China despite the increasingly challenging macroeconomic environment and new competitors that seem to pop up on a daily basis.
There is a lot to chew on in this piece and you’ll likely learn a thing or two about Tesla so I invite you to click the link and take a read.
For those that aren’t familiar with the term ‘user experience,’ I think this article does a good job of giving you a 50K’ overview and why it’s so important for the auto and tech companies to have their new products and services drive towards giving consumers the ‘ultimate’ user experience. It could be what separates the winners from the losers.
I’ve been an evangelist for car companies shifting from ‘fit, form, function’ to ‘user experience’ as their Northstar when looking at how to capture new revenue streams and deliver products and services that customers will want.
Since user experience is very personal and not a ‘one size fits all’ thing, companies need to be careful about properly identifying who their target markets are, what particular needs they have and how their particular need is filled via their product or service’s user experience.
Hackett may be taking the right approach, the challenge is that his competition in Silicon Valley have been at this from the very beginning so not only does he have to change a culture for about 175K employees, he needs to nail that design in his new products and services in a compressed timeframe in challenging macroeconomic conditions.
The opportunity lies in having control of the hardware and software. If the software is outsourced to an external partner, it’ll be VERY challenging to create that ultimate experience.
I was told by some Ford insiders that Hackett has been really pushing this ‘design thinking’ to the point that’s frustrating employees. Let’s just hope that he gets most of them to buy in and more importantly, get things moving!
the California Department of Motor Vehicles (DMV) requires that companies testing their autonomous vehicles in California disclose the rate at which their vehicles have to disengage their autonomous driving mode when roadtesting and a report is generated every 12 months and shared with the public. The California Department of Motor Vehicles (DMV) Autonomous Vehicle Disengagement report for 2018 was released last week, and no surprise here that Waymo is waaay ahead of the 47 other registrants, including 11 from China (~24% of total), with disengagement, summary below:
Waymo: 1x /~11K miles driven
Cruise: 1x/~5.2K miles driven.
Pony.ai: 1x/~1K miles driven
Baidu: 1x/205 miles driven.
Apple: 1x/1 mile driven
In the past, this was a pretty good way to the check progress of these AI startups. Now many believe this isn’t terribly useful anymore because the isn’t a universal definition for ‘disengagements,’ and factors such as where the car is being driven (city vs. suburb), time of day driven, just to name a few.
I agree that without the proper context this has pretty limited usefulness, but for now, it’s just an easy, if not primitive way, for us to keep score.
Byton has made a big bet that riders will gleefully pay for content while they are stuck in traffic and consequently, designed the M-Byte and K-Byte interiors to accommodate just this.
With multiple iPad like touchscreens as well as a gesture-controlled vehicle wide dashboard/instrument panel, the M-Byte takes automotive entertainment to the next level. Byton is also the first EV company to fully embrace the ‘user experience’ as a difference maker and will fully occupy that market space when it launches late this year.
There are a lot of risks associated with this since most people still will need some convincing when it comes to consuming shows and entertainment in their vehicle. It may be a bit easier in China since there are quite a few cities that rank highly in the annual Congestion Index but only 1, Los Angeles, that ranks in the Top 15. Further, I don’t know many people that would prefer to sit in their car, to consume entertainment unless they are forced to.
For most countries, it may be some time before customers can truly take advantage of Byton’s product and service offerings so here’s to hoping Byton is around long enough for customers to fully experience and embrace what they have to offer.
China January 2019 car sales fell by over 18% when compared with Jan 2018, the 7thconsecutive month of slowing sales for the country.
All signs point to this slowdown lasting at least through this year if not well into 2020. This comes at a time when major automakers plan to roll out new vehicles, which should help them a bit, and EVStartups try to launch new entries into the China EV market over the next 18-20 months.
There should be a laser focus on mistake-free launches, the EVStartups in particular, to preserve capital and avoid a poor quality reputation, which could kill their brand before they can build up any momentum.
The U.S. is also considering throwing tariffs on European made cars imported to the U.S. For most of the German automakers, the U.S. is their 2nd most important market after China so were this to happen, it would put more pressure on them in an already challenging next couple years due to the China slowdown.
Currently, the U.S. adds a 2.5% tax on European imported vehicles while the EU slaps a 10% tax on American imports to the EU. If taken at face value, this seems to be very unfair but there are exemptions, specifically if the American made vehicle has a good proportion of the car’s parts made in Europe. Further, there aren’t actually that many EU built imports into the U.S. (~7% of total sales in 2017). The U.S. is more protectionist when it comes to SUVs and pickups though, slapping a 25% tariff on foreign-made SUVs/pickups vs. 10% for the EU.
Two leaks in the last week show that Didi is having a tough time getting past the tragedies that occurred last year when 2 women were killed by Didi drivers. These tragedies created a backlash from Didi customers as well as scrutiny from the Chinese govt. that resulted in new policies that have made it much more expensive for Didi to do business.
It was revealed that Didi lost over $1.6B in 2018! Also, Didi will be laying off about 15% (~2K) of its employees in a money-saving effort that will also include ‘scaling back on non-core businesses.’ I heard that they plan on entering some international markets later this year to compete against Uber so hopefully they pick those markets wisely or they’re going to be in another bloody fight to grab market share reminiscent of the good ol’ days when they were doing battle with Uber in China and bleeding money because of it.
I don’t believe that Didi is in as bad of shape as Ofo but let's hope that they’re tightening their belts so that they don’t become the next cautionary tale of growth over profits when combined with inexperienced management can lead to trying times.
Barcelona based Silence Electric Scooters recently launched a new consumer model called the S01. Till now, Silence has played in the commercial space selling to delivery companies and municipalities but they’ve decided to throw their hat in the ever-growing ‘e-scooter’ ring.
From the sounds of it, seems Silence is dominating the Spanish market is going to try to spread its wings in the near future to some international markets.
Their secret sauce seems to be the Inspector Gadget battery that mimics a wheeled trolley for easier transport. With a built-in cord it can be wheeled to your apartment for charging and can also power other devices like say a speaker for a picnic?
Due to their commercial background, these batteries seem to be pretty bulletproof as well, very durable for those that will put lots of km’s on their scooters. With a price point that hovers around ~$7K, this scooter is mostly aimed at the very well-heeled.
Amazon’s recently announced investments in Aurora and Rivian make it plainly clear that they plan on using those company’s expertise in AI and mobility to help Amazon by automating the delivery process and further squeeze out costs in their supply chain.
They aren’t the only retailer, namely Walmart and Kroger, that’s toying with driverless delivery but their scale will place additional pressure on any brick and mortar retailer and could ultimately drive the buying experience online completely, with few exceptions.
This is pretty low hanging fruit so it's pretty easy to point to why they’d make these investments, but this makes me wonder what other ideas the Amazon investment team have up their sleeves, with regard to this tech and how they plan to utilize it in the future.
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.