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Wired - All Things China EV, BYD > Tesla in EV sales, China's chip dilemma - SAI Newsletter 26



 

It feels like we’ve gone from ‘end of the world’ lockdown and restrictions and in the blink of an eye back to business ‘almost’ as usual, here in Beijing at least. People are back in the offices, kids are back to school, business and family trips have been booked, no one is wanting to horde food and the OEMs and EV firsts companies are getting back to the sales volumes in June we expected from them pre-outbreak. Parts of Shanghai, Xi’an and a few other cities on the other hand, have had some mini outbreaks and are again placing restrictions on those areas so like I said in previous newsletters – a game of whack a mole which creates an uneasiness over the entire country. I have friends in Shanghai who're getting notices from their staff that they may not be able to go to the office due to 'close' contact with someone that was infected. One really annoying (and scary) turn of events that happened to me that’s worth mentioning. WeChat asked me to re-verify my account information, so I did that, including uploading my picture, etc. but before I did I asked my wife if she was asked to do the same – she was so she verified her information and didn’t think much of it. I thought it was a nothing burger, that was until I tried paying for lunch. My WeChat pay wasn’t working as they were still ‘verifying my updated account status.’ No big deal, I had my friend pay for lunch and I would send him the money via WeChat later once my account was verified. I could still use the app to chat but WeChat pay wasn’t available. That evening my wife and boys went over to a friend’s to watch a movie and grab dinner so I stayed home and planned to order waimai (外卖) aka takeout. Guess what, I couldn’t do that because I would need to use WeChat pay to pay for it. Then I decided I’d grab some actual money and take a Mobike to SLT and grab dinner with a friend. Couldn’t do that either because I needed to pay for the bike via WeChat pay. To make a long story short, that’s how much I, and other people in China rely on apps in general, but WeChat specifically. The issue was finally resolved and my account is back to normal but the reliance I have with WeChat just to do daily tasks makes me a bit uneasy if I am being honest. China EVs & More is scheduled this week for Thursday, 07.07 – 9pm EST, Friday, 07.08 – 9am China local time so meet us in our Twitter Spaces room then to get a download on all that’s happening in the space. Those that can’t join, the China EVs & More podcast is available wherever you grab your podcasts from. Most of our back pods are posted and the descriptions will be able to tell you what we discussed that particular episode. This week I should note that we have a very special guest for our next MAX episode. He lived in Michigan and worked at a US OEM for a while as a designer. The conversation we had is nothing like our other MAX episodes so Lei and I are excited about sharing it with you likely mid-next week. It's out getting edited right now and like the Steve Levine MAX episodes, this may need to be split into two since we covered alot of ground! QUOTED It’s been quite a busy few weeks of me talking with journos for articles that have been posted in the last couple of weeks. With Wired, they dedicated a section of the latest edition to writing about China EVs hence the double dose this week. It’s safe to say that the west is starting (I say starting because before they heard the alarm but effectively pressed snooze for 4 years during the Trump years) to wake up to all of the noise coming from the East about EVs, charging, batteries, AVs, data, chips, raw materials, and battery swapping with a bit of fear and apprehension about when China EV Inc will flood the US markets with products. It’s coming but not likely a flood, it’ll start as a trickle and whether it turns into a flood will have a lot to do with the domestic players and the attractiveness, affordability, and quality of their products and whether or not they address the specific needs of today's consumer. (read: GM, Ford, Stellantis and yes, even Tesla). - The broad overview that gives you an idea of how China became the global leader in EVs so quickly. I spoke with Jennifer Conrad about this Wired article which gives a broad overview of ‘how’ we got to this point meaning China dominating in EVs, charging and battery manufacturing including pointing out some of the policies that were put in place to begin the process of switching the country over to EVs. It’s just tongue-in-cheek that I described how China became the leader so ‘quickly’ because they started the ball rolling way back in 2009 and are likely >$80B in on investment. So if the US thinks it can snap a finger and overtake China on any of these fronts, I am here to pour cold water on that notion. Finally, the multi-pronged approach with attention and investment in battery technology R&D, the build out charging infrastructure, encouragement for entrepreneurs to start ‘EV’ & battery companies and policies that limited foreign firms from going in and dominating any of those sectors before enough momentum was built by the domestic players. - EVs CAN indeed pose a potential national security concern. This one is worth a click. I spoke with Justin Ling at length for his Wired article about how all of the data that’s being collected by smart EVs will uncover all kinds of insights (AND secrets) and that the US & EU are behind in addressing where there could be exposure. If Tesla vehicles aren’t allowed in certain areas of China, then shouldn’t that be enough to raise alarm bells in the US and EU? Justin goes into a bit of detail into what data is being collected and how it could be used so for those that are still new to what ‘they’ - with the they being the legacy automotive companies, technology companies and the mobility platforms like Uber, Didi and Lyft - do with the data this article gives you a good idea what CAN be done with it and how vulnerable it likely is for hacking.= - BYD tops Tesla in 1st half 2022 for global EV sales? Yes and no. It depends on who you ask and how you define EV? True statement here – BYD sells both PHEVs & BEVs while Tesla sells BEVs ONLY. It was a combination of PHEVs & BEVs from BYD together that outnumbered the Tesla BEV ONLY number. It doesn’t seem that controversial, right? WRONG ANSWER! Lots of Tesla STANs, many of them snowflakes in their own right, take offense to BYD being crowned EV king. The Shanghai lockdown likely played a major role in Tesla not maintaining their global sales lead so this victory could be a one-off and hence shortlived. We should also note that BYD largely sells their products in China so not as international as Tesla either. I’ll admit that the STANs do have a valid argument as to why Tesla should keep it’s crown but what can’t be disputed is that BYD is ROLLING! Their level of vertical integration is the envy of many automakers. BYD's ability to develop and produce their own batteries also will help them create distance between them and everyone else in the long-term, perhaps besides Tesla since we’ve still not seen whether they'll be as successful outside China as they are within its borders. I think they'll do just fine in the US & Europe but it'll take time, nurturing and investment. TESLA - 2K. That’s how many supercharging stations, consisting of a total of 8.7K chargers, Tesla has opened up in China. Contrast that with 1.4K in the US as of late June 2022. IN THE NEWS - UberX Share is back in the US! With Uber relaunching this carpooling service for the US market, can we O-fficially proclaim that fear of contracting Covid is now over? It’s limited to some of the largest cities in the US for now including NYC, SF, da ‘Burgh, LA and Chicago but I do see this becoming a thing as Uber has redesigned the UX so I suspect they grinded the data to optimize safety, convenience and made the cost savings compelling enough that users would more often than not opt for it. (Stepping on my soapbox) THIS is what makes mobility makes sense - MORE SHARING! Sharing can’t be at the expense of safety, convenience, and cost savings and it likely only makes sense in the larger cities where there would be the critical mass of transactions but – BRAVO, more of this please! (Stepping down from soapbox) - Lincoln June sales in China climbs 19% YoY. The Corsair, China ONLY Zephyr and Aviator are leading the way for the brand’s resurgence. Total sales for June: 8.3K, Q2: 18K - Compare that with Audi (701K), Bimmer (848K including Mini & Rolls), Benz (735K), it’s still a small base for Ford. These are ALL ICE vehicles as well but it bodes well for their future in China as it’s rebuilding a foundation and may have an opportunity to take share from ABB. It also points to their commitment to succeed in the China market. TRENDING ON SOCIAL MEDIA - Ganfeng warns about an investigation into insider trading. Uh oh, one of the world’s most important lithium suppliers and whose customers include Tesla and BMW is being accused by the Chinese Securities Regulatory Commission of suspicious trading of a mainland stock. Supply scares = opportunities to game the system to make a few extra ¥¥¥. Not saying this was being done, but it wouldn’t surprise me. Worth tracking to see if anything else has been manipulated. - Another animal themed short seller goes after an EV related company. This time it’s Fuzzy Panda Research going after EVgo, a US based charging infrastructure company. Some of the things EVgo is being accused of, broken chargers and network utilization rates being low, isn’t exclusive to EVgo! Are you starting to see the trend here? INTRODUCING - The Electra Meccanica. A one-seater with three wheels that tries to take the daily driver/city commuter use case mainstream. Yes, it does look like half a car. And yes, there are other very narrow EVs that are trying to address the single person who lives in the city and has no interest in purchasing a 4 seat EV for >$25K that will NEVER have 4 people sit in it use case. I hope they all succeed. I am predicting that the days of Ford Expeditions and Chevy Suburbans are numbered, at least in dominating city center streets. They take up too much room, are intimidating to most other drivers and aren’t necessary. I’d argue that they should stay out in the burbs where they are really (arguably) necessary and has the room to roam. More major cities around the world saw the benefit of pedestrian & bike friendly streets and avenues and there's an opportunity (because of COVID) to make permanent changes. Cities like Paris are investing hundreds of millions of €€€ to make their streets bike friendly. I know this is likely not the take that my US legacy OEMs want to hear but it's a very probable future for large vehicles globally so do yourselves a favor get out in front of it. And then go visit with these startups that are trying to disrupt your space, mentor them, work with them on rev models, help them lower their costs so that they can try to have a viable business because it’s likely not a purchase and park model that’ll wring out profits but either a hybrid or a sharing model. That way a few EVs can help many. If you’re struggling to find some of these ambitious companies or want help white boarding out use cases and revenue/cost/profit modeling, get in touch. We can help! - Aito introduces the M7. The joint venture between EV company Seres & Huawei, on the heels of Li Auto’s L9 launch, launch an eerily similar segment busting EREV. This is basically Huawei’s 2nd ‘non’ entry into the EV market. I jokingly write that because it’s clear that Huawei is pulling all of the strings on this JV and Seres acts as just the CM. - Xiaomi just went over the top with it’s newest phone camera. Xiaomi bolts a 1” sensor onto its top of the line 12S Ultra that includes Leica camera. A 1” sensor has been done before on a mobile so they can’t be credited for being the first to do that but a short look at the entire spec sheet clearly points to Xiaomi pushing point & shoots toward extinction. Brief highlight of specs: 48MP ultrawide, 48MP telephoto, 50MP main camera. Is this overkill? Without question, but it’s still pretty cool. GET SMARTER - 3D printing is real and its time is NOW, especially for auto manufacturing. 3D printing has been around for quite some time, I’ve seen 3D printers in malls making small toys for kids and you can also buy them now on Amazon or at Best Buy, pull down instructions off the interweb and 3D print your own products. But the 3D printers in this article are industrial sized and theyll be able to fab much more complicated products. The next time you get in your car, look around it, many parts you're able to touch are made of injected molded, plastic, and other simple aluminum and steel parts. All of those parts are prime candidates for being 3D printed in the future. The mass adoption is still years away, but when it does happen, it will wipe much of the entire tier 3-4 level suppliers that make the most simple parts. With the trend of OEMs vertically integrating, even the need for tier 1s is in jeopardy. What if GM bought a bunch of those 3D printers, developed the custom software that instructs the 3D printer to do its work and cuts out the tier 1 middleman? That’s why you are seeing the tier 1s also invest in autonomous vehicle technology and try to push into the OEM space. Suppliers will become an endangered species within the next 15 years so the smart ones are trying to reinvent themselves as we speak. Think Aptiv, Bosch, Conti, Valeo and a few others who are all working on connected & autonomous capabilities - they all have a chance to stick around for the next 15-20 years. Some of their current competitors, not so much. - China fab’d 5% of the automotive chips it used for its cars last year, companies like Horizon Robotics aims to change that. There are a number of chip design startups and fabs that are being heavily invested in by Chinese SOEs and investment firms with a ton of capital being poured into the space (including govt investors) so the value of China gaining independence from the rest of the world with regards to chip supply and innovation should NOT be lost on anyone. Remember that in 2009, there were virtually no EV brands in China or any automotive grade battery companies, now they lead the world in battery manufacturing and with the exception of Tesla, have the largest EV companies in the world. There’s no if about this – when is really going to be up to how fast companies like Horizon and Black Sesame can innovate and learn how to fabricate their own chips. It’s not enough to design the chips, they have to be able to fabricate them in mainland China, that is the only way they’ll be able to stop relying on Korean, Japanese, German, Dutch, US and Taiwanese companies for chips and chipmaking equipment. They'll be able to build the most cutting edge consumer, commercial and yes military products completely on their own. BY THE NUMBERS - 10 million. That’s how many battery swaps have taken place at NIO’s currently 1,011 battery swap stations over the 4 years since the first one was open. Collectively, the swap stations average about 30K swaps/day. Congratulations NIO on this amazing milestone! - $700M. The estimated total of investment being made by Volkswagen’s Electrify America and Siemens to boost charging infrastructure manufacturing in the US. President Biden wants to have >500K charging stations in place by 2030, long after he’ll have left office so let’ see if we sniff anywhere close to that by 2028. —— 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 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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