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US Three vs UAW Still, Ford's Mach E China Stumbles, GM & Ford's Differing Paths - SAI Newsletter 36



 

The UAW Strike continues with President Biden and former President Trump weighing on the side of labor. Upstream suppliers that support the factories that have been shut down are in meltdown mode as they scramble to keep the doors open hoping for a quick resolution to the current impasse between the OEMs and the UAW.

This as the US govt will be shutting down unless a new budget can be approved. Between the EU, US and China – there’s likely not going to be a dull week now through the end of the year so make sure to stay up-to-date by reading this newsletter and listening to the pod. Much appreciated.

Except for this week in China where it’s National Day – so for the readers there, 国庆节!

QUOTED

- WSJ. A great piece by Selina Cheng, who I gave my $.02 to, digging into why the Ford Mustang Mach E ultimately isn’t very successful in China. She goes behind the scenes and details the poor decisions leading up to the launch, the challenges at launch and the flawed sales strategy. If you’re wondering why Ford struggled and pulled back from China, this is a must-read.

- The Wire China. It’s XPeng’s turn for a spotlight in the Wire China and I was happy to contribute to Aaron Nicholas’ story about the ups and downs of XPeng and what’s next for them. Hint: It involves the EU.

Two worthwhile articles that just happen to include some of my thoughts.

BIGGEST NEWS OF THE WEEK

- Presidential hopeful & current CA Governor Newsom puts the brakes on banning driverless freight trucks on CA roads. California used to be the leader in allowing driverless testing on its roads but it’s now taking a back seat to Texas, at least when it comes to driverless freight trucks.

We are still very early in the move towards pulling the truck driver out of the cab when hauling freight across a state but it could be a reality by the end of this decade, that’s if states like CA allow for piloting now. Currently, all autonomous trucking companies still utilize a safety driver so this veto was more about the near future.

That said, if not CA then who? TX? We don’t really have to answer the question anymore about workers being displaced by autonomy and AI because that’s going to happen. What IS still up for debate is which countries will have companies that are leaders in those spaces. It’ll be a lot less likely they’re American if we can’t get more pilots testing.

- GM & Ford taking completely different paths to try to get to the same place. That place is called ‘affordable.’ That is American made EVs. Currently, the glidepath to 'affordable' without Chinese IP or cells does not get there this decade, I don’t care how many vehicles they forecast to sell in the US before 2030.

This article points to CONSIDERABLE pushback from GM to the US government on Ford’s plan to license CATL IP to build LFP cells that’ll go into more ‘affordable’ F150 Lightnings & Mustang Mach E’s. Since affordable is a subjective word, let me be more clear, I am talking <$45K.

Ford has a very narrow path to transitioning to EVs successfully (read: profitably) and that’s by mimicking their historic success in the US with the F150 being the best-selling vehicle but this time around in EV form. Because unless they can convince US consumers their other offerings are desirable and provide value, then it’ll have to be the F150 Lightning and the F150 Lightning alone that propels them into a successful EV transition.

The challenge is that they can’t get to the affordable part without using the LFP batteries. Currently, the only game in town that Ubers you to the ‘affordable’ part of town is China Battery Inc.

GM must believe it has a different path to profitability via EV sales growth without using Chinese cells (or using Chinese IP to build cells themselves) apparently and I’d be curious to know what that path is. And when are they forecasting profitability on a / EV basis?

GM's path seems to be much wider than Ford’s due to their already formidable lineup of luxury / premium / (kinda) affordable offerings that include the Blazer EV that starts at $51K and the even more aggressively priced 2024 Equinox at a starting price (for now) of $30K.

They are able to offer more products because they spent time developing their Ultium platform. Ford decided to go the route of electrifying individual vehicles so clear advantage: GM.

I am going to do a bit of digging to find out more about GM’s thought process behind the next several years. And if the Ford CATL licensing deal actually gets through, which is getting unlikelier by the day, then all bets are off and ALL US based manufacturers will try to copy that model, they'll have to. And therein lies the rub. Oh, and wasn’t Tesla also planning to license CATL’s IP for a US cell factory as well?

Below are visuals to China dominance in the battery space.



- EU to China - We need to talk re: bilateral trade? It looks like the EU wants a reset. China is running huge trade surpluses with two of its largest trading partners and neither like it very much. Decoupling is out. Derisking is in. For both the EU and the US.

What that specifically that means is still up for debate between the parties. The US is trying to thread a needle – should it allow Chinese cells into its US supply chain in order to make more affordable EVs now and risk what could likely become a prolonged advantage in the space for China Battery Inc?

The EU’s pressing crossroads. What to do about the growing number of China EVs entering its markets. This is also an important moment for China as it’s economy is the weakest it’s been in years. It’s real estate market is a powder keg that could blow up while the need for foreign direct investment is still strong, specifically by companies from both the EU and US.

This game has been played between the parties since China opened up its economy over 40 years ago but it’s different now. Chinese companies want in on other people’s economies. The shoe is on the other foot.

They may think they still have leverage since their economy is the 2nd largest in the world but foreign companies are feeling less welcome in China. And their economy has been sputtering ever since it came out of Zero-COVID. And costs have risen making other countries a bit more attractive. But for ambitious companies, NOTHING will replace the Chinese economy. FULL STOP.

I don’t see the US softening its stance towards China on anything significant for the foreseeable future but I do see the EU not doing much as it worries that any protectionist measures for its automotive sector could lead to retaliation by China for its companies doing business there. Volkswagen is stuck between a rock and a hard place.

- As the EU toughens its language towards China, the US and China inching towards hugging it out. This hug is to try to stabilize relations since diplomacy between the two has been difficult to say the least the last few years. Not a lot of trust here but at least it’s an acknowledgement by both sides that the world is better if the two sides are talking and at least trying to find common ground.

- NIO & Merc rumors heating up again. We put this on watch quite a few months ago so no surprises here. We knew they talked but I am wondering what will actually get the deal over the top? Does NIO want too high a valuation? Does Merc feel threatened by NIO in the German / China markets?

Finally – remember what I said about ALL Legacy OEMs. They are all under pressure to increase speed so they are all going through a ‘make’ vs. ‘buy’ evaluation on every aspect of vehicle development. Would Merc actually adopt NIO’s battery swapping platform? Clearly Merc sees value, how much it’s worth to them is the question. Can they see the forest from the trees?

CHINA EVs & MORE (CEM)

We are back to our normally scheduled LIVE show at 9am ET on Friday.

If you’d like to join the live show, follow me on X: @sinoautoinsight and at 9am at the top where the Spaces rooms show up, you should see our show. It’s an opportunity to ask any questions and have discussions with Lei and I so if are itching to know more about something, join us tomorrow morning!

If you can 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.

BYD

- 90 Yangwang stores by the end of 2023 forecasted. Write that down. BYD is going to be very aggressive with marketing it’s Yangwang premium brand to the Chinese consumer. If you squint, it’s SUV, the U8 has a similar silhouette to the G-Wagon. That can’t make Merc feel good. Porsche has to also be on its heels since they’ve owned the performance premium SUV segment since entering China in 2001. Now they have Lotus, Volvo, Polestar and Yangwang to contend with. All at once.

TESLA

- Tesla to use JD.com to sell more cars in China. For those wondering, JD.com is one of the largest e-commerce platforms in China. In its early days, it focused on selling technology products but has since branched out into consumer products and passenger vehicles in order to compete with Alibaba and T-Mall. This will specifically help them reach consumers in the lower tiered cities.

BY THE NUMBERS

- 5 million. That’s how many vehicles they’ve built globally since their founding in 2003. ALL EVs in case you forgot. It was a revised MIC Model 3 rolling off the line at ShanghaiGIga. Of course, it had to be built in its most important market. When I lived in Silicon Valley and heard about Tesla, you better believe I was curious but from what I’d heard and what I saw, I wasn’t impressed. How things have turned for them.

They are now a global leader in EVs along with BYD and there’s no one else. Congratulations to the Tesla team. You are doing the impossible.

INTRODUCING

- The Fetch+ (+2 & +4) cargo / family bikes. These were intro’d in Feb but the fact that Trek one of the global leaders in bicycles has now begun to sell cargo bikes points to how common electric bicycles are becoming and if you read the review, how their designs have matured.

There is still some consideration that needs to be made on the form vs. function side of things but when e-cargo bikes were first launched years ago, there weren’t that many design features that actually provided a better UX. I’d like to see more of these on roads, specifically for delivery folks that have less onerous packages, specifically for urban areas.

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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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