Episode #55 - Ford's Big Split, Stellantis Global / China Strategy & Lei Drives a Tesla Model 3

Tu starts out the pod talking about Rivian’s marketing and pricing missteps with Lei reminding everyone that the EV startups will run into these types of challenges as they gain footing into the market. 

Tu then shares his thoughts on Ford’s announcement this week about splitting the company into Ford Blue, the division focusing on ICE development & Ford Model e, the division that will build out Ford's EV & mobility services strategy and why it was such an important move to hire Doug Field and let him take on the lead role for Ford Model e. 

Lei moves on to discuss Stellantis' China strategy which is was part of his overall strategy review. Stellantis China will take on an asset light approach to China leaning on brands like Jeep, Citröen, and Peugeot.  

February sales was due to be a slow month due to Chinese New Year but BYD & Tesla seemed to buck that trend they continue with their expectations for BYD for 2022 and its likely consistent sales of >100K / month starting in March as long as long as they can continue to manage supply chain issues so that they don’t affect production in any significant way.

Lei moves the conversation over to Li Auto’s earnings their grand ambitions and how they’ve contrasted themselves vs. XPeng and NIO.

Tu talks about Lotus's new electric SUV that’s to be unveiled at the end of March and how Lotus is following the playbook of Porsche, Bentley, Rolls Royce, and other sports car brands that eventually launched SUVs. 

Lei closes out the pod with his experience of spending a week driving a Hertz Tesla Model 3. 

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Transcript

China EVs & More #55
Ford's Big Split, Stellantis Global / China Strategy & Lei Drives a Tesla Model 3

Tu Le:
Hi everyone and welcome to China EVs & More where my co-host Lei Xing and I will go over the week’s most important and interesting news coming out of the China EV, AV and mobility sectors. We will open the room up at around the 40-minute mark to anyone who's keen to ask us any questions. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. If you enjoy this room, please help us get the word out to other enthusiasts and tune in again next week.

My name is Tu Le and I'm the managing director at SinoAuto Insights, a Beijing-based consultancy that helps organizations bring innovative and tech-focused products and services to the transportation and mobility sectors. I write a free weekly newsletter that we pull many of our discussion topics from. You can sign up for it at signautoinsights.com, which I encourage you all to do.

Hey Lei, can you please introduce yourself?

Lei Xing:
Hey Tu, I'm your co-host Lei Xing, former chief editor of China Automotive Review. This is Episode #55, huge week of announcements from legacy automakers around the world. Carlos Tavares vows to move fast, Jim Farley splits Ford, RJ apologizes.

Tu Le:
They are all vowing to move fast.

Lei Xing:
 I just realized there's a total of five legacy automakers that made announcements. So obviously, Stellantis, Ford, Opel being part of Stellantis, and Hyundai Kia, they had their sort of capital markets day where they announced huge numbers, and all pointing to 2030. We heard Li Auto earnings, the first of the (smart EV startup) “Big Three” to announce Q4 and 2021 earning last Friday. And there's some preliminary EV sales numbers that came out. Where do you want to start?

Tu Le:
 Let me add two things to what you just announced. Panasonic also has announced that they're going to add capacity in Japan and are looking at adding capacity in or around Texas. It's going to be specifically, I believe, for the 4680 battery, which should probably start mass production sometime next year. So I think that's a pretty big deal. And you know, and I know, Cheng Lu from TuSimple, he's stepping down as CEO. We are told this is planned, so no surprises there. But I wanted to congratulate him. He's done a terrific job steering TuSimple past IPO and now he's got some flexibility. He's got a few bucks in his pocket.

So I want to congratulate Cheng on his successful steering of TuSimple. It'll be interesting to see how the management changed, because it's not just one management change, it’s a few different management changes, affects the strategy. So look forward to following them even more.

Lei Xing:
 Yeah and I had the privilege of interviewing Cheng earlier this year just right after CES so where he made that “0 to 1 moment” comment about the first Driver-Out. That was a huge milestone. And also speaking of Texas, so Giga Berlin supposed have an announcement tomorrow. And I just had someone asked me this going to mean less production out of Shanghai. And I said, and this is some guy from a supplier, and I said no, because Berlin is not going to ramp up like fast, right. So shanghai was still be a significant in terms of a full capacity at least this year.

Tu Le: 
 If Tesla can maintain supply of chips and batteries in China, that thing is going to be running 110% the whole year.

Lei Xing:
 And this is the crazy thing, right? This is all of a sudden, so 2020 in the pandemic, 2021, the chip crunch. And now we're facing this war situation. That's all of a sudden again disrupted. It was looking sunny. Now it's all of a sudden it's cloudy. Right? We've seen most of, at least the European and some Japanese auto makers announce production stoppage, and sales, and suspending sales into Russia, right? We know Great Wall and Chery. Great Wall has a plant in Russia. We haven't heard from Great Wall and what they're going to do. But in China, specifically, we've seen companies raising prices, right? WM Motor did that, Great Wall’s ORA announced it and some other ones. 

Tu Le:
 Tesla did it.

Lei Xing:
 And we just heard this whole debacle from Rivian. This is a crisis that they experienced the last few days, but as a CEO, on the one hand, you got to face this cost pressure. And on the other hand, you got to make customers happy and it's a tough job I tell you. Right?

Tu Le:
 That move to me, points to him looking at quarter to quarter. I think they thought they could contain the backlash potentially because we're talking 17 and 20%。

Lei Xing:
 As high as 20%.

Tu Le: 
 Not insignificant. I don't know his internal folks, his comms people, somebody screwed up, right? Because 17 and 20% increases in prices. Just out of nowhere, it is like multiple departments didn't do their jobs, and rather than own it, or try to get it back somehow on the operation side, they wanted to pass more than 100% of the cost change over to the customer, because that's more than 100%.

Lei Xing:
 There's still a startup. There this still growing pains, almost the exact same thing happened to Xpeng when they started delivery of the G3 back in 2019, they had a similar situation where the price was, it changed. And it irked some customers, but at the end, it worked out. But I don't know. There's some people saying that half of the orders or half the people that ordered have cancelled. I don't know, it might not be true, but yeah, if I was a customer, I’d be pissed.

Tu Le:
 So I heard from a trusted source Lei, that because they pushed a lot of their initial ramp production into 2022, so the battery supplier or a couple of other suppliers had charged them penalties for not taking those orders, those original orders that they had forecasted, right? And so they had taken on this huge charge for delaying production effectively, right? And so that's what happened with NIO early. Remember, when they were not able to ramp production very, very well. JAC charged them a bunch of money for not filling their master production schedule. So when these delays happen, it's not just a customer thing. It's an operations nightmare, because you've already hired X number of people based on this forecast that you did 18-24 months ago, and then you're not able to fulfill that demand, either because of engineering issues, quality issues, manufacturing issues.

So you push it out, but these suppliers have already ordered that material to build parts for you. And so they're not going to be sitting on it because they'll go bankrupt within 8-9 months if every OEM did that to them. So like you said, growing pains from a startup, I’m really surprised that they didn't handle this better because Rivian seems to be very image conscious, right? That’s the only thing that I’ll say about it.
 
 Lei Xing:
 And this is a tough game that the automotive manufacturing is a tough game, no matter what, without a pandemic, without the chip crunch right? It’s a tough game. And now you're adding on top of all these things that are happening, that are out of your control, right? All the raw material prices are going up and manufacturing difficulty itself. And that's why we heard this week from Jim Farley and Carlos Tavares. And I think I got the same message from both of these guys that at least one of the messages was, we're going to learn from you, the startups, but you are going to have to learn from us because of the complexity, because of scaling up, we've had that experience. And we're going to learn from you faster to beat you, Carlos and Jim, basically they said exactly the same thing about speed, and that's why you see Jim did what Ford did, Model e and the Ford Blue and similarly for Carlos where he's like, the challenges will be, for the new entrants, is high volume production. Once you get into the millions, the rigorous quality, the complexity.

Tu Le:
 It doesn't. And let me add really quickly Lei. The complexity is not linear as you add quantity. It is exponential, right? Because so the manufacturing expertise that these guys have is second to none. And so we already know that manufacturing stuff, because Elon told us its tough. So you give them a lot of credit. And the one thing that since you know me Lei, the one thing I’ve said is technology guys need to take on management role in leadership positions at these companies.

Lei Xing:
 Doug Field.

Tu Le:
 Yes. If we're to see, they truly mean it. And so two things, there's that 4-minute video that Ford did to launch this kind of reorg for their company. I think it was cool that how Tai-Tang was the second person on the video, Farley let it out and then how Tai-Tang, who is Vietnamese American. So that's pretty cool because I think he's the highest-ranking Vietnamese ethnically in any automotive management team. So that's super cool, inspiring for me and my kids. 

Lei Xing:
 And even Kumar. 
 
 Tu Le:
 So you know this, Kumar was head of PD in China for a few years. 

Lei Xing:
 And Lawler was the China CEO for a few years in the early teens

Tu Le:
 And then Kirsten head of human resources, she was working here. They all worked at Ford when I was at Ford in Shanghai a long time a go.
 
 Lei Xing:
 And that Model e is basically pooling, I think, Team Edison. And I think the press release, there was a paragraph that mentioned also pooling some of the teams out of China. They also have a team down in China. Similar like a local Edison for the electric.

Tu Le:
 So this is Doug Field’s story and why I wanted to pointed out. 

Lei Xing:
 The bunny slippers comment hit the nail.

Tu Le:
 He started his career at Ford, and spent time at Tesla, spent time at Apple. And then Farley had recruited him back. And I was told that because Apple decided to lean into the software and not the hardware and software together. And I was told that Farley offered him the keys to the castle. That's effectively what he's getting with the Model e. He's effectively the CEO of the Model e team. So I think that's a huge deal. Huge.

Lei Xing:
 And Ford has been making moves all these years. It's almost been non-stop, right? Starting with 2019 when they announced China 2.0 strategy, I remember putting China as a stand-alone business after all these years.

Tu Le:
 Before then they were managing Asia and Thailand, remember?

Lei Xing:
 China and Asia Pacific kind of overlap.

Tu Le:
 So it was the weirdest structure, because when I was there, it was APA so Asia Pacific and Africa. So we were managing South Africa out of China, which was completely weird, but they've kind of figured things out. China is now, I think, going to be a strength for them. So the other person that I’ll bring up is Lynn Longo. She was hired by Volkswagen Group to manage..

Lei Xing:
 Digital part of it. CARIAD.

Tu Le:
 So she's the Chief Technical Officer now, I think. But she came from automotive, but she was always on the digital side of automotive. So I think you're starting to see that, we have to give Ferrari props for being one of the first to lean into having technical high tech people. Right? Because a lot of their team comes from, I forget the CEOs name, but his old semiconductor company. And so I’m telling you we're going to see more and more of this where high tech people with some automotive experience, whether they're Tesla people, whether they're Rivian people, they're going to come to these big giants. Because if you look at Rivian, the guys in management, they have their shares already vested. So they can go somewhere else. They can go sit on the beach probably, right? But if I was a Ford employee, I’d be pretty excited, little nervous. But they're making some bold moves. And that move that Ford made is going to push all the other automakers to make bolder strategic business moves too.

Lei Xing:
 And also you are seeing this different way of doing things from the legacies, and the startups is especially comparing Rivian and Ford taking reservations for their respective vehicles. So Ford stop it. And whereas maybe the startups, sometimes you wouldn't see them say we will stop taking reservations before it stopped it. So that's kind of different, right? And now you're going to see these, the Doug Field, for Stellantis, it would be the guy named Ned who came from Amazon to be more prominent, and also the lady who spoke at the Mobilit-E.

Tu Le:
 Anne-Lise Richard.

Lei Xing:
 At least becoming more prominent and at the forefront of facing the media and industry.

Tu Le:
 And so Lei really quickly shameless plug. They posted her keynote on their website. So the keynote that she did for Mobilit-E conference for us is posted now on their website. She wanted to stay behind Tavares’ big meeting or conference that was just a couple days ago that we're talking about. So if you now watch her keynote, it dovetails well with what Tavares was talking about a couple of days ago。

Lei Xing:
 So going over to Stellantis I think is, talking about basically on China, what was said. What was basically it was rumored before that was come confirmed, right? So taking control of the Peugeot and giving control of the Citroën brand to the Chinese partner and opening up DPCA to third parties. That was an interesting play. And then on the Jeep side just one plant, I think it's the Changsha plant where currently some Jeeps are made and the 75% equity stake increase, those were already announced before. It looks like the priority is not driving sales, but getting costs down and making sure they're profitable. So, but if you look at China 2030, their global net revenue goal is 300 billion Euros. China is only 20 billion Euros. It's still compared to the other big legacies, China will still be so small for Stellantis.

Tu Le:
 Which was a bit weird to me, because they have a couple of significant brands that I think they could grow.

Lei Xing:
 Also speaking of Opel announced they're going to be all electric by 2028. I feel like there's a chance that they will bring Opel back to China, because Opel within Stellantis is one of the more resonating brands in China, back in the GM days, Opel was on sale as imports but decided to pull out. But in the slides, they said basically six brands in China, so that will be Jeep, Peugeot, Citroën, Alfa Romeo, and Maserati, and one other one missing。

Tu Le:
 You know this and I know this Lei, really quickly. Jeep is the only one that has any strength currently, in my opinion, the rest of these brands that you had mentioned are pretty weak here.

Lei Xing:
 True. But I think in terms of the history, Jeep is more global. But Peugeot and Citroën, I believe, have more brand equity in China, even more so than Jeep, because of the longer history right. The Fookang days, the 308, that started producing in early days. So at least DPCA is on the way back, I think they're trying to give control. I think Citroën is doing pretty well finally, relatively.

Tu Le:
 I think it should be noted that Stellantis, a disproportionate amount of profits come out of the United States. So I think Tavares is also trying to balance profitability and revenues coming out of other regions.
 
 Lei Xing:
 I would still expect some kind of a stand-alone China announcement, maybe from their China based executives because it was not much to tell you the truth. And he did answer a couple of questions on China about the asset-light model and what that meant. But I think the priority is just get, he said he doesn't want to be saddled with capacity. So that's why you see the one plant of the GAC-FCA joint venture and offering the DPCA manufacturing hub to third parties, who they're going to be, we don't know, but it's a lot more liberal now of using existing utilizing existing manufacturing capacity, and that's what China wants.

Lei Xing:
 And that's what China has to balance. Right? Because the central government would rather not add a ton of capacity into the system. They would rather convert old capacity to new capacity, but the local governments, they want more jobs, they want new factories, because it's more tax revenue, et cetera. So there's this push and pull from the central government to the local government. And so I wonder Lei, if our friend Sam Chuang is going to have any surprise announcements for Jeep at the Beijing Auto Show.

Lei Xing:
 Jeep’s got to start putting that battery electric model, first and foremost, they really need that, it's way overdue. Right?

Tu Le:
 I feel bad for Sam because he's doing his best and there still a lot of loyal Chinese customers for the Jeep brand. But he's got this onslaught from one company, one brand that's Great Wall. He's got this onslaught.

Lei Xing:
 Pretty much all the Chinese OEMs, Geely, Great Wall, Chery that are the kind of the brand dilution, I think, over the years, just really slow, but considering over the past year and a half that Stellantis put China in the back burner, because they had to deal with the merger first. So understandable. But now you really have to move and speed of execution, right? That was what both Carlos and Jim talk about.

Tu Le:
 And we should explain a little bit about what happens in these strategy meetings in these board rooms. In order for these huge announcements to come out, because they're looking at their balance sheet, they're looking at their flexibility. They're looking at the macro economic growth factors in each of the regions that they play in. They're looking. So one of the things that is happening a lot right now is the risk management teams of these huge legacy companies. Risk management means where's their risk around the world? How do we deal with it? And it's part of the strategy, right? Do we move factories? Do we add suppliers that don't have facilities in the Ukraine and Russia? Because the rich management teams, their priority is business continuity. So to your point, Rivians and these smaller companies, they don't have these huge risk management teams that know so well how the company operates and how to create alternatives. And so that's one of the factors because it's going to be unpredictable over the next several years, not just because of battery and chip supply, but because of everything else that's going on in the world. That's unfortunately still pretty tragic.

Lei Xing:
 It seems that the European automakers are over proportionately more exposed to the Russian Ukrainian (war). If you look at, right, not only are they stopping production in Russia, they are stopping production at home. Right? Volkswagen, BMW they're suspending production at some plants, their major plants because of exposure to the Ukrainian supplier base. It's not huge, but it still affects them. 

Tu Le:
 And remember, Volkswagen has a factory in Brattislava. So in Eastern Europe, they're building, and they're building in Poland. Unfortunately, those are risk factors, because if Russia and honestly it feels insignificant to be talking about car manufacturing when this stuff is going on, but it's just something that is important to understand.

Lei Xing:
 Yeah saw that interview with Toto Wolff talking about that schedule this year and not raising in the Russia Grand Prix, and you said everything is just insignificant. Anyways. 

Tu Le:
 So let's talk February sales because we expected smaller numbers because of Chinese New Year, but maybe you can kind of give us your take really quick, right?

Lei Xing:
 Not much surprises. Everybody fell month on month, pretty much on February, but BYD is kind of the “outlier.” It fell too, but not by much, a couple of thousand units from January.

Tu Le:
 Can I address the elephant in the room? Ford called BYD out by name in an announcement this week and to BYD’s defense, the factory that they're building the NCM batteries for Ford’s Mach-E is in Xi’an. Xi’an had a 6-week lockdown or 5-week lockdown because of COVID. So effectively, there was no production.

Lei Xing:
 This is the exact same reason that affected ID. sales at the end of last year, because the outbreak in Ningbo, a lot of the suppliers were involved, and Shanghai Volkswagen has a plant in Ningbo. So these things plus the fact that you have to ensure your own, BYD is pretty much doing 100,000 units a month, give or take. And remember one number that BYD Chairman Wang Chuanfu threw out there was they had, I think, 160,000 backlog of orders or something. I haven't confirmed that number, but it's a huge number. And March, I’m pretty sure they're going to do over 100,000 units barring any disaster happening in the supply chain. And from March there on out, it's going to be pretty much 100,000 units every month. That's the trajectory. And I heard from a friend of mine who's in China. And he basically commented that the 1.5 million units is not even the high end of BYD's internal projections. So we'll see but like I said at the beginning of the show, it's gotten all of a sudden cloudy, because right, you're right, raising prices. You're still facing the chip and the battery crunch. And you wonder, if BYD does 1.5 million units, that's a quarter of the 6 million projected for China. That's crazy. But then again, BYD, out of all of these competitors, controls its own destiny, right? That's the way I put it in my article. They're pretty much integrated.

Tu Le:
 That's what I was just going to point out, right? The one thing that's also hanging over every manufacturer’s head in China is the fact that as long as COVID zero strategy is here, there's always going to be that risk of a lockdown due to, because that's completely out of their control, right?

Lei Xing:
 The other thing I’ll say is really every single year, at the start of the year, you don't really look at the January and the February numbers, because of December pre-buy effect and Chinese New Year effect. You look at the March numbers and you look at the Q1 numbers. So basically we have to see who's going to rebound the most, right? And Q1 based on Li Auto, Li Auto is the only one so far that have given any guidance that they're expecting right around 30,000 units. And they did roughly 20,000 units in the first 2 months. So it's basically 10,000 a month in Q1. And if we look at the Big Three of Li Auto, NIO and Xpeng, if you look at their product, launch cadence, NIO is supposedly the one that should have a huge year because three models are coming. But then at the same time, I feel like NIO is also, they are due to perform, right? And this is a lot of pressure, I think, for them, because if you don't deliver, then the questions will pile on.

Tu Le:
 Degree of difficulty for sure, is highest with NIO, because new factory, new products. Xpeng is there, but they've already launched the P5. The G9 is going to be super important launch for them.
 
 Lei Xing:
 And that's why I say NIO has the best chance to beat all of these other guys, because it has the product cadence. And Li Auto is, we're supposed to talk about the earnings in a bit, but Li Auto is still in a league of its own, because it's just with one model is still doing pretty well, right?

Tu Le:
 Yeah, so you'd expect that efficiencies to be gained after almost two years of selling the Li One。

Lei Xing:
 That showed in the earnings, right? With the margins, continuing improving margins over 22% in Q4, the highest among the three U.S.-listed startups. And I think in the earnings, the two words that stand out for me are “focused” and “Apple,” what Li Xiang said. So he basically took a swipe at NIO and Xpeng, he didn't specifically say, but what I heard was you guys are going to do your mobile phones, smartphones, you're going to do your flying cars. I'm just going to focus on the car and focus on efficiencies, focus on specifically the family target group. And he also mentioned the 0 to 1 kind of moment that they've gone past that. And now it's 1 to 10. And with 10, he said, the target is to be like Apple of the smart EVs. Li Xiang being Li Xiang.

Tu Le:
 Which is bold.

Lei Xing:
 But the other interesting thing I think he mentioned was the reason why he mentioned Apple was basically as a car company, they have to meet three different types of demands the superficial demand, the hidden demand and creating something that the customer didn't know that they needed. But once they have it.

Tu Le:
 Exactly. It's that unmet need that the consumer didn't know they needed.

Lei Xing:
 And then the other is just reiterating their 20% target share of what they refer to as a segment of passenger vehicles, this includes ICEs, a segment above RMB200,000, they expect that segment to get to 10 million units in 2025, and they want to take 20% of it. Obviously, their target announced was 1.6 million in 2025. So that's still in place, that's bold. Let's say they do 200,000 units this year, you can do the math. He's basically saying that we're going to focus on the RMB200,000 to RMB500,000. So I guess nothing below RMB200,000 and basically the X01, which has been named the L9. Maybe the L stands for Li and large and 9 stands for the largest single number, single digit number, right? So that's probably the biggest car they're going to have. I expect that car to be in the RMB420,000-450,000 range.

Tu Le:
 Yeah, and we'll see it for the first time at the Beijing Auto Show.

Lei Xing:
 And supposed to have a different or newer EREV setup. And next are the two BEVs coming next year and every year after.

Tu Le:
 If you study Xpeng, NIO, and Li Auto they're not really in the mass market, because the price points are a little bit higher, but it's great to see how contrasted their strategies are. Because even Polestar who made that Superbowl announcement of no nonsense, right? They come out with this video of an amazing looking car with the drone that flies out of it. So you know, what is that about no nonsense? Like if you're going to poke somebody in the eye and say, we're not going to go to Mars and stuff like that, and then you come up with a video a week later for the drones.

Lei Xing:
 That's the way, just creating awareness about their design and in circularity, right? They talk about the seats and all the aluminum, different types of aluminum that can be reused, recycled, right? That's their message. 

Tu Le:
 The bottom line with Polestar is that they really need the 3 to succeed, the SUV coming out of South Carolina. And then the other company that I think could compete with the Polestar 3 is Lotus, and they're going to be launching their vehicle at the

Lei Xing:
 End of this month.

Tu Le:
 Revealing the vehicle on March 29.

Lei Xing:
 The 132.

Tu Le:
 Yes, and so we've spoken with a couple of people who have gotten a sneak peak and they said it's nice. It's completely out of character for Lotus because they're a small displacement, two-seat sports car manufacturer traditionally.

Lei Xing:
 The Evora, you don’t think them as SUVs.

Tu Le:
 You don't think of them being built in China either. So they're just following in the footsteps of Lamborghini, of Bentley, of Aston Martin, of all these other companies that have launched SUVs. Porsche was the OG because once they launched the cayenne, that's when they got into really high volume relative to historical sales, that's when they start getting high volumes, the Macan sells like hot cakes here too. So it's going to create a new customer, new type of customer, attrtact new customers.

Lei Xing:
 Porsche’s success in China definitely started with the Cayenne. Because in the beginning, nobody thought of Porsche as a sports car, at least in China, when the Cayenne came out, nobody bought 911. Now it's changing a bit.

Tu Le:
 You and I make fun of this last time, right? Where it's like the private schools, every woman or every mother and I’m stereotyping. So every child is getting picked up in a G500 a or a Cayenne. Now the Macans are coming out. And I think that's ironically more affordable for a younger demographic. And so you're seeing younger people buying Macans and stuff like that.

Lei Xing:
 So I guess the other, Volkswagen haven’t announced ID. sales. They usually do at the beginning of the month, but it looks like from the early information that SAIC Volkswagen, as part of the SAIC Group announcement, did 6,300 NEVs in February. So that sounds good. Not sure how much ID. in there, but hopefully they'll get back on track. Because ID., remember, there's no new models for ID. this year in China, they're stuck with the five models that they have.

Tu Le:
 So they're going to focus on opening more retail locations.

Lei Xing:
 Yeah, and focus on building up the Volkswagen Anhui MEB plant, which will launch the first model, I think toward the end of next year.

Tu Le:
 So we should throw a little bread crumb that hopefully in the next week will launch a new MAX episode that'll give a bit more clarity on Volkswagen strategy in China. 

Lei Xing:
 You already said something that was said and I did as well. So the other thing I guess that Cruise and Waymo getting paid licenses right from the CPUC, and then did you hea this: that Geely’s ECARX is looking to SPAC in the U.S. It's crazy.

Tu Le:
 I don't know why they believe there's a market for a SPAC.

Lei Xing:
 $4 billion valuation.

Tu Le:
 I know but SPACs are dead, especially if. So ECARX is technically in the UK I believe, right? But it has Geely's fingerprints all over. So. Then and there, I understand that they're trying to extract value, but Chinese SPACs are kind of radioactive a little bit. So see how that works out.

Lei Xing:
 I think we've covered pretty much everything today.

Tu Le:
 Let's open the room up. We'll continue to talk. One thing I did want to note is that Rivian had made that announcement of the price increase, and then the following 48 hours, that mea culpa, I did notice our friend Taylor also got a price change for his Model S Plaid. I don't know if Taylor wants to have a discussion, a little bit discussion about that, but as a customer, think of it though, like if I bought an Apple phone, right, and it was already $1,400, right? But it's going to be eight weeks for it to ship. First of all, you need to deposit $150, boom, right? So you've taken my money now. You're using it for something else. Now you're going to tell me that I need to pay $1,800 for this thing or $1,600 is just absolutely. There needs to be some sort of customer protection on that, right? And I don't care what the contract says. I really don't care what the fine print says, because if you want to raise it by 3%, whatever, but 20% is just absolutely mind boggling. So anyways.

Lei Xing:
 The only other thing I’ll add is just to throw out some numbers there because Hyundai and Kia, similarly, they announced their 2030 plans a couple of days ago. So Hyundai is aiming 1.87 million BEVs annually by 2030 and Kia 1.2 million in a huge investments, 95.5 trillion Korean Won. I don't know how much that is in dollars.

Tu Le:
 A lot of zeros.

Lei Xing:
 Like tons of BEV models. And just look at the battery capacity requirements, it’s huge. Hyundai 178 GWh, Kia 119 GWh, Stellantis 400 GWh of battery capacity by the end of the decade. 75 BEVs, 5 million annual BEV sales by 2030, Stellantis. Ford: 2 million EVs annually by 2026. Opel didn't announce numbers, but 2028 they're all electric. So that's why I say this week was interesting, because you're hearing all these legacy automakers. I've never seen so many announce these huge moves in one week. It's almost like they're sending a message to the startups, to the ones who are leading: here we come.

Tu Le:
 And these numbers, these huge GWh that you're kind of throwing around that creates the tipping  point and the critical mass for battery swapping, for other types of business models, from a battery standpoint. There was even Volvo on Twitter had posted that they're experimenting with wireless charging. So there are going to be new ways of dealing with ranging anxiety. In the next 3, 4 or 5 years. Battery swapping is probably going to take hold in other parts of the world for sure, right? Because NIO this week had announced that they have an SOE partner that's going to help them launch swapping services outside of China. To me, that means Europe. If somebody's going to help you fund that stuff, then great. But I still kind of wonder Lei, if NIO is going to make that exclusive like a one to one, or will they try to sell and license their technology to other premium automakers in order to kind of amortize some of that risk or de-risk that business model a little bit.

Lei Xing:
 I think they said on the record that they will be open to that. But now basically, they have a competitor in CATL right? So it's a matter of why would I battery swapping, what makes it so I would choose NIO over CATL or one over the other.

Tu Le:
 CATL will undercut them without question. One thing I should note that I didn't post on Twitter yet, I should, the place where I live. I live right next door to Shimao Tianjie, which is if you ever watch the news and they show Beijing, there's that location where there's a big screen in this plaza, so I live right next door to that. Yesterday, they were putting up a Cadillac LYRIQ stand. So I’m going to go back today because I have to go pick up my kids. I'm going to go check it out. So i'm excited. 

Lei Xing:
 I think that place is becoming aa hub for automotive brands. 

Tu Le:
 Temporary stands.

Lei Xing:
 Toyota was there for the Olympics.

Tu Le:
 So anyone who's seen old pictures, they know that there's a permanent retail store for Xpeng there. And then in the mall, so both sides of this huge plaza that's covered by this huge screen. There is a AIWAYS retail store, so and then down the road and this right across the street from central park, there's an ARCFOX retail location or dealership. Remember that old Volkswagen dealership that was on the corner of Chaoyangmen and across the street that's become an ARCFOX dealership Lei.

Lei Xing:
 Yeah, there's used to be the Mercedes Me in Sanlitun and now it’s somebody else.

Tu Le:
 Yeah it closed. But that's a reflection of how fast things move here in China as well.

Lei Xing:
 I'll just say that the topics that we talked about today, if I take off my fair and impartial hat, I am really rooting for these legacy automakers. I think you are as well coming from Detroit that they can be relevant and right it can't just be Tesla all the time, it can't just be the startups. Somehow they'll find a way, that some of these legacy automakers are going to be, right? What Ford is doing? Capital market might not like it, but I want them to succeeed. 

Tu Le:
 You and I know that they were never going to look the same in order to be successful. They would have to completely change themselves。

Lei Xing:
 This is why this is such an exciting time to be observing what's happening and it’s fascinating.
 
 Tu Le:
 The one thing that I will say is if I was part of the Ford Blue team, I would want to make sure I had a lifeline in 5 years to head over to the Model e team. Right? Because if they do a good job, that means in 10 years that Ford Blue team is like a skeleton crew, right?

Lei Xing:
 Somebody asked the question on whether it'll be what in terms of employees, and basically Kumar, he answered, everything's on the table. So that's basically, yes, that the people will lose their jobs, also. But that happens, right? That you have to make the tough moves.

Tu Le:
 We expect you and I have small children Lei, so you and I expect them to keep or learning new skills, learning, and not to get left behind. Right?

Lei Xing:
 Just like RJ has to eat up this thing. 
 
 

Tu Le:
 I emailed a couple of people that we know that you talked to recently on the conference and try to get their take on it. And so I think what we'll see and we've already started seeing this and you and I are starting to get much more attention from Western media as well, which is great because we have an opinion. I think we have crystal balls, right? Because what we've been following this for forever over here, and it's bound to happen over there. It's going to be a little bit messy.

Lei Xing:
 I was talking to one of the PRs of an AV startup. Let's just say one of the Chinafornia companies and she was telling me within this their circle of all these AV startups, these different founders, they are, totally different. Some like Maxwell Zhou is like to be out in the front. Some are very reserved, some are very low key. And though they might have all came from Baidu right? As well, Zhou said, right? That the two people that he used to work with at Baidu are now senior execs at two other AV companies.

Tu Le:
 Pony.ai and WeRide came directly out of Baidu.

Lei Xing:
 That's the dynamic. And I was also going to say that there was some chatter on legacy executives not driving Tesla, right? 

Tu Le:
 Not driving EVs.

Lei Xing:
 So I’m going to write a little recap of my Hertz Model 3 experience. I think I’m qualified to say things after driving it for a week and it was eye opening, as I said last episode, I’m going to write something and post it.

Tu Le:
 Let me request something, Lei: can you also look at this? As this is a Tesla specific feature or Tesla specific advantage versus because you didn't have to go through all these. First of all, you were in California, so charging stations are much more numerous, full stop. And then the second part is because you're at a Tesla, you have superchargers, so it's more convenient and that's their advantage, right? That's why they sell thousands of cars. So maybe can you also specify, I don't know how this experience is, if you're a non-Tesla driver, like I’ll give you an example. A friend of mine just bought an IONIQ 5.

Lei Xing:
 I like that car as well because I test drove it for like 10 minutes.

Tu Le:
 And so I’m, first of all, I don't know what, I guess you could buy an ID.4 in the U.S., but I want to understand his calculus. Why not Tesla versus, or an ID., why did he buy the IONIQ 5? Because I don't think it's a wrong decision, but it's interesting to note, right? Because now that there is more than one game in town, what compels you to buy one versus another? 

Lei Xing:
 Personally speaking. I think a lot of it has to do with the HMI. I also felt the IONIQ 5 in terms of HMI, in terms of what you see in front of you and feeling with the screens is better than the ID. but obviously Tesla tops them all.

Tu Le:
 Most of our listeners are very educated in electric vehicles, but just for those who might be one, HMI stands for human machine interaction or the UX, another word for UX, or user experience.

Lei Xing:
 When you step in a car and trying to figure out where the functions are. That's how you gauge how easy it is.

Tu Le:
 Because it should feel natural, right? So when you pick up an iPhone, it kind of just makes sense.

Lei Xing:
 Exactly, and that's the experience and the feeling I had with the Tesla. That's where it wins.

Tu Le:
 Johnny Ive said this: simple design is really, to design something simply is very tough. So we've seen that. I believe we see that with the clunkyness of the ID. UI right? I also, because it's not just what the layout of the touch screen is. It's also the latency. If you're used to an iPhone or an Android that has instant recognition of you touching the screen, and then you go into your car and it takes literally half a second for it to react.

Lei Xing:
 The caveat of the Model 3 I rented, it was brand new, right? Less than 500 miles. So everything was new, everything worked. There was not a glitch, nothing, there was no glitch whatsoever. Everything worked.

Tu Le:
 So I learned to appreciate that stuff. When I first started using a Macintosh computer.

Lei Xing:
 I switched last November and I can't go back.

Tu Le:
 It's amazing, right? It just works. It never becomes a brick. I'm completely biased. So for those people that are PC people don't get upset because I’m completely biased.

Lei Xing:
 And also the fact that I had this Tesla rental not only as a kind of a fact finding for myself for my selfish self, but also it's part of the vacation, right? It's part of the vacation for the family to see it.

Tu Le:
 Yeah your daughter wanted it, right?
 
 Lei Xing:
 Even though it's not cheap, it's $900 for a week’s rental, it’s not cheap, but I thought it was worth it because it's part of the vacation, right?

Tu Le:
 Think about it too Lei, how much did you save in gas, right? Because you drove a lot.

Lei Xing:
 I think I drove almost 600 miles.

Tu Le:
 Yeah, so that's too tanks probably.

Lei Xing:
 The gas prices just all of a sudden went up like crazy last few days.

Tu Le:
 So SF hit $5. Again.

Lei Xing:
 I think when I there last week it was like $4.50ish, you can do the math, right? I think charging only total was around $60, but I didn't have to pay because Hertz had that limited charging for free before March 1, so it was perfect.

Lei Xing:
 So I’m going to talk to my friend and find out because he just got it delivered to him on Monday or he picked it up on Monday. The IONIQ 5, I think it's a great looking car。

Lei Xing:
 In the U.S. right? It is. I like it.

Tu Le:
 It’s like the modern day Volkswagen Golf, it looks, it's much bigger.

Lei Xing:
 but it's even more spacious than the Model 3, I feel.

Tu Le:
 That's all design. Right? Because even if it is actually not more spacious, design wise and color wise and angle wise, it really creates the feel for you, right? It's like painting a room really dark. It makes the room feel smaller. If you paint it white, it makes the room feel larger. And these optical illusions they all matter. It actually goes back to Arian Walker talking about familiarity, right? With the Alexa Auto. And I think that's so important. And but we as in the United States just needs more product, right? A little bit more diversity when it comes to, who we can pick and Kia & Hyundai are crushing it already in the U.S. anyways, right? So I don't see them losing momentum because of that.

Lei Xing:
 So it's just a housekeeping coming up. I think this is very important week for China because of the Two Sessions and Two Sessions means all of these proposals and motions submitted by these members of NPC and CPPCC who are also automotive CEOs. So Li Shufu, right? He talked about a motion on standardizing swappable batteries, across brands, across stations. So there will be a bunch of these submitted that will be circulated. And then it's almost 315. So what that means, you are going to see a lot of recalls. All these brands are trying to avoid being shamed on CCTV and then before you know it, it’s Auto China.

Tu Le:
 I think it's important to note that with these Chinese EV makers, the majority of them already have a product out. Their priority right now is to scale and to launch manufacturing of their new products without many hiccups. So behind the scenes, they're working with the central government to ensure that battery capacity increases that supplies for raw materials, for batteries and chips and things like that, is not interrupted

Lei Xing:
 This is definitely on the agenda of very high up in China as well. I’m sure you're going to hear a lot of keywords mentioned in the government work report relating to the auto industry and battery swapping has been in the work report, I think at least the last 2 years in encouraging the buildup of the infrastructure.

Tu Le:
 And now that one of China's largest companies is putting their weight behind battery swapping. It's only going to be even more of a priority for China, right?

Lei Xing:
 But again, battery swapping, it's not going to be the majority. It is going to play a role, but I think the normal charging will dominate. But the battery swapping will have its place, and there will be players involved in it. But I don't think it will become the majority form or the dominant form of charging.

Tu Le:
 No, I think it's going to be, in addition to, like I said last week, the just another option for other automakers and customers. So speaking about batteries, we should congratulate Mujib Jhaz, Our Next Energy just announced that they raised another $65 million of capital. So he's going to have that hybrid battery pack, right? That is two chemistries, that's how he's going to try to tackle  increasing range, and so.

Lei Xing:
 But then you have that Wall Street Journal article on what it means to be breakthrough, right? Did you see that one that just 7 to 8% growth every year? 

Tu Le:
 That's pretty good though. Seven, but I actually had a post and because I posted about that article in my newsletter this week, saying that to me, it's as much about educating the consumer about not actually needing 350 miles of range on a vehicle, right? Because remember, Mike Granoff said that if you could get 130 miles of range on a Model 3, it would be no more than $25,000.

Lei Xing:
 That’s why the standard range, I had an option, Hertz has an option to rent standard range or a long range. And I was like California, why would I need a long range? Standard range, 250, 260 miles is more than enough. And it proved to be exactly the case.

Tu Le:
 Because you said you didn't have any anxiety, right? 

Lei Xing:
 No. Not at all. Because it's everywhere. If you click the lightning icon, right? It just pops up everywhere. They have the 250 kW third-generation, the highest power charging selections, supercharger stations you can select.

Tu Le:
 Yeah, dude, you're on vacation, too. So it's not like you're in some super, super hurry to get anywhere, or you need something charged in 2 minutes.

Lei Xing:
 Right. And the only thing I don't have is owning it for an extended period of time, more than a year, then my assessment might be different, because there will be ownership issues, right? There will be repair quality issues that I haven't seen. But in the week that I had it, it's all right. There's no camplaint.

Tu Le:
 Yeah, that's why JD Power has that 90 day quality assessment, right?

That brings us to the end of this week’s show. Lei and I thank you for tuning in. My name is Tu Le, and you can find me on twitter @sinoautoinsight. You can find Lei on twitter @leixing77. If you wouldn't mind rating and or reviewing us on Apple Podcast, Spotify or wherever you grab your podcast from, we'd appreciate that as well. Even better if you enjoy this show, please tell your friends about it.

Please join us again next week as we track down all the latest news on China EVs & More.