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Unmanned Delivery AV Accidents, Spotlight on BYD, Gogoro Enters China - SAI Newsletter 40



We are back at it this week after some R&R (not really for me) for Golden Week. It’s going to be a sprint to the finish line for all automakers as they try to build on September’s sales momentum, hoping it continues well into and through the end of Q4. There will be sharp elbows as EV first cos & legacies alike jockey for ‘chips,’ power (as in electricity) & customers. In this ÜBER-bullish market (>3M unit volume) though, it’s hard to tell who’s actually managing sales (efficiently selling) the best. So far, as we’d outlined in last week’s newsletter but bears repeating this week, here are some notable companies and the clubs they currently reside in with the one notable update in RED: 5K Club WM Motor (first-time member) 10K Club (newest members) XPeng NIO Volkswagen (ID Series) 35K Club BYD 50K Club Tesla 70K Club BYD (hybrids + BEVs) Q4 of every year is normally the BIG quarter for vehicle sales here so look for some monster numbers from everyone, again chips & power permitting. XPeng had just begun P5 delivery in September so there’s a good chance, if production ramp progresses without a hitch, they could become members of the 15K Club in December. Tesla, it seems had sales of over 56K units that included 3.8K units exported. That’s still over 50K sold domestically with 33K MIC Model Ys. I was waiting to see what the sales ratio of MY : M3 would end up at and it seems that It’s a healthy, almost <2:1 ratio so that should dispel any noise about Model 3 demand falling significantly. The STANs are all going to say ‘I told you so' but it is important to note that it indeed took the China numbers for folks to be reassured that Tesla is still on an upward trajectory. It’s funny how many analysts tout the Tesla China story when it suits but omit it when it doesn’t. Also, if we average the out a monthly domestic sales number for the quarter, we get to ~24K/month which when you look at Q2 (~20K/month) could be concerning but it should all clear itself up one way or another as we close out Q4. But it doesn’t look like Tesla is growing faster than the market. Onto some administrative items: This morning, I moderated an AV panel about the ‘Future of Autonomous Vehicles’ sponsored by the Carnegie Mellon University Tech and Entrepreneurship group or (CMU T&E group for short). Below is the (very impressive) group of panelists.

  • Gautam Narang, CEO & Co-founder of Gatik

  • Tudor Achim, CTO & Co-founder of Helm.ai

  • John Dolan, Principal Systems Scientist, CMU Robotics Institute

It was interesting to hear their different approaches and what they saw as opportunities, challenges, and misconceptions on commercialization, regulation, and safety across the different AV use cases. Once the recording is posted, I will share via this newsletter so stay tuned! I will also be participating in the China Institute Executive Summit 2021 – ‘The View from China’ online conference later this week as well. This will be a 2-day online conference on October 13-14 from 8-10:30am EST (each day) with an in-person reception scheduled for October 14, 5:30pm EST in NYC. I will be a panelist specifically for the ‘On Investing in China: Who will be the next tech Unicorns?’ panel on October 14th, 9:30am EST but I encourage all of you who are curious about China to virtually attend any other panel that seems interesting, and there are quite a few IMHO. For those interested in checking out the agenda or signing up for the event, you can click here. EVs & More will be hosted on Twitter Spaces one day early this week - Wednesday – 9pm EST/Thursday 9am China time. Lei & I will continue our talk about September sales and the outlook for Q4, Honda’s recently announced China strategy, and touch on the accident this week between an autonomous delivery vehicle and a normal car that occurred over the weekend here in Beijing. So if you’re free, please drop in or better yet come with some questions or comments. To join the room all you have to do is follow me: sinoautoinsight or Lei Xing: leixing77 TESLA NEWS - Tesla has its best sales month ever in China, and this time most of the vehicles produced were shipped to domestic customers. Vital stats Domestic: 52,153 Exported: 3,853 TOTAL: 56,006 Model 3 sold: 22,973 Model Y sold: 33,033 This should keep the FUDsters quiet about sales weakening here for Tesla. At least until next month anyway. I expect Tesla, NIO, XPeng, WM, Leap, NETA, and of course BYD to ALL have blowout Q4s so stay tuned. IN THE NEWS - Ex-Apple VP of Retail, Ron Johnson wants folks to believe that his time as CEO of JCPenney was an anomaly. Let me first say that Ron Johnson is one of the most dynamic speakers I’ve ever listened to. It was within my first quarter of being at Apple and Ron was the head of a new-ish group called ‘Apple Retail.’ Each quarter at Apple, a department would sit down and listen to a presentation from another department or business head. This was in order to ‘learn’ what other parts of the company did so that we could all do our jobs better. I don’t remember ANY other presentations because most of them weren’t memorable. But Ron’s was different, his energy levels, how he explained things, how he seemed so personable and convincing, they all made me pay attention. He told us stories about how he came up with the retail concepts you still see today and how even after Steve ‘threw up’ all over his learning station idea, what we now know as the Genius Bar, he launched it anyway and the rest as we say is history. Rumor has it that Ron was aiming for the CEO role so when Tim was promoted, Ron left. He took a role with JCPenney. For my non-American subscribers, JCPenney is a traditional department store not unlike a Macy’s but with more affordable brands. Ron basically tried to turn the JCPenney department stores into Apple stores and it turned out to be a complete failure. Anyone with that type of talent, intelligence, and ego has to get back on that horse because after a humungous, very public failure like that, they have something to prove. His new company Enjoy is trying to turn product sales on its head and I highlight this article because he’s trying to turn delivery into a high-touch business where the delivery folks are also salespeople that try to cross-sell you items outside of what you’d purchased and had delivered to you. If successful, it’ll jumpstart the whole rolling retail store concept and copycats galore will pop up. Mark my words. I am not convinced yet that it’ll be successful, but I do think that Ron would be one of the few that could make it work. I’ll be tuning in to see their progress. - AVs and accidents, who’s at fault, and who pays for the damages? So there was a traffic accident in Beijing last week but not your typical accident (or it wouldn’t be covered in the newsletter). It was between a Meituan unmanned delivery vehicle and a normal passenger car. The police deemed the accident was completely the unmanned vehicle’s fault but because the AV didn’t have any license plate OR accident insurance, there was some confusion about how the driver of the vehicle would be compensated. Luckily, no one was injured but this brings up some really good food for thought. First, if these drones are being piloted on the roads, where should they legally be allowed to operate, in a bike lane? How will they be identified in the future if they don’t have a license plate? And finally, Meituan did provide the AV with theft insurance but not any collision insurance so how will that work in the future? This WILL need to be addressed globally, so all eyes on China about how to proceed. - DO NOT SLEEP ON BYD. I was interviewed for this FT piece by Henry Sanderson on BYD that highlights a lot of what you need to know about their journey to becoming one of the leading EV brands in China including how vertically integrated they are and how Warren Buffet came to learn about the company. They’ve evolved considerably since their early days of building batteries for computers and seem to be setting themselves up to be a major player in the EV space, either as a supplier of batteries, an OEM, or likely both. A lot of attention is being paid to NIO, Xpeng, and Tesla, but BYD keeps launching vehicles into the market that seem to resonate with the Chinese consumer. Google ‘BYD Dolphin.’ It’ll take more time for them to build that trust in the EU, but if we can take anything from their history, we shouldn’t doubt their will or capabilities. - Li Auto overpays for chips BIG TIME. IF this story is true, then paying 800 X’s market rate for anything means that they have a really crappy sourcing team! Further, Li Auto’s particular situation is a lot different than any other carmaker because they build ONLY 1 model so in theory due to the less complex supply chain they should’ve been able to see it coming and/or manage it a little better. Li Auto also sourcing a dedicated chip for their system from Malaysia also seems to create an unnecessary headache. The engineers should pick a different part that’s more readily available, or at a $6/piece they should’ve loaded up on inventory since carrying costs would likely be close to 0. As part of product development, single sourcing a part that only one supplier can build should’ve been pushed back on even before the part was sourced and approved for production. Why? So stuff like THIS can’t happen. But that’s another debate altogether. As many of you know, I was a sourcing/supply chain guy in a prior life so these types of situations are near and dear to my heart because I ‘chased’ parts on a daily basis in previous roles, and in particular, I chased down chips ALL DAY LONG in that prior life. In working very closely with materials teams in the high tech & auto sector I can tell you this about the great ones, they:

  • Believe that suppliers build parts for THEIR products ONLY but are happy to share when there are plenty of them

  • Expect to be 1st in line to be made ‘whole’ when supply of THEIR part is tight

  • Have a decent idea of how much weekly production capacity each of their suppliers has and if they are building ahead or are behind in production

  • Know who else uses THEIR part and their likely order volume (and many times price)

  • Will be on the phone with multiple contacts at the supplier the moment they suspect that they’ve been ‘shorted’ THEIR parts

  • Will ‘bird dog’ the supplier until THEIR complete orders are filled and request expedited shipments including throwing THEIR parts on a plane if it means it’ll get to them ‘on-time’

  • Will track THEIR parts 24x7 until every single part that makes them whole has hit the dock and has been received

  • Hate partial shipments because it means they need to keep on chasing the same part

  • Will request (not ask) the supplier pull-in the schedule to meet current demand which could be anything OVER their current MPS

  • Aren’t afraid to get bosses, VPs, and CEOs involved if it means that they’ll get THEIR parts on-time

  • Want healthy suppliers that make money, just not off of them

  • The unsung heroes of many manufacturing heavy companies

A supplier’s job is to keep their OEM’s plants running & good suppliers do that. TRENDING ON SOCIAL MEDIA - Gogoro launches in China It wasn’t enough for Gogoro (GGR) to announce that they’d be going public at a ~$2.5B valuation, they want to make sure they follow that HUGE move with other equally HUGE moves and I’d say that partnering with Yadea qualifies. Yadea is the biggest boy around in China so this makes a ton of sense for a few different reasons. GGR also announced previously that they’d agreed to partner with Hero Motorcycles in India, another monster moped maker for the Indian market. Let it be known, with those two partnerships GGR is NOT thinking small. With those two partnerships, they’re able to provide their swapping service to a HUGE number of new consumers without the hassle of manufacturing the actual mopeds themselves. And since the price of the battery isn’t going to be part of the moped price, it allows Yadea and Hero to undercut the market somewhat with their swapping EVs. Yadea is supposed to start shipping their new mopeds utilizing GGR batteries before next week (I believe) and I’ve been told demand has been brisk. With a population of 10M, Hangzhou could be the perfect place to work out all of the kinks before moving on to larger, more gnarly Chinese cities. GET SMARTER - The whole idea of a dealer is outdated. I will probably get blasted here for this post but there are two reasons currently for dealers. For car companies to push inventory to them so that they can claim that these cars were ‘sold’ and for servicing of said cars. If cars will begin to look mostly the same with software, range (battery size), and services becoming the main differentiators if I were a car brand, why would I EVER let a potential customer head into a dealership? And it doesn’t matter if it’s luxury or not. Nowadays, we can customize even the cheapest knickknacks so a customized, personal experience isn’t exclusive to rich folks anymore. Don’t believe me? Check out the Van’s website and see how many ways you can ‘customize’ a pair just for you. With digital, branding starts when they start to think about you. Not when they see your car. That means that your brand is reflected in the app being used to engage users, how it integrates into their needs, and extends into the relationship that’s developed between the brand and that user as you educate these prospective buyers on why your brand is perfect for their needs. Unfortunately, because of some arcane laws, dealers will be part of the car buying process in most countries for the foreseeable future but if I were a carmaker, I would box them out as soon as I could in order to wrestle the ownership of ‘MY’ brand back from them. Because they’re likely not doing it any justice. Luxury or not. JUST THE NUMBERS - 100K. That’s how many XPeng vehicles have rolled off of the assembly line as of yesterday. It took them 6 years vs. Tesla at 12 years. They have 3 vehicles for sales now, they’ve just crossed the 10K/month barrier, and their newest product, the P5, promises to be their high-est runner aka the most popular vehicle. AT <$35K, I’d imagine it’ll get to sales of 10K/month all on its own sometime in 2022. It’s safe to say that they’ll get to 200K much, much faster as well. It’s worth mentioning that there are comparisons about how fast XPeng and NIO were able to get there vs. Tesla but that’s all clickbait. First, Tesla launched with a roadster, then two vehicles that stickered at over $80-90K each! The other ‘NOT the same’ situation is the era that Tesla launched, and finally the regions that they sold their vehicles in. It’s kinda silly to compare them TBH, but I feel even sillier having to explain why. - 535. That’s how many swapping stations that NIO has up and running in China as of this week. They’ve also another 382 supercharging stations that have a total of 2,348 stalls. - $1.5 Trillion. What UBS estimates the subscription economy will grow to by 2025. GM is betting that they can carve out $20-25B of that as part of subscription services they’ll be launching in the future. Frankly, EVERY company believes that they’ll be able to move their revenue generation from car sales to services (if we include robotaxis) and most of them will be wrong. Install base will be THE most important metric to achieving any of those subscription revenue targets so that means continued vehicle sales (in the millions) are still key for now. The problem is, the only growing car companies are the EV first companies who are actually live in ‘digital,’ not dabbling like the legacies. It’ll take the legacies time to re-program customers into believing their (soft)wares is as good, scratch that, even better than a NIO, Tesla, or an XPeng’s. But if we’ve been listening to some of these CEOs chirp lately, we know that talk is cheap and in this business and unfortunately for them, you can't just talk being good at UX & SW development into existence. PS. GM, as with their EV1, was a pioneer in subscription services because they had Onstar. They did NOTHING with it and now are trying to rebrand it into something that makes sense. Team GM, just start over… —— 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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