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US Protectionism & Li Bin, UAW Contract Negotiations, Audi Needs an EV platform - SAI Newsletter 27



 

Am back from my Pacific Northwest adventures. No plans to go anywhere the next couple of weeks but there may be a trip to the west and perhaps even the far east in my near future. If that is the case, I’ll let you all know the deets so I can get out and meet some of you in-person to talk shop. Big news this week was the FT article that highlighted Li Bin’s comments about US protectionism. With NIO neck deep in a (hopeful) domestic rebound - during a price war - and fairly recent entry into a number of EU markets, their plate are plenty full. I look at this as a trial balloon and seeing that Li Bin is one of the more recognizable people on the China EV Inc side, he decided that he’d represent the rest of the team and go ahead and throw it out there. China EV Inc isn’t banned from entering the US markets but the combination of a 25% + 2.5% tariff on imports into the US (from China) along with exclusion to any financial bennies from the Inflation Reduction Act (IRA) combine to make the US a mighty unattractive place to launch NIO’s products so this could be the first in many attempts to soften the US govt. I don’t see the Biden administration eliminating the tariff anytime soon though. There are several questions I would’ve posed to him as he’d made that statement but that’s for another post. The example he set about Tesla is true BUT I’d argue that the Chinese govt needed Tesla’s help to get their domestic EV market kickstarted and that was enough reason for them to roll out the red carpet for Elon. I’d also argue that the Chinese govt saw this day coming where China EV Inc would want access to foreign markets, specifically the US and European markets so they needed to be able to point to how their market is ‘wide open’ to foreign companies, despite having a requirement for any OEM who enters the China market to have a domestic JV partner the previous 35 years or so. I’ve spoken with a few major NIO investors recently about their frustrations and I think it might make for a good branding exercise, but they want Li Bin to focus more on his core market and build out a dominant position there and in the EU countries they’ve already entered rather than take on a US market where significant share would be a tough go, not least of which is because the US market is still really just at the starting blocks from an EV adoption standpoint, but perhaps that’s the exact reason he wants said access, so he can beat the premium brands to the punch. Li has famously said that NIO would enter the US before 2025 so until he backs off that statement, I’ll take him at his word. I had the privilege of present my take on the global EV market to a bunch of technical folks this week and I think for some it’s starting to sync in why the Biden administration had to do the Inflation Reduction Act, although I think I need to do it weekly through the end of this year before enough people know how really far behind we are with Tesla and China EV Inc. Thank you Tobias for inviting me to speak. I hope that you and the crew got something out of my preso. CHINA EVs & MORE Just had our last show so apologies for continuing to change dates. We will get back to a regular schedule soon. For those that 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. Also, if there are any companies you want our thoughts on, let me know. BYD - No surprises here. BYD leads the China market for June sales. Not just for NEVs BTW – they lead the China market in TOTAL sales. Beating out the likes of Volkswagen and Toyota. TESLA - Model 3 refresh stories are popping up more frequently. This means that journos and analysts alike believe it’s just around the corner. And there should be some pretty significant improvements from V1 of the vehicle which should goose demand, at least in the US & EU. For the China market where its rumored to be launching end of the summer / beginning of Q3, jury is still out. Will it boost sales – YES, but unless they are offering significantly more features at a very competitive price, there are many other fish in the sea that the Chinese consumer can turn to. That isn’t the case in those other places. NEWS THAT GOT OUR ATTENTION THIS WEEK - We should blame VW ID struggles on design? According to the newly minted head of design at VW brand, that’s one major reason for its EVs. I would tend to agree with that assessment, among the myriad of other reasons that they're not selling including the endless number of bugs from basic SW functions they weren’t able to get right. Now isn’t the time for Monday AM quarterback’ing though and the timing of 2026 being the launch date for the ID.2ALL also seems too little too late. - UAW contract talks begin this week with Detroit’s Big Three. UAW head Fain has positioned these negotiations to be the most important ever as the union preps for its first 4-year contract in the EV era. He is also hoping for his members to forget how corrupt his predecessors were during their many years in leadership and mismanagement of the 150K strong union. I am a bit torn. My father was a 27.5 year UAW worker before he retired from GM in the mid-90s and I can tell you with 100% certainty that I wouldn’t be typing at this computer today writing about my feelings on this contract negotiation without the past contracts that allowed my father to put food on the table and provide for me and my 7 siblings. I also see that GM, Ford and Stellantis (US ops) are at a VERY vulnerable position as their competitors: Tesla, Nissan, Honda, Hyundai, BMW, Merc and others whose factories in the South run without the UAW. I remember my first job at the Orion Assembly plant and the difficulty management had with the union policies in place that didn’t allow them to fire problem and event absent workers even though many of their colleagues thought it would’ve been the right thing to do. Hoping for the best for this negotiation but everything points to a strike, a major one. My guess is that due to the fact that GM announced they’ll be launching 10 EVs off the Ultium platform – ALL built in China for China – it’ll be them that the UAW will target with a strike. And this could last at least a few months. - Audi set to buy an EV platform in an attempt to play catchup, perhaps. Audi has been kicking the tires on the SAIC brand - IM Motors platform because the MEB platform that underpins the(Q4/Q5) e-tron vehicles isn’t getting it done. You could argue that the MEB platform isn’t getting it done for any of VW Group’s vehicles but for Audi at least desperate times calls for desperate measures including having recently cut the old boss Duesmann. For a proud German brand, this must be a very hard pill to swallow. I’d mentioned before in this newsletter and on the pod every single legacy automaker, whether American, German, Japanese or otherwise, is currently going through a ‘come to Jesus’ moment and going through the ‘make vs. buy’ exercise for every strategic product decision. This in order to put themselves into a competitive position vs. the likes of a Tesla and BYD. This tells me also that Audi sees that their place in the China market is slipping away quickly and that there’s no guarantee that waiting years on reinforcements will catch them up let alone leapfrog the future leaders in the market. It’s also a very negative commentary on what they believe to be their in-house capabilities. Pan out a bit further and we see rumors of VW kicking the tires on the Huawei stack for its EVs in China. Desperate times indeed. With those two brands struggling in China, a disproportionate amount of pressure is being placed on Porsche to carry Team VW Group for the foreseeable future and we know what they say about what pressure does to pipes. - Inventories for EVs balloons in the US. A couple of quick comments for the analysts and the OEMs. The pace of EV adoption will be slow until it’s not. It gets to 'not' when the OEMs launch and build many more of the affordable ones and / or more products that people want. Not the base price Ford F150 Lightning that start at $57K. And BTW, the decision to go all-in on EVs has been made by virtually every OEM. That horse has left the barn so can we stop talking IFs? Because IF the OEMs are too slow to get many more affordable EVs on the road in the US, then Tesla - who will eventually get a Model 2 on the road – will put themselves in an even more dominant position building on its current 60% share of the US market. The automotive space is different and its being pushed along by China EV Inc and Tesla. So even if China EV Inc plans to opt out of the US market for the foreseeable future, that just means more pie for Tesla as the legacy OEMs struggle to launch and produce in any type of real volume these EVs they’re promising to everyone. TRENDING ON SOCIAL MEDIA - Human drivers are crap. Cruise took out a full-page ad in the NY times and many local papers to let us know that almost 43K people were killed in car crashes last year. That’s an insane and unfortunate number of deaths. It’s also a statistic that Cruise is using to tout its technology. If people are to get comfortable with the thought of using robotaxis, there needs to be a consistent awareness and education campaign from all of the players involved. I applaud Cruise for doubling down on itself and the implication that having their robotaxis on the road would make those roads safer. - A fight brewing that could derail the battery factory that’ll use CATL IP to build more affordable LFP batteries. EVERY single new partnership and / or investment by China EV but specifically Battery Inc will result in protests at best and lawsuits at worst. Why would companies want to invest in Michigan when this is a likely outcome for their commitment? Ford knew this was going to happen, right? - Cones on a Cruise robotaxi stops it dead in its tracks. Companies that develop frontier tech and launch it out to the wild can't predict all the challenges it’ll run into. It can deal with most of it, unless of course it’s caused by humans …on purpose. Something a software patch should be able to fix – but the larger argument of these vehicles are causing traffic jams on its face is a bit ridiculous since throwing cones on their hoods guess what – causes traffic jams. Not sure if this would happen in other cities but SF is known to have A LOT of NIMBYs and this is just another example of that. INTRODUCING - Tesla kid’s quad bike. China gets it too. And I am betting it’ll sell out the same day it goes on sale. It WILL BE a collectible. Hmm. I wonder what the buy limit on them is… BY THE NUMBERS - 2.14M. That’s how many cars were exported from China in the first half of 2023. The lion’s share was still ICE vehicles but the tide is definitely turning w/ BYD & Tesla leading that path. Remember – this is a HUGE pressure release valve for the Chinese automotive sector as the economy struggles to get back on its feet and the automotive sector is months into an intense price war. - 1M. That’s how many MIC Model Ys have rolled off the line at ShanghaiGiga so far since delivery of the vehicles started in Jan 2021. Pretty impressive for a US EV company to be able to do that before everyone else …besides BYD.

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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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