Winter is here, Data is the new oil, NIO breaks down on Chang'an Jie - SAI Newsletter #5
Happy Year of the Pig! 新年快乐！Chúc Mừng Năm Mới！
Since many of you have this week off, I'll keep the newsletter short. I am traveling again this week so that means we may or may not have a newsletter next week, but I'll try my best!
A housekeeping note, I've recently updated the Sino Auto Insights website so that it now includes all my past newsletters. It's searchable by keyword now in case there were any newsletters you may have missed or if there were a particular area you're wanting to research. As always, look forward to your feedback on how I can make this newsletter even better.
For the new readers, my name is Tu Le and I am the founder and managing director of Sino Auto Insights. 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 U.S. 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/Ridesharing/Ride-hailing/Bikesharing, 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
I have heard about this complaint from a few friends who live in 4 season cities and own Teslas. They’ve told me that Tesla batteries can lose almost 50% of their charge due to cold weather. That’s on top of the fact that the car generally has to work harder in slippery, snow conditions – an additional strain on the battery.
This isn’t something a software update can fix but as mentioned this is a battery cell problem so EV companies across the board should all have to deal similar issues.
With the issue of the door handle freezing, Tesla is finally having to deal with the challenges of designing, manufacturing and selling a vehicle for the masses. Back when they sold <80K units/annum TOTAL, usage cases can be fairly predictable while warranty and design issues can be remedied with a high level of customer service and without much negative publicity.
When you’re trying to reach 200-300K customers/annum, usage cases that weren’t part of design considerations increase significantly. Behind the scenes, during the product development phase for the Model 3, there were probably some design reviews where engineers argued with designers about how their designs may cause failures or quality issues which in the case of the frozen door handle, the designers obviously won that argument. Maybe Elon now sees that in most cases unless truly critical to the vehicle, form should always follow function.
BTW, if this was not an issue that was brought up in design review prior to launch of the Model 3, then they need better engineers and definitely need to do more cold weather testing.
I remember being taking part in ‘cost down’ meetings in a prior life. A lot of it was just coming up with new ways to beat up suppliers so that they would concede another few pennies/part so that we (the OEM) could make our cost savings goals for the quarter.
In Tesla’s case, there could be some really significant low hanging fruit due to the unnecessarily complicated design and manufacturing that they baked into the Model S, X and 3. With that said, Einstein said “Insanity is doing the same thing over and over and expecting a different result” so hopefully he’s not only taken Munro’s suggestions into real consideration as part of these ‘cost down’ opportunities, but that he’s also looking at process; decision-making and cost-benefit analysis.
Toyota’s philosophy is that quality should be designed into the entire process so that there isn’t a need to repair anything on the back end. Makes you wonder if Elon has hired a few manufacturing guru’s that can put his team in check and/or work the miracles necessary when he overrides their cost savings suggestions.
Similar to the article above about Tesla design, seems like this was a rookie mistake by the NIO design team. If it takes many steps to start the software update process, where was the salesperson when this test driver was accepting the steps for the update?
Nonetheless, as protocol for test drives, NIO should require that their product managers/salespeople make sure that every morning prior to any test drives, the software is updated so that this wouldn’t happen regardless of how time consuming or how easy/difficult it is for the customer to activate the software update.
This is more of a no harm no foul mistake, but take it from someone that lives off of and has to drive on Chang’an Jie quite often, the traffic jams on that road can be quite time consuming and consequently extremely frustrating. Next time though, at least I may know the reason for it.
Yet another reason why the U.S. and China’s economic futures are tied to one another. As the March 1st deadline approaches for the Chinese and U.S. trade negotiations teams, they have yet to come up with an amenable deal for both sides. And even if they can agree on something that’ll prevent more tariffs to be triggered by the U.S., the long term prospects of trying to decouple the reliance that both sides have on each other economically still seem to be pretty remote.
I am optimistic a deal can be made in the short term (by March 1st), but that structural differences will still make for a challenging next few years for both sides.
If some analysts are to be believed, then control and monetizing the data is what drives the valuation of the AI companies.
That’s one of the main reasons why Morgan Stanley analysts’ valuations of GM’s Cruise Automation ($9B) is so much lower than Waymo’s ($37B). Waymo’s ability to data mine and monetize that data, which you could argue is part of their DNA, is the biggest reason why they’re long Waymo, especially in the long term.
Will the traditional OEMs be able to learn quickly ‘on the fly’ in order to generate revenue from the data like Waymo and other tech companies? That remains to be seen but it looks like there are a few at least that aren’t that confident the OEMs can.
With Version II of the ‘last mile’ solution, the Viner brothers have something on their hands. Now the unicorns in the market can definitely quickly copy their business, so the Viners will also need to quickly deploy their capital quickly to other markets before the key markets get saturated with a bunch of ‘me too’ e-bike clones that can do just about the same thing theirs are able to.
As I stated in my 2019 predictions, I think these types of e-bikes stand a much better chance of longevity in the market due to being safer and the ability to ride longer on them vs. e-scooters.
If these e-bike startups can work with municipalities to carve out some decent sidewalk real estate so that they can be properly parked in ‘safe’ zones this could be step #1 of e-bikes replacing e-scooters as the preferred mode of transportation for folks living or visiting the city.
Open source hardware? Not exactly but VW is considering something radically different than anything they’ve done before business-wise. If they share their electric car platform they could reach break-even much more quickly, not to mention have access to all the data their customers are gathering as well which we know from the article above is really where some analysts believe creates the value in the future ‘autonomous vehicle’ companies.
Again, what they do with that data and more specifically whether they’re able to capitalize on it by developing new services, products or ways to monetize will be where they will create shareholder value.
I must applaud the VW Group for at least kicking around, some might say, drastic new ideas to try to transform the company. I would argue that due to the challenges of the recent past, namely diesel-gate, it was probably most important for them to do that to remain a relevant competitor in a quickly changing environment.
We’ll find out if they follow through on all these ‘proposed’ ideas they’ve announced or that seem to be in the pipeline, and if they do follow through, whether they have the horses to execute to plan.
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.