First off, a bit of housekeeping. Lei Xing and I will be at it again this Thursday 8am EST on Clubhouse talking China EVs and More. We had alot of fun with our first run last week so for those on the Clubhouse platform, please do drop-in and have a listen. We will dedicate the last 15-20 mins to answer any questions you have. For those that would like an invitation to Clubhouse, shoot me an email at: firstname.lastname@example.org.
There’s been a lot of recent news about tech companies wanting to enter the EV sector. Companies like Foxconn, Apple, Baidu, and others that want a piece of the HUGE (TAM >$4 trillion across different verticals) and developing pie. There are still no obvious winners (unless of course you count Tesla with their almost $1 trillion market cap) so those entering now still see a huge opportunity for themselves to quickly take on a leadership position in the space. Let’s be very clear though about how risky entering the EV sector could be for those tech companies. Building cars is nothing like building computers, tablets, mobile phones, or watches. It’s going to take your best internal folks, strong leadership, and the ‘right’ partners that complement your strengths and hide your weaknesses (which for some companies could be many) in order to get a decent product to market. That’s right, I said ‘decent.’ It’s also much easier to convince someone to pay $200, $300, even $2,000 for a tablet or computer than it is to convince them to fork over >$20K. Further, as anyone that’s followed the sector over the last few years knows, many of the best ‘dance’ partners have already been taken further complicating your ability to design and manufacture this compelling, game-changing product or service. There is a lot of ego involved in deciding to enter the market so I hope the company boards deep dive into how much capital and management attention will be needed to make this monster of pivots before they approve of these moves. The sector will suck up all of your resources both human and financial, and unless you have your A-Team working the problem, your first try will most likely be pretty 马马虎虎 and need further seasoning, iterating, capital and development in order to make it competitive and attract customers. Do you have that kinda time and/or capital? The auto OEMs have no choice in this matter. They face an existential threat so unless they successfully make this pivot, they may cease to exist in any significant way <20 years. The tech companies do have a choice. I am NOT saying that the tech companies aren’t capable of putting out a terrific product, they are but the question that should be asked at this point in time is ‘at what cost?’ TESLA IN THE NEWS - Tesla is normally forcing the competition to keep their pencils ‘sharp’ by not hesitating to reduce the MSRP (manufacturing suggested retail price) of their vehicles at a moment’s notice. Case in point – Tesla reduced prices on all of their products at least once each last year some more than once. They’re at it again cutting the price of the US standard range Model 3 & Y by $1K. Not likely significant enough to push someone towards purchasing a Tesla vs. the competition but it shows that they’re always thinking about it and aren’t afraid to do it again. This reduction could be to keep pace with the new Chevy Bolt’s revised pricing so maybe Tesla is the one chasing GM here? Also in an attempt to beat its total sales of 2K units in Japan in 2020, Tesla slashed pricing of its Model 3 by ~20%! This move is likely possible because the Model 3 is now shipping from China vs. Fremont where they’re saving on manufacturing + logistics costs. Japan is one of the largest passenger vehicle markets in the world with sales of ~3.5M in 2020 in what would be considered a down year due to the pandemic. That also means that sales for Tesla there are anemic so desperate times call for desperate measures. - The head of Tesla China has confirmed that there will be a ~$25K Tesla and that it’ll be designed in China at an R&D / Design center that’s being constructed in Shanghai as we speak. This could be a perfect vehicle for the Southeast Asian & South Asian markets in particular India where they’re also consequently planning to manufacture in the near future. It wouldn’t surprise me if they unveiled the vehicle at the Guangzhou Auto show that’s scheduled for November of this year. - Did a large shipment of MIC Model 3’s just hit Australian shores? Tesla customers, some of who’ve been waiting since last November may actually be able to get behind the wheel of their new rigs within the next week or so. IN THE NEWS - Big risk, big reward for SAIC …or just big risk? SAIC is putting their weight and trust behind a Beijing-based chip design startup, Horizon Robotics. This decision was not made lightly and you can bet that Horizon will be provided all the resources and capital necessary to be successful. Still, this seems a bit like putting ‘all your eggs in one basket’ when the basket hasn’t even arrived yet. Horizon JUST shipped their first product last March! Horizon’s chips could conceivably control everything from the infotainment systems to the battery management and autonomous driving systems so again, SAIC seems to be betting big on this startup. There is INFINITE upside for the Horizon team if they can come through, that’s including becoming national heroes. No pressure here at all. - Xiaomi is getting into cars. Yeah, why not? Seems like CEO Lei Jun has been pondering this move for some time. To illustrate their seriousness, Xiaomi even tweaked the organization in what looks like a move to optimize for EV manufacturing. - No Merc EQC for the US market. After an initial 1 year delay of the US launch, Merc has decided not to export the GLC at all to the US. It seems there could be a number of reasons for this, price, just OK sales in the EU, fierce (EV) SUV competition in the US from companies like GM, Rivian, Tesla, and Ford perhaps? It’s basically an electric version of the Merc GLC and they know if they’re to sell enough of them in the US market, they need to improve on a lot of things is my guess. That includes increasing battery size (from 80KWh) and boosting the range which currently stands at an anemic ~220 miles. - For those who have never been inside an automotive assembly plant let me assure you it is quite a sight to behold whether building ICEs or EVs. In fact, Lucid Motors posted a short video that includes a brief tutorial on how Lucid Airs are manufactured while giving viewers a peek into the factory in Arizona that builds them. CEO Rawlinson has modest expectations for year 1 since capacity will be capped at ~35K vehicles at a rate of 6 jobs/hr. That’s pretty slow considering I worked at a plant that did >50 jobs / hr. or almost 1 job / min. Also, outside of the obvious financial incentives the city / state offered it seems a bit odd that Lucid would choose Arizona as where to manufacture since that would mean that suppliers would likely have to also build near the factory or next to (in the case of ‘bad shippers’ – parts that are too big or too heavy to ship economically long distances – think seats, instrument panels, etc.) or ship from facilities that aren’t that close. I haven’t researched this too deeply so maybe there is already an eco-system there? Will dig into it a bit more and update later. - Will Baidu’s share price continue to be boosted by its movement into autonomous vehicles and EVs? One analyst seems to think so. Geely is also hoping for a jump into Tesla market cap territory with its recently announced tie-ups with Baidu, Foxconn, and Faraday Future. I am not sure that’s going to happen for them though. - You may recall in previous newsletters that Revel is the company that in 2018 launched a moped sharing service in NYC using Niu mopeds. They’ve just added to their portfolio of services by launching an electric bicycle subscription service. For $99 / month, you can rent an electric bicycle on a month to month basis and the service includes maintenance and repairs as well. I am not that familiar with the Wing electric bicycles that are being used to supply the service but I assume that the e-bikes being used are going to be pretty durable, especially since NYC is a 4 season city. I’ve looked at these businesses before and profitability could be a challenge so I am not sure about the economics of this service yet. It will likely a be a combination of the bike’s wholesale price, durability, and simplicity or ease of repair, pricing sweet spot, take rate, and some fancy accounting that’ll determine whether Revel will actually make money with the service but I can totally see this being a hit if the right parameters in place. Look for other ‘platforms’ like Uber (and perhaps some OEMs or even Apple) to incorporate similar types of services in the near future to help build out their install bases and ecosystem. - Uber drivers are considered employees, at least in the UK they are. This is a BIG hit to Uber’s business model and places an even brighter spotlight on Uber’s need to diversify into other transportation services or focus more on the ones that’ll make them money at least. Consistent profitability from ride-hailing was already elusive, but this could make it all but impossible until the era of robotaxis is ushered in which could be another 10-12 years. The UK startups in food delivery as their standalone service are without question also scrambling due to this decision. - A same-day delivery & logistics service provider in Mainland China, Huolala is under fire because a woman in Changsha who used the service jumped out of a moving vehicle and eventually died in a hospital. Didi was under tremendous pressure from the Chinese govt. a few years back when two women using their service also died (were murdered) so I think there’s going to be some real scrutiny here about what happened and what type of screening process Huolala has for its drivers. This could be bad for the entire space. TRENDING ON SOCIAL MEDIA - VW Group is considering selling part of Porsche AG in order to raise capital that they would use to invest in EVs and ‘digitalizing’ their company. VW Group would still likely own a majority of Porsche so that $30B represents <30% of the company at current valuations. I always wondered how VW was going to fund their ambitious digitalization transformation. That still leaves them about $50B light of their announced $80B commit though. - Here’s a list of vehicles that should be available in the EU sometime in 2021. Seems pretty comprehensive but there are likely a few missing. Perhaps an entry from NIO for instance? - Pix Moving has raised tens of millions of RMB in a pre-Series A round. Pix Moving designs and manufactures skateboard chassis’ for slow-moving autonomous vehicles which I think could become a very important and growing enterprise. These skateboard manufacturers could really become an integral part of a non-OEM supply chain so I’ll keep an eye on this company. JUST THE NUMBERS - Don’t sleep on Great Wall Motors. Haomo Intelligent Mobility has closed a 300M RMB pre-A funding round with premium investors such as Meituan and Hillhouse Capital attached to the raise. A baby in terms of how long they’ve been around (November 2019) they do have over 10 years’ worth of ties to Great Wall’s in-house ADAS development. - $455M raised via SPAC for AEye, Inc. (at a $2B valuation), a startup that makes LiDAR systems for autonomous vehicles. Throw them alongside Velodyne, Luminar, Hesai, Ouster, and Innoviz as the competition for supplying LiDAR heats up. - EHang’s share price closed 62.7% lower on Feb 16th when Wolfpack Research accused EHang of cooking their books and generally lying about their products, manufacturing, revenues, and partnerships. EHang has since come out with details about some of their transactions to refute the claims by Wolfpack. - 9 million units. That’s what an analyst predicts will be overall NEV sales in China for 2021 up from ~1.3M units sold in 2020. I predicted China would get to ~1.8M units so we shall see. —— 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.