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Waymo One Confused, Tesla - The Big Short, Foxconn Dominates - SAI Newsletter 19



Things are starting to heat up again here post auto show as more announcements emerge from companies officially ‘throwing their hats’ into the EV ring. This week it’s Midea, one of China’s largest appliance manufacturers, if you ask them. The other notable announcement this week came from tech company JD.com, a combination of Amazon.com and Best Buy. They announced a partnership with Enovate, an EV startup, to jointly build customized vehicles. It’s getting beyond ridiculous right about now but most of the companies I’ve told you about in this newsletter or the Clubhouse room seem pretty serious about bringing a product to market. Before I get to neg on any of them, let’s see how they do getting a prototype out first. I also wanted to highlight this video embedded in this article about a Waymo vehicle from their pilot program in AZ, Waymo One, that gets confused by some orange cones in the road. It doesn’t know what to do and needs to be rescued. If you are wondering how ‘close’ we are to completely taking the driver out of the vehicle and going FULL robotaxi, this video should tell you that we are NOT CLOSE at all. Let me also assure you that this happens more often than these AV startups let on. The China Transformed – NIO presentation I gave a couple of weeks back is posted here for those that weren’t able to attend the Zoom call. You can watch my preso at your leisure. So far, most of the feedback was very positive so if you find it helpful or not, please do let me know. Always up for improving the experience. Lei Xing and I are back at it this week with our Clubhouse room. We have decided to move it back to Thursday night, 10pm China time / Thursday, 10am EST. We will talk about the latest news this week as well as take some questions towards the end. Always a passionate, inquisitive, and knowledgeable bunch of folks who join in so if you haven’t tried it yet, this week will be a great time to drop-in! Here’s the link for those keen to participate. Good news for the Android users out there, Clubhouse is now also available to you! If you’d like an invite to join Clubhouse, click that link, and I can get you sorted out. TESLA IN THE NEWS - The guy that made the 'Big Short' famous is now 'Short' Tesla. Michael Burry, one of the few investors that saw the housing bubble and knew that it was inevitably going to burst, bet against it and made his investors a few dozen Brinks trucks worth of cash along the way is now certain that Tesla’s share price is going down.

He’s SO sure, he’s shorting Tesla to the tune of 8K puts or about 800K shares. This is EXTREMELY risky as anyone that has followed Tesla’s share price rise for any amount of time knows that the Tesla ‘short’ sellers aka $TSLAQ have taken a bath in anticipation of Tesla’s crash back down to Earth.

Right now, it looks like Michael is right, but we have no details about the value of his ‘Short’ or when it will expire. Tesla hit as high as $880 in early January before falling to where it currently sits - $576.83 which means that there’s a decent likelihood that Burry is right …again. IN THE NEWS - Waymo and Cruise taking the next step in SF. There are finally a couple of American AV companies that are ready to take it to the next level and experiment with charging for their taxi and delivery services. Waymo & Cruise, the two companies some analysts believe lead the world in how far along their progress towards L5 is, although a few companies in Pittsburgh would dispute that, plan on offering paid services in and around SF. No timetable was offered as to when either of the services would begin but does this mean we will begin to see more companies in the US roll out pilots in order to keep up? That’s what happened in China and we now have multiple companies with multiple pilots running in multiple cities, a few with no safety drivers as all! The pressure to get some ‘wins’ on the board, especially when they look across the pond, could start to build for the US AV startups. - Ambitious mobility startups don’t just reside on pavement, some don't hit their stride until they're 60K' in the air. Meet Boom Supersonic, an aerospace company that wants to bring back super & hypersonic commercial travel à la the Concorde’s from back in the day. The twist is that Boom believes they can be carbon neutral and ultimately get you anywhere in the world within 4 hours for $100! Now, with the audaciousness of the CEO’s goals, this thing could fail either by not being able to engineer his vision into reality or run out of money trying. Having said that, this is the type of ambition that inspires me so I am automatically inclined to hope they’re successful. Even being close to any of those numbers being thrown around would be a HUGE win for technology, innovation, and the travel industry. The fact that the CEO is a Carnegie Mellon grad is just icing on that cake! Oh yeah, I am definitely ordering some Boom Supersonic schwag when I’m back in the States …eventually. - E-scooters, make that E-scooters and ride-hailing just don’t make for lucrative standalone businesses. Can Bird eventually become profitable? Yes, if they do a massive pivot and are able to provide services that aren’t as capital intensive all the while growing their install base so that they can capture more revenue from a larger denominator. When you get into other countries & regions where laws, competitors, cost structures, and city sizes vary it makes for a pretty steep ‘profitability’ hill to climb. That’s OK though, retail investors will likely bail the institutionals, early investors, and employees out and be left holding the bag like many of the other ‘dawgs’ that the SPACs have become. - Get knowledgeable about chips – What they do, how they're designed, how they’re ‘fab’d’, what are typical lead-times, which companies design, fab, do both, what types there are, where they come from, why Taiwan dominates manufacturing them, and why there is a shortage of chips and why that will likely the case for some time. This podcast is a good start. Hal does a good job but there’s A LOT more to learn and know. When I worked in Silicon Valley, I basically drank through a firehose in order to learn everything I could about chips in order to do my job better. Luckily, I lived in Sunnyvale so there were plenty of engineers around from Nvidia, AMD, ATI, Marvell, Intel, and of course my brilliant co-workers at Apple at the time that patiently answered ALL of my questions. It’s complicated and it’s not easy to understand so if you get an opportunity to tour a clean room and have someone explain to you the process in real-time – TAKE IT. This will be like breathing. If you can’t speak intelligently about how computers are made, because that’s what most products will become, really complicated computers – you’re going to get left behind. Your automotive knowledge is going to matter less and less, faster and faster - So what are you waiting for? - Foxconn dominates the contract manufacturer (CM) space for high-tech products. Now, they have their sights on eating every auto OEM’s lunch as well. I may not bet against them. As a matter of fact, I am saying this here and now – Foxconn is going to be a major player in the mobility space in the near future. They are a sponge and have encyclopedias full of ‘lessons learned’ from building products for what reads like a ‘who’s who’ of tech hardware giants: Apple, HP, Dell, Nintendo, Xiaomi just to name a few off of the top of my head. They could never move upstream with their own standalone brand settling for building products for others since they made more money manufacturing for someone else than having to compete with the likes of HP, Dell, etc. for low margin, high volume sales. EVs are different though. Everyone is learning and products, brands, business models, and design is still shaking out globally so there are no dominant players yet unlike in tech products. Further, Foxconn has ALL of the goods where it matters most - Manufacturing - so with that in-house expertise, they could CM for Fisker, Geely, Faraday Future, Stellantis, and others until they feel comfortable enough about design then, all bets are off. I think that could be sooner rather than later. The OEMs know this as well. - The Western AV companies have seen some consolidation. Does that mean consolidation in Chinese AV companies is imminent? I see it coming but not till much later, the major AV companies here haven’t had much trouble raising capital, it’s more of the valuation that they’re having a more difficult time justifying. Although some of them having pilots running in both the US & China their valuations could be more justified than their western counterparts. The market in China is HUGE and as long as there aren’t any serious (read: tragic) accidents, the EV tailwind should keep the capital spigot open for these companies a bit longer. There will be consolidation though as fewer companies will be able to launch pilots with the same velocity as WeRide, Baidu, AutoX, and Pony.ai. - A new Shanghai traffic rule boosted NEV sales over the past 6 months. By effectively banning vehicles from outside provinces on the elevated inner ring roads, the Shanghai govt. pushed the residents who didn’t have a Shanghai license plated vehicle to purchase a NEV since there is no waiting period for Shanghai license plates. If you purchased an ICE, you’d have to participate in and win an auction in order to receive a Shanghai license plate that could add $15k to the total price of ownership. It also wouldn’t be those pretty green license plates, just the plain old blue, and white ones. As long as there is much more demand than supply of cars and the exception continues, NEVs should continue to grow in sales in Shanghai. - Beijing effectively tells Didi and the other ride-hailing companies operating in China to not make ‘too much’ money on their services. This could put a real damper on future revenue prospects for these companies especially considering Didi is rumored to be IPO’ing later this year at a valuation of between $70-100B! TRENDING ON SOCIAL MEDIA - The makers of Pappy Van Winkle try their hand at Baijiu (白酒). For those not familiar with Pappy Van Winkle, it’s a limited production bourbon that’s the equivalent to being the ‘Holy Grail’ of bourbon. It retails for $130 but it’s almost impossible to get a bottle at retail price. Try 10x’s that. I’ve had a shot that cost $80 and boy was it glorious! The distillers that bring you Pappy Van Winkle are experimenting with baijiu. For the folks that aren’t familiar with baijiu, it’s the ubiquitous alcohol of China. And just like any spirit, there’s rotgut cheap baijiu like Erguotou up to bottles costing hundreds or thousands of dollars like Moutai. For westerners, baijiu is an acquired taste but one I’ve had the pleasure of acquiring. If anyone has tried Buffalo Trace’s version, I’d love to hear your thoughts since I’ll be ordering one for myself after I press send on this newsletter. JUST THE NUMBERS - AV startup WeRide raises another round in the ‘hundreds of millions’ right on the heels of announcing that it raised $310M in Series B just four months ago. Now, would that be RMB or USD?? Yeah, as I said earlier there’s still money out there to be had in the AV space, at least here in China and there will be for the foreseeable future. I’d say, through the end of this year. It also looks like I’ll need to take a trip back down to GZ to check out how much their services have improved. Stay tuned for that! —— 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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