US, China open for biz, Tesla crushes earnings, SF bans cars on Market - SAI Newsletter #40
Since I have been traveling most of this week, we’re going to have a mini-version of the newsletter. It was a productive week, I had the chance to meet with some companies that I hope become new clients. Back in Beijing now but I’ll be in Shanghai again next week for some follow up meetings, site visits and a panel I am sitting on so I will share what I can with you about these visits in next week’s newsletter.
One of the perks of being a mentor for the Chinaaccelerator program that’s run by SOS Ventures in Shanghai is that I am able to participate in events like NewCo Shanghai on Thursday. Our track visited 5 Chinese startups in the luxury goods, healthcare, mobility, and education sectors and learned how each is working to disrupt their sectors. It was a good event and I’d likely participate again next year.
I am always keen to learn about & meet new companies so if you’re a startup doing great things, please reach out. Let me assure you that there’s still plenty of room for your product or service in Detroit, Silicon Valley, China, and/or the Southeast Asian markets.
There is a lot of uncertainty about what’s going on with the US and China so I want to clear up a fallacy that the trade relationship between them has completely seized due to the trade war, etc. Let me be clear about this. Both parties currently rely waaaaay too much on each other to completely close off their market to the other. It HAS slowed down, no doubt but the reality is that the trade war is hurting both sides and neither side wants to be seen as backing down since there is likely a political price to pay for doing that. Let’s hope that cooler heads prevail very soon.
Let me also emphasize that the US & China markets are HUGE so there are still a number of opportunities for ambitious companies that have mastered their home markets and are willing to take on complex markets like China’s and the US’s. China is already the largest auto market in the world having sold almost 29M million passenger vehicles in 2017 and I firmly believe that, with the exception of this current sales hiccup, I am long China’s long-term growth prospects and think once the market rebounds there’s still room for Chinese consumers to purchase well over 30M cars/year. The US is no slouch either with sales topping 17.6M vehicles back 2106.
There will be more scrutiny in some sectors for sure and the complexity of both markets make having a compelling product or service essential with market entry strategies, access to capital, patience, partner selection, and recruiting a kickass execution team THE top priorities for companies trying to enter either market. It’s not going to be easy but it NEVER was to begin with. Like I tell my Chinese and US clients, if you don’t go in with a ‘winning’ mindset both markets will suck up all your time and capital, and that’s if you’re doing things right!
The one thing I can assure you though is that both markets are well worth the risk. The poseurs are exposed very quickly in China and the US as I’ve experienced this first-hand, but as Wayne Gretzky once said, ‘You miss 100% of the shots you don’t take.’
There was an uptick in subscribers the last couple of weeks so welcome to those who are newbies to the newsletter. Happy to receive constructive feedback on the topics & my POV - especially if you believe I am wrong or am missing something.
The strike continues while the workers vote on the new contract but pundits agree that it’s likely to get passed, maybe as early as tomorrow. This will have been the longest strike against any automaker since 1970.
Since Ford and Fiat have essentially seen the term sheet they should be able to put agreeable contracts in place without the threat of any strike hanging over their heads. We should see theirs completed in a month or so. Looks like GM is going to be doing what they do best very soon, build cars again.
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.
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
Had a good long convo with Michelle Toh of CNN regarding Tesla’s Q3 earnings as well as some of the updates Elon provided about the Shanghai Gigafactory.
One thing I did want to clarify (since it was probably me that could’ve misspoke and/or something certainly got lost in translation) is my comment about ‘…in China, nothing (usually) happens that fast,’ what it should’ve been is ‘even at China speed, nothing usually happens THAT fast’ or in other words, although China moves very fast generally, spending ONLY 10 months to build a plant is quite fast.
Michelle does a pretty good job of capturing much of my thoughts so I invite you to click on this one and read it!
Vibhuti Sharma from Reuters reached out to me prior to Tesla’s earnings release to discuss what Tesla is doing or has done on the operations side to ensure successful product launch and whether or not they can hit their target production of 1K/wk before the end of the year. They seem to have learned from their past mistakes so let’s hope that its reflected in the build quality and reliability of the China made Tesla Model 3’s.
San Francisco’s (SF) Transportation agency voted unanimously to ban the use of personal vehicles on Market Street, one of a handful of main streets (with Van Ness, Geary, 19th Avenue, Embarcadero and Lombard some others), Market cuts through a major portion of San Francisco’s downtown area and separates the Financial District with SOMA (which stands for South of Market).
SF joins mostly European cities like London, Paris, Madrid, Rome, Frankfurt, and a few Scandinavian cities that have either completely banned or limited the use of certain types of vehicles like diesels from entering parts of their cities, normally city center, in order to manage traffic, encourage public transportation usage, and limit the pollution that is caused by these vehicles.
It’s going to be tough for these cities to break people’s habits of using their cars to get around but I see this trend extending more and more across European and some of the larger American cities.
In order for these bans to really succeed and gain momentum though, these cities really need to think through the outcomes of these bans and offer real, reliable, convenient and cost-effective alternatives that do NOT change materially the time it would normally take people to get from point A to B if they weren’t to use their personal vehicle.
This is a HUGE opportunity for mobility companies, ‘last mile’ providers and new types of urban transportation providers to take advantage of this new reality that should only increase in popularity and prove that they have viable, cost effective solutions that people will be open to utilizing as alternate to their car.
LAST MILE MOBILITY (< 4 wheels)
For those who have followed my newsletter for a while, you all know I am long electric bicycles and this just reaffirms my position that electric bicycles (the ones with some form of pedal assist and a small battery) will continue to grow in 2020 and that they will become a major player in the shared ‘last mile’ economy.
The tech is already there and the bicycles that support them do NOT have to be totally re-engineered the motor and battery just need to be BOLTED on. I am oversimplifying this but not by much. Can’t wait to see to the new form factors and ways that startups as well as well established companies both find new ways to try to monetize and capitalize on their increasing popularity, you never know maybe I will be helping one or two of them to do just that!
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.