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Zeekr visits the US, NIO Gets 10% Smaller, The US Three Get Back to Work - SAI Weekly #41



 

Just got back from NYC. I, along with a few others (including people from Jalopnik, Car & Driver and Motor Trend), were invited by Zeekr to a track day at the Monticello Motor Club about 2 hours outside the city. Zeekr decided to send over a few 001s and a 009 to see if we could send them back needing some new treads. It was a beautiful fall afternoon to see what these vehicles could do when pushed to their limits.

The day started out with a presentation from Giovanni Lanfranchi, the new head of the Digital team. He went through the history of the brand, positioning, technology, sales and a product overview. For the folks that didn’t know Zeekr well before, the preso was very informative. Remember that they are planning to IPO in the US so I don't think having this track day in the US at this time was a coincidence at all.

Then it was time to drive. Unfortunately, they didn’t send over an X or a 001 FR which are the two cars I really wanted to take for a spin. The 001FR is the performance version of the 001 that was unveiled just the week before in BJ but alas, I was told it could take up to 4 months for a vehicle to hit our shores from China.

Both those test drives will have to wait until I get back to China, likely early next year. I’d driven the 001 before but NEVER like this. The track is about 3.6 miles long so one lap took some time and on one straightaway, I got it up to almost 200km / h which for the Americans is a bit over 120mph.

I’ve never been that into car racing so I didn’t push the car too much, but I was in the car when one of the instructors they sent over from Shanghai decided to give us one hot lap. Let me just way, I got a much better appreciation of what the 001 can do but also what a race car driver endures when pushing his equipment to the limit. Overall a very fun day.

We also got a sneak peek of Waymo's L4 robotaxi that Zeekr is the contract manufacturer for. It's based off their popular Sustainable Experience Architecture (SEA) platform that also underpins the JiYue 01, Lotus Eletre and other notable EVs from Geely.





I am also locked and loaded for the LA Auto show. I will be in SF for some meetings starting on Mon, November 13th and then head down to LA on the 15th through the 17th. For those in or around NorCal / SoCal that want to meet up, let me know.

CHINA EVs & MORE (CEM)

Back to our normally scheduled programming – 9am ET on Friday. Join us if you’re free.

If you’d like to join the live show, follow me on X: @sinoautoinsight and at 9am at the top where the Spaces rooms show up, you should see our show. It’s an opportunity to ask any questions and have discussions with Lei and I so if are itching to know more about something, join us tomorrow morning!

If you can can’t join the live show, I invite you to listen to our recorded China EVs & More episodes at this site. And as always, we appreciate any feedback that will make the show better.

BIGGEST NEWS OF THE WEEK

- NIO to lay off 10% of its workforce. With no end in sight for the price war and NIO continuing to struggle getting over the sales hump, it’s a positive sign that they’re willing to take more drastic measures to right the ship. They’ll also reconcile investments in non-core businesses to make sure they are focused on designing and building high-quality EVs.

This is really the first high profile company that’s taken these measures, although quite a number of them are (Aiways, WM and few others) are farther gone and close to the end of their rope.

The EV space is becoming less of a two-headed monster with one company clearly taking the global leadership position. And it’ll be really tough for any one company to push them off their perch. Even one with as deep of pockets as a Tesla.

Chart courtesy of Bloomberg.

- The US Three have all settled with the UAW. For all intents and purposes, the contracts mirror one another as far as I know with raises equaling about 25% over the life of the 4 year contract while also allowing for COLA which means that it could be even higher depending on inflation. This is a HUGE win for the UAW but it’s still unclear whether the JV battery factories will be part of the contract or not although I am hearing that clarity will be given on that shortly.

The non-union factories run by about every other automaker are now under pressure to raise their hourly rates but the US Three are at a distinct disadvantage when it comes to the cost side of the equation, which some analysts equate to higher priced cars, at least during the life of this contract.

With inflation and interest rates high, the current appetite to buy is low. With the automakers dialing back their plans on EV production, higher priced cars could really slow EV adoption down here in the US despite the Inflation Reduction Act incentives. This uncertainty will continue until the US govt can decide definitively who, what, how much given the battery and purchase subsidies. The good thing is that now, the 150K UAW workers can all go back to building cars.

- Speaking of non-union factories under pressure. Toyota will be raising assembly line worker wages by 9.2%, pushing its highest wage to almost $35 / hr. This as a pre-emptive strike in hopes of quelling any unease by workers of their current pay due to the BIG wins the UAW got from the US Three.

Look for Tesla, BMW, Merc, Volvo, Hyundai and the other non-union US automakers to make a similar move, lest they want to see Shawn Fain’s face on TV all day talking about how unfair their wages are vs. his newly minted US Three contract.

- Chinese drones (read: mostly DJI drones) are looking to be banned from government use by US lawmakers. This isn’t much of a surprise but the US really has no alternative in the space as DJI (and China effectively), like EVs, dominates this space. DJI currently has 58% share of the commercial drone market in the US.

I have an older one but a few friends a fanatics and spend tons of money to get the latest versions. This is another sector that the US is going to find VERY difficult to re-shore. Like almost impossible in the near term.

GET SMARTER

- In order to negotiate the best deal in years, the UAW brought in outsiders. It worked. Three outsiders to be precise and together they crafted a negotiation and social media marketing strategy that kept the US Three off balance and uneasy till the very end. Great piece by the Detroit WSJ team, highlighting how the US Three leadership was outflanked again, this time by a labor activist, comms guy and a lawyer.

A bit of history here. The UAW recently went through a tremendous corruption scandal that led to the conviction of over a dozen former members including two ex-presidents. This created an atmosphere of distrust between rank-and-file members and so called leadership. For Fain, he had nothing to lose, he barely won the presidency so bringing in outsiders that helped him execute an entirely different negotiation strategy led to the huge wins that are part of this next contract.

I also look at this as the US Three management unable to really manage the conflict in front of them, similar to the Tesla and EV situations. These management teams have really done poorly on the last few major tests that they’ve had to face. And it’s only going to get even more dicey from here.

QUOTED

- AFP. Spoke with Rebecca Bailey about how China came do dominate …the electric bus sector? Yep, that too. As early as 2021, China was where over 90% of the world’s electric buses & trucks were. When I was in Shenzhen earlier this year, when I left the airport I saw a sea of BYD electric buses and taxis ready to take weary passengers anywhere they wanted to go across the city.

It’s helped tremendously with pollution and noise in Shenzhen while Beijing and Shanghai are also looking to completely flip their fleets to electric as well. A lot of electricity in China still comes from coal, so there’s still that issue but the success of moving the fleet over to clean energy is something most other countries should study in detail.

Not only because of the vehicles but also how they set up their infrastructure, reinforced their grids and gave domestic companies, specifically BYD an opportunity to become experts at designing and manufacturing electric cars and buses. Look where that’s got them!

BYD

- BYD tears through a milestone by selling 301,833 NEVs in October including breaking its export record. That’s 6 straight months of record-breaking sales. No one else in the space is even close.

This was the split between BEVs: 165,505 and PHEVs: 135,590. They even exported 30K NEVs to overseas markets from 9.5K YoY or growth of 220%!

Did I also mention they sell cells to other OEMs? They sold 15GWh of cells to other carmakers in October. That’s also up 50% YoY,

This should make it clear, there’s BYD and there’s everybody else. Including Tesla.

TESLA

- Tesla shares losing steam. Losing steam enough to give Tesla’s valuation a $130B haircut in less than a month. With media and analysts all running around screaming that the sky is falling, this was bound to happen. How it’s unique, Tesla is one of the companies signaling that the slow down has arrived which they’d only indicated before via their price cuts.

Their exposure to China is very high, which in good times puts them over the top. In bad times, like when the Chinese economy continues to sputter or when their new(ish) products don’t resonate with the market, it spells trouble for Tesla.

Let me remind you all that they are still worth north of $600B so don’t feel too bad for them. The combined valuations of Toyota ($300B), Stellantis ($62B), VW Group ($57B), GM ($38B), Ford ($40B), Merc ($63B) and BMW ($58B) all add up to about the same amount. I still wouldn’t worry about Tesla too much.

BY THE NUMBERS

- $8B. Total investment in their battery cell facility in North Carolina will be about $14B by 2030 once it’s all said and done. This, in order to extract some of the IRA subsidies and remain competitive in the US market. By 2030, the factory will have a capacity of 30GWhs / year. For those wondering, if an EV has a 65kWh battery then this factory could supply >450K EVs / year.

This announcement marks the largest commitment made by a foreign automaker in the US market since the IRA was announced and it all but guarantees Toyota a seat at the table as EV adoption heats up later this decade.

- 51%. That’s the percentage of hybrids (of total sold vehicles) Ferrari sold in Q3. Yep, it’s not just for Prius’ anymore.

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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 global automotive and mobility sectors. 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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