VW's important launch, GM & Google partners, Argo CEO has alot to say - SAI Newsletter #34
Happy Mid-autumn festival (中秋节快乐) for those in China!
Today is a holiday for China, but not a day off for news in the mobility and transportation sectors.
First, there were A LOT of introductions for new vehicles, some electric some not, at the Frankfurt auto show here are a few I think you should do a bit more reading up on if you have the time or inclination:
- Byton M-Byte
- VW ID.3
- Renault K-ZE
- Porshce Taycan
- Honda E
- Hyundai 45 Concept
- Land Rover Defender (personal favorite)
- Merc Vision EQS Concept
Also, Nissan was again in the news this time with their CEO Hiroto Saikawa announcing that he would step down from the job on September 16th. This after their previous CEO, Carlos Ghosn, was arrested and accused of stealing from the company earlier this year.
The Chinese passenger vehicle market continues to struggle with its 14th consecutive month of sales declines and shows no signs currently of abating although there was a temporary cease fire agreed to by the US and Chinese govts. In hopes of settling their trade disputes.
Finally, this week’s headline picture is of the newly opened Saleen store in Parkview Green in Beijing. Just a reminder to the readers in the US that Saleen is indeed now a full-fledged Chinese company.
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.
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visit: www.sinoautoinsights.com. Thanks for reading.
The Sino Auto Insights team
The headline of this Fortune article highlights VW Group’s $33B investment commitment to electric vehicles (EVs) in an attempt to shut the door on diesel-gate while also usher in the electrification of their future vehicle lineup starting with the introduction of the ID.3, what the e-Golf ultimately should’ve been.
VW Group CEO Herbert Diess believes EVs could make up to 50% of total VW Group sales in China and Europe within the next 10 years with the ID.3 being a big part of that total. The ID.3 will be the first vehicle to utilize their MEB platform (electric vehicle platform) which will be shared with other future products across VW Group’s multiple brands as well as with Ford Motor. VW is counting on the introduction of the ID.3 to be a turning point in VW’s recently challenging times.
With aggressive pricing and good to great range (depending on the battery package), the ID.3 could be THE electric vehicle that breaks through with the sales volume that will get industry folks to stand up and take notice. For more on the actual vehicle specs, etc., here’s a link to initial thoughts from the UK based Top Gear guys since there are NO current plans for it to be sold in China of the US. What we CAN expect is that A LOT of the design and tech will be incorporated into vehicles specifically for China and the US though.
If the initial reviews from consumers is positive and the sales follow, this will help Diess and VW Group take that first step towards making VW THE global, dominant player in the EV space. For those companies that have a product competing directly in the same space as the ID.3, it may be time to start worrying …if you’re weren’t already.
GM has decided to throw in the towel on internally developing an OS to run the backend for their vehicles' infotainment systems and outsource everything to Google by 2021. That means that every GM vehicle outside of China will be running a new, better version of Android Auto called Android Automotive OS and have Google Maps, Google Assistant and other Google productivity apps pre-loaded with the Play store, as part of their infotainment system.
IMHO, one of the pivotal factors in the future for the car companies is deciding ultimately who will control the interior of their vehicle and the data that can be mined from it. From a financial standpoint, this makes TOTAL ‘sense’ for GM since you ‘make’ the things you’re good at making well and cheap and ‘buy’ the things you’re not good at making well and cheap. That’s unless you believe this to be a future core competency.
Although GM is in the business of manufacturing and selling vehicles currently, they believe that in the future more and more of their revenue will be generated by services derived from analyzing user data. If this is the case, then great lengths and risks should be taken in order to position the company to be successful in its self-defined future.
In GM’s case, that means remaking the entire company so that future opportunities, service or otherwise, can be conceptualized, developed, and brought to market quickly and efficiently through design, engineering, development, marketing, and execution all completed ‘in-house.’ This is a HUGE task that’s not for the faint of heart since many things can and will go wrong but this should be something GM’s experienced management team has to take on and should be able to do, sorry HAS to be able to do.
Starting in 2021, Google will have access to all this data and can include it with ALL the other data they possess of your life in order to 'convince' you to open up your wallet. If they're good at it, which we know they are, GM may not get their chance to.
To put it succinctly, the reason why Audi’s E-Tron and Porsche’s Taycan aren’t able to match Tesla’s range is due in large part to their strategy. The Audi and Porsche engineers believe the sacrifice in range are far outweighed by the increase in their vehicle’s durability and battery life over-engineering them will give.
Having warranty issues derived from drivetrain and battery failures is not something their customers would tolerate, at least traditionally, so the decision was made to not optimize for range. This article reads a bit wonky with graphics to illustrate their points for those that want a deeper dive.
Having said all this, you can bet that these engineers are working OT to make sure that the next versions of these vehicles are able to better match the Tesla specs.
India, the 2nd largest country in the world behind China, also aspires to electrify their transportation network which consists of 2-wheeled mopeds, 3-wheeled delivery and taxi tuk-tuks, as well as 4-wheeled cars and trucks.
The Indian government has set target dates on requiring vehicles, 3-wheeled by 2023, 2-wheeled by 2025, to be fully electric but in a democratic Indian government the policies, funding and enforcement of these ambitious targets could (read: will) get bogged down in bureaucracy and red tape.
From where I stand, India is in the initial stages of transforming their transportation system and I think where there will be the most progress in the short term is with electrifying the
This could also be a place that battery swapping gets a lot of traction as well since, as mentioned in the article, swapping out moped batteries, as evidenced by companies like Gogoro, is not a difficult task and could be done by most people.
I am expecting to see a lot more innovation, announced partnerships, market entries from companies, and potential ‘solutions’ to alleviate some of the transportation challenges facing India and will keep you all updated on what I find interesting!
Brian Salesky, the CEO of Argo AI, the de-facto AI team for Ford and recently VW for the US wrote a brief blog that essentially summarizes his view of the autonomous vehicle sector and my key takeaways are summarized below.
- Players in the space aren’t ‘racing’ to be first or to dominate the market
- There is room for many players for different types of services
- Constraints will always be decided by the hardware & software available at that time along with the environment (traffic laws, local norms)
- Select specific use cases in specific cities to roll out mobility services via their partners
- Operating Design Domain = when and where autonomous vehicles can operate
- Compelling user experience one of the key drivers for their R&D
- The fallacy that AI is a ‘black box’ that you shove a bunch of data into and it will work where ever you put it
People that have lived outside their home towns for any length of time can attest its very true that there are local norms that aren’t dictated by traffic laws. As a ‘~Detroiter’ (I am actually from Pontiac, MI), when I moved to Pittsburgh the first thing I had to get used to when driving was one of their local norms.
In Pittsburgh when turning left at a 4-way intersection with a blinking red light, as soon as the light begins blinking red the oncoming traffic always allows the first car directly opposite in the left turn lane to turn left, with cars behind the first one still having to wait for an opening in the traffic to turn left. Doing this in and around Detroit, if you didn’t get hit you’d definitely get a lot of stares and folks laying on their horns!
In China, as soon as that light turns green that first car in the left turn lane turns and each car behind it follows, basically blocking the oncoming car going straight AND WITH the green light to cross the intersection until that last car waiting to turn left completes their turn. By then, the green light may have already turned red again and there you are waiting again for the next green light.
I summarize these examples to illustrate the significance of incorporating the local customs into the machine learning system, although in China’s case you could argue that what drivers do here is illegal since folks going straight actually have the right of way - so if laws are enforced that could stop happening!
Signs that the struggling Chinese automotive market is affecting another EVStartup, this time Byton who just took the wraps off their first production vehicle the M-Byte at the Frankfurt auto show this week.
- A founder leaves abruptly CHECK
- Cash crunch CHECK
- Lays off some Chinese and US staff CHECK
- Delay launch of vehicle CHECK
- Have challenges raising more capital CHECK
- Pretend that nothing could be better CHECK
This isn’t an indictment on Byton, just a confirmation that not one but ALL EVStartups are having to deal with their own challenges due to the market and lack of appetite for Chinese EVs.
I think what’s important to note here is that if it isn’t clear yet, I am going to say it now. The China market is NOT the ‘silver bullet’ for EVs that many people thought it would be, and it’s going to take some time and nurturing, not to mention a good deal of education, better priced products and a better economy to turn the ship around if car manufacturers, both big and small, have any chance of hitting their lofty internal sales forecasts for the next few years.
I am starting to believe that this slowdown could last WELL into 2020, which doesn’t bode well for companies like Byton or Tesla who will be actually launching into a market with ‘recession’ type symptoms.
LAST MILE MOBILITY (< 4 wheels)
Although this is a more or less an electric bicycle review, it speaks to what I am certain will be a trend that will slowly grow into a full-blown competitor to ride hailing & conventional car ownership. The average American drives 16 miles to work, the average distance traveled for Uber/Lyft trips is between 5-7 miles.
With the power in these electric bicycles increasing, the size of the batteries getting smaller and smaller more and more people will likely consider this as a legitimate alternative to getting into a car, either one they own, or a Lyft/Uber driver’s. An average Lyft/Uber ride in the US costs between $12-13 so this particular e-bike, the Juice Bikes’ CrossCurrent X ($2,500 retail) would be paid for after about 25 rides.
This doesn’t even take into consideration the health benefits of actually pedaling for some of that ride!
The electric scooter craze has officially hit many European cities and is causing local city managers the same type of headaches, how to regulate them. On the flip side, the e-scooter startups are finding that the electric scooters that worked so well in many Californian and other flat, non-hilly American cities aren’t equipped properly to handle to much older and in many cases, hilly cobbled streets that define many European cities.
We’ve already seen a great deal of innovation when it comes to electric bicycles, mopeds and scooter manufacturers so this is just another challenge that the R&D teams at these startups will need to tackle in order to get their products to last at least the three months necessary to get to a positive return on investment. Their challenge may be finding a way keep manufacturing costs flat so that they can stay on the positive side of that equation.
Also, as mentioned in the article once London opens up their city to these e-scooters, we will see the competition heat up even further among the dozen or so e-scooter sharing companies. It’ll still be and always be for that matter, the product innovation combined with the deep pockets that will win out in the end.