China EVs & More

Episode #54 - Faraday Future's future, NIO mobile phone's and Lei's Hertz Tesla Experience

March 19, 2022 Tu Le & Lei Xing
China EVs & More
Episode #54 - Faraday Future's future, NIO mobile phone's and Lei's Hertz Tesla Experience
Show Notes Transcript

Lei heads to California for a family vacation so Tu takes over for this week’s headlines.

Tu and Lei kick off this week’s pod by talking Faraday Future’s pre-production vehicle that was unveiled earlier in the week. Lei moves the conversation over to the news that NIO is getting into mobile phones and how this is a trend that other automakers and technology companies will follow. Tu broadens the discussion on NIO and the implications of the increased capacity coming online later this year for them. 

The discussion heads over to the brewing Tesla vs. BYD biggest EV maker in the world title that both are vying for with their recent announcements of increased capacity. 

Tu talks about how the west has not only begun to pay attention to China EV Inc but also China Battery Swapping Inc with the news that CATL will be launching a battery swapping service. Where does battery swapping fit into the charging infrastructure conversation and who will end up taking on that technology? Tu explains why battery swapping lends itself so well to the China market.

Lei closes out the pod detailing his experience renting a Hertz Tesla Model 3 for a week in California. It looks like Tesla has another convert!

China EVs & More #54 (Recorded on February 24, 2022)

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, and you can sign up for it at sinoautoinsights.com which of course I encourage you all to do. California boy Lei, can you please introduce yourself?

Lei Xing:
Good evening and live from California, Newport Beach to be exact. I'm your co-host Lei Xing, former chief editor of China Auto Review. This is episode #54. 

This week i'm on a little family vacation out to the West Coast. This was kind of a last-minute decision. My daughter is on a school winter vacation, and it's her birthday tomorrow, so we rolled everything into a little mini vacation. And so Tu, you're going to have to fill me in on all the big news events happening in the past week or so. It's been such a long time that I’ve been able to kind of step away from all the bruhaha and enjoy life for a few days ever since the pandemic began.
 
 And I definitely feel like I’ve fallen much behind in terms of being on top of all that's been happening in the China EV, AV & mobility space. But I have this feeling that man I missed this, and missed that, but I do want to share my experience renting the Tesla Model 3 from Hertz. So we can talk about that. It was a family vacation, but as much as a fact-finding trip about the experience of both driving a Tesla for an extended period of time and the whole rental process.

I don't have my headlines, but I know there's been talk about NIO trying to make smartphones. There's some news about CATL working with additional companies. And I just recently heard that Li Auto invested into Sunwoda, a battery company. And there's some chatter in the international space, I think Porsche is trying to IPO right? You fill me in and then we can talk about whatever you have in mind. You can share your MOBILIT-E conference highlights. And then we can talk about the Hertz rental. I think it's a great experience.

Tu Le:
I'm not going to be as in depth as you are on the week's updates, but you are right. NIO is looking to get into mobile phones, Xpeng is also looking to launch a Robotaxi service, not only did Li Auto invest in a battery company, it looks like they are also getting into chips through another joint venture where they'll own 75% of that stake.

What we're seeing is this vertical integration, where if we look back at the 20s and 30s, Ford and GM were also vertically integrated. What Henry Ford and GM wanted to do was control up and down the supply chain in order to control costs, quality and supply. And then the trend was to go away from being vertically integrated. So 70s, 80s, and 90s, and you created these huge suppliers, these tier-1s, pushing all that stuff, sourcing of raw materials and parts manufacturing to the suppliers, because with the wage increases and the unions that got really expensive, but it looks like the pendulum has swung, Lei, in order to control more of the design process in the supply chain. It looks like these EV companies are starting to do or take on more themselves, because we know other EV companies are looking at chip design. Xpeng is talked about it, but they still do have to go against the Qualcomms, the Mobieyes, and the NVIDIAs.

So it's going to be pretty tough. I don't think they are trying to design those types of AI chips, but you never know. A couple of other big news events, SAIC renamed there more mass market sub-premium, I guess it's premium, but it's not luxury premium, from R Auto to Feifan Auto and unveiled their R7 coupe SUV. So think Model Y, EC6, ZEEKR, there's no pricing available yet, but some of the notable items from the R7 I’m sure we'll see that the Beijing Auto Show in April. It’s going to have the NVIDIA Orin chip, and it's using Luminar LiDAR and it's going to be battery swapping capable. To remind everyone, SAIC also has a brand called IM Motors. So it looks like they're slotting Feifan just below IM Motors with IM Motors being the premium brand for EVs.

Lei Xing:
I think their official English name is Rising Auto. Is that correct?

Tu Le:
Yeah, that's right.

Lei Xing:
Because it used to be R Auto. Now they have a word for the letter R: Rising Auto.

Tu Le:
So the other thing was Faraday Future had live streamed their unveiling of their production intent FF 91. 

Lei Xing:
I saw that. Finally.

Tu Le:
I understand the traditional automotive production, product development process, there's EVT, DVT and PVT. EVT is engineering validation, DVT is design validation, and PVT is production validation. So it works like that. I wasn't sure what production intent meant, because PVT is the final gate in your building a few hundred of these cars. One of the key differentiators from some of these other technical processes is that production validation is all of these parts are coming off of production tooling. And previously in the pre-production builds, some of these parts or a lot of these parts are handmade or one off parts, because they're still trying to mold them, fit them perfectly. And then once that is frozen, then they send those specifications off to the suppliers, and then they build production tooling off of that. And so I thought production intent meant pilot, but they're not even close. This is still pre-production like prototype, and it's only one. So give them credit because it looks like they are getting through some of these milestones. You had mentioned these milestones when you had visited Faraday a while back. But they're getting through them. They're still having struggles. Right?

Lei Xing:
Right, remember, they're still in this kind of quiet period. I don't think they've released the updated Q3, I believe, report. They were under investigation, and then they hired a new what chairman and Carston and some of the other executives had their salaries reduced. I remember those last month or a month ago.

Tu Le:
I think they kind of made up some sales numbers or and there's some management changes because of this right。

Lei Xing:
reporting issues. So it's one of the good news that they've had in a while. So number four, there's three more to ago, I believe, before their Q3 start of production, whatever that means, because you look at it and are they going to be producing in quantity by then? It's hard to fathom.

Tu Le:
Well, we have to use that word “quantity” relatively right? Because at 100 and over $120,000, I think the vehicle is almost $140,000 or $120,000 vehicle. Quantity is probably going to be, a good year would be 3,000-4,000 units first year. But I think it's going to be way less than that.

Lei Xing:
So they're sort of like a Lucid type, maybe Rivian, and the initial month or maybe a few months, the production volume will be really, really low, maybe only in the hundreds if they ever get to the hundreds.

Tu Le:
Because I would imagine the level of complexity for that vehicle is, the degree of difficulty is 2X or 3X of a Model Y, right?

Lei Xing:
Actually, now that they've unveiled this, I actually saw this when I visited. They had shown me this, but I couldn't talk about it. So now they've revealed this, I’ve seen it in their headquarters, at least a clay model.

Tu Le:
Good for them. I think there's still a lot of challenges ahead for them. They will still need some capital. I think they raised less than $1 billion for their IPO and the share price isn't is doing very well right now. So still, a lot of challenges ahead. 

Lei Xing:
Right. And then with all the, it's also hard to believe that this, Russia and Ukraine debacle going on that will. It's all almost like, are we going to see the Third World War? It's like crazy times that things that happen like this and how this will affect the supply chain, right? That there's some chatter about that. And some operations within Russia, especially these Chinese companies, Great Wall, and so much going on at the same time.

Tu Le:
China is the Ukraine's largest trading partner. So and supposedly, there are some raw materials needed to fab chips that come out of the Ukraine. So I think we should just say this. We're talking about cars because that's what this shows about, on mobility. But obviously this is a larger issue that is tragic and unfortunate. But what else here?

Lei Xing:
So I have a few comments on the NIO smartphone. Whatever happens, I think this is of the sign of times that not only are we seeing companies going into multi-modal mobility, but I think we're starting to see companies going into multi-device ecosystem. And Geely’s done it, NIO looks like it's about to do it. And NIO is not going to be the last one. So this is if we do a reverse thinking why Xiaomi, OPPO and Huawei are going into the car business, then it's the same, especially if you look at the NIO ecosystem wheel that I tweeted, that they showed this in one of their press conferences last year. There's a lot of part of it that really, whether it's lifestyle, whether it's things outside the car, the smartphone is just part of it. It is no longer surprising now that we're seeing this is a two-way street. So NIO going to smartphones, Xiaomi going to the cars, it’s a free for all.

Tu Le:
I break it down much easier, because I’m an apple ecosystem guy, so I have Apple+. So I use their cloud service, I use their music service, I use their mobile phone service, I have Apple TV and so I’m already 70%, Apple can already predict 70% of what I’m going to be doing most of my days right?

Lei Xing:
Same here.

Tu Le:
So it's a logical extension because that's the last piece for the technology companies is in the car in the vehicle. And so we talked about Amazon last week how they're much more aggressive when it comes to Alexa, because Apple has a CarPlay, and Google has AndroidAuto, but they're not as, I almost want to say, intrusive as, and it's not the right word because Alexa is an option, right? But again, if tech companies know your buying habits that's pretty significant, and they already know your schedules. If you're using Google Calendar or, Apple Calendar, they know your schedules, they know what you're doing. And if you have the mobile phone, then they know where you're surfing, what information you're looking for. So the final frontier obviously is, when you're in the car, what are you doing when you're driving? I look at it at as the exact opposite, right? NIO, they are going to have what six cars, they are going to have the ES6, EC6, ET5, ET7.

Lei Xing:
By the end of Q3.

Tu Le:
So if you're just going to slap Android onto a mobile phone, I get that it may be on paper, it makes sense, but if my customers are primarily going to be the NIO mobile phone buyers and Apple sells 10 or 12 million iPhones a year. And you can ask Xiaomi, how difficult it is to sell a lower price mobile phone in foreign markets, right? So it just seems I would love for them to focus more on crushing it on all of their vehicle segments, right?

Lei Xing:
Yeah, that's the first priority. And if you seeing some of these interviews with William Li, he did say in, one of those that Apple would be one of the biggest competitors, right? Because he knows what Apple is doing and Sony, right? Sony is coming in as well. So this is almost like you want to call it an offensive move in a way or defensive move. I don't know. And so this is, I think in a few years what we're going to see this multi-device ecosystem from some of these players, not all of them, but some of these. Again, these startups are still not out of the woods. Again, we stress this, even though they're on 100,000-unit a year trajectory.

Tu Le:
But listen to this Lei. So 2022 NIO is projected to sell right around 150,000 units. Let's say they sell 175, right? The plant in Hefei is supposed to get up to almost 250,000 units by the end of this year. They have that NEO park factory that’s also going to be putting out almost 300,000 units a year by the end of this year. So there's a ton of potential excess capacity. If they're only getting 200,000 or 175,000 units this year, we have to see either derivative vehicles like de-contented, cheaper vehicles. So Xpeng is going into Robotaxis. That makes sense. They can build these cars, sell them at costs or utilize them at cost. But it keeps the utilization rates high at the factory. Because one of the things that makes the traditional automotive sector so hard is that unless these plants are consistently running at 75%, let's say, bottom, the lower tier needs to be 75% capacity, you want them running at least 85% for sure. So if they stay idle for 2 years, less than 50% or 60% capacity, they're bleeding a lot of money.

So if the management team is also then worried about software bugs on a mobile phone and how it integrates into the NIO Life branding and ecosystem as well as integrating into the NIO vehicle, software, hardware, infrastructure. Man, that's just a lot of brain drain when they should be just, you know what, this ET5  could be a killer vehicle for us. Let's just focus on this, right? And the key is what you said about 5 minutes ago, they're not out of the woods yet. That's the one thing because NIO is a premium EV maker. They're not going to sell a million units in the next 2 or 3 years. That's just not going to be, the price point is way too high for their vehicles. But if they're not doubling their demand or close to it over the next several years, then, man, they're going to have a lot of overhead costs that weigh them down, right?

Lei Xing:
We're still yet to see the announcement of the mass brand, right? So mass brand is outside of these six vehicles. I think that's coming. Maybe we're going to see something announced if not at the auto show, but end of this year at NIO Day 2022. And then when you mentioned capacity, it makes me think of the other news going back to Tesla again, the Reuters article about their adding doubling capacity to 2 million in China. So a second completely second new facility in
Shanghai.

Tu Le:
Basically pangbian: right next door.

Lei Xing:
Yeah, and then considering this makes me remember another news from CATL, they signed that big agreement with Shanghai putting up another factory right in Lingang, earlier this week I believe? You think about that and then you think about one of the rivalries this year is, I had also tweeted about this, is BYD versus Tesla, that BYD their publicly announced plans is 1.2 million NEVs, but they had made that WeChat post about serving 3 million customers (at the end of the year). So inherently, that means 1.5 million. But here's the thing. BYD's got the momentum, BYD’s got the products they're launching. I just wrote a piece that hasn't been published yet, but in that piece, there will be a list of all the models that will be launched this year plus the existing models. And the all-new models plus refreshed models, it's more than a dozen. And then they've got capacity, they're adding capacity. They have plants in Shenzhen, Xi’an, and Changsha, but they're adding five different plants of capacity this year. They'll come online soon. I think the number of I’ve seen was at least 2 million units, if not more of capacity. So they're setting themselves up. And these are the front runners. And you look at NIO, right? If they're not out of the words, they're thinking about smartphones. And then you say, wait, is this, are they doing something, that's, what the heck are they thinking? But then again, you think about this multi-device ecosystem, then this is Chinese smart EV startups doing that thing that nobody understands.

Tu Le:
They seem to still have a positive external kind of view from customers in Europe and in China. So I think that's good. They can still leverage that. But missteps take a lot to, in the automotive world, to get over, unless you're Tesla, then you have this reality distortion field: bad news is always good news, good news is great news. And so the other thing about Tesla, adding another million units of capacity over the next 2-3 years here in Shanghai is, remember what Elon's goal was during Battery Day last year, it's 20 million units by 2030. So they're going to have to have two or three products, at least in 25, 26, 27 that are selling 2-3 million units by themselves in order to get to that 20 million units. So it doesn't surprise me that they're looking at 2 million units. They're obviously looking at China to be an export hub. So it's going to feed all of Asia. And I don't know if you saw this, but they are still having problems, getting final approvals to ship production, vehicles out of Berlin Giga, right? Now there's a water issue. So they have to be counting on, let's say, by mid-2023, getting 350,000 or 400,000 units out of that factory, right? But they're going to rely heavily on China.

Lei Xing:
It looks like in terms of regional Gigas, China will be a major a presence serving the entire Asia region. It doesn't look like there's going to be any new plants elsewhere. Remember, there was a rumor about new Giga in Shenyang, right? And then Tesla denied it. And then even the post that was sent from the government account, they deleted it.

Tu Le:
So there was a tweet that kind of articulated how much the Shanghai government has profited or not profited, but the benefits to having Shanghai Giga. So they must, Tesla is using that as leverage, right? Sure, hey, Shanghai Government, I’m taking care of you. But if you're not going to take care of me for Shanghai Giga 2, I’m going to go shop, right? Maybe I’ll do it in Beijing, maybe I’ll do it in Shanghai, right?

Lei Xing:
Yeah, it's same for CATL

Tu Le:
Tt's good business, right? It's just good business. But the 800-pound gorilla in the room, Lei, is that that's a lot of risk, because if this is a hub for Tesla, for Asia, and remember that 60% of all global population resides in Asia. So it makes sense to have a lot of capacity here, right?

Lei Xing:
Yeah, and I think this year moving away from Tesla a bit and focusing on the bigger picture is China as an automobile export base. It's never gotten that kind of, it's not known for an export base. But I think in the EV age, this is starting to happen, that we're seeing, especially last year and this year, that it says something about manufacturing, building in China of quality vehicles that can be accepted. Quality EVs, in particular, that can be accepted in the western markets. I think that's the significant thing that we have to look at rather than whoever is building a capacity to export. But maybe Tesla played a role in helping it.

Tu Le:
I was just going to say lay. We can point directly back to Apple, making every handset maker better in China, right? And so Tesla has raised the level for everyone, and so that whole catfish effect, there's no doubt it worked, right? But with China and exporting, there's always going to be other factors, involved and that's where I’m talking about the risk, because western analysts might not price that into the share price, because relations go bad, challenging related, because they're already challenging. If they get worse, there's 2 million units and no export markets, because everybody's throwing up protectionism or they're not welcome.

But that's the big challenge with the automotive sector and why the technology companies are super hesitant with the exception of Xiaomi and a couple of others that have looked at the China market, say this is way too lucrative for us, because you can't add incremental volume in your capacity. Because with Apple, they have Foxconn, a contract manufacturer. So if they order, unfortunately for Apple, they just keep on adding demand. It's not like I’m going to take away 5 million units of demand in 2019, add 10 million, it's pretty consistent. It's like chalk, right? But with automotive manufacturing, if you add capacity, then you got to sell it. You can't add 10,000 units, 50,000 units, 70,000, you got to go 300,000 units, 150,000 units. In order to recoup those costs, you got to sell a lot of those cars. And so do I think Tesla in a frictionless, free market economy going along the path that they're currently going, sell 2 million units, let's say 50% of that directly to domestic China, and then, let's say more than 50%, let's say, 60 or 70% and then 300,000, 400,000 or 500,000 units shipping to the export markets? No problem. Frictionless, market economy and supply meets demand, no problem. But there's other risks involved, right? And they've not only embraced those risks, they've doubled down. So that should be recognized because if tow-thirds of your capacity is in one country, regardless of its China or not, if two-thirds of your capacity is in Japan, and there's an earthquake. If two-thirds of your capacity is in Thailand, and we saw this right in 2012 with that tsunami in Thailand, it screwed a lot of the auto makers up. So that needs to be recognized, right? There's a lot of benefit to that, right? Because suppliers, you can create more leverage with your suppliers. And there's a dependency interdependency because just such a large manufacturer in the country. But when the getting is good, it's great. But you also need to acknowledge that there are probably a handful of major risks that are completely outside of your control.

Lei Xing:
I did want to mention some of the other news on the CATL, they signed some deals with the Fujian highway and also Sany, one of the China's largest construction machinery, crane and also heavy-duty truck manufacturers, that they're going to help with battery swapping, batteries and building these stations along a certain part of, expressways, serving the heavy-duty truck battery swapping. I think this worth mentioning because we've been focusing a lot on the passenger vehicle side of it, but not many people know that China has already is going big on battery electric heavy-duty trucks, and most of them are already battery swappable. And Sany actually is the leading battery electric heavy-duty truck manufacturer and seller last year. So that was interesting move just to expand into a different segment.

Tu Le:
So I also look at those announcements by CATL at least on the commercial vehicle side, to those were probably in play when they made that announcement. Right?

Lei Xing:
And the reason why batteries, electric heavy-duty trucks are taking off, is not that these trucks are traveling long distances, but there are requirements in ports, in industrial areas, in mining zones, where these trucks they can run fixed routes, but then they can have these stations next by, and they can do this swapping without going along distances. The other reason is in a lot of these mining zones and factory industrial areas, if you have these type of vehicles, you can operate longer, because there's some electricity shut down requirements. If use diesel trucks, you don't get as much as preference or preferential part support. So that's why you seen these battery electric heavy-duty truck sales take off.

Tu Le:
I have to refer to two panels for MOBILIT-E. One was the battery technology and the keynote or this the company spotlight that Mujeeb Ijaz had presented. He was very practical in his assessment, and  he said, if NDRC estimates are 400 km in the practical world, they're probably more than half of that, right? And then in the United States, he was talking, he was referring to the U.S. because the U.S. is a truck and SUV country. So a lot of people tow things. And so if the estimate is 400 km of range, if you're towing something, it automatically goes to half of that, right? And so that's why commercial vehicles lend itself well, because the routes are predictable and they might be heavy, but then we can quickly swap out the battery without losing a lot of utilization on that.

Lei Xing:
So what you are seeing in China's heavy-duty truck space is that we've gone past that pre-buy effect due to the China 6 (emissions rules), which came into effect last July. And now you're seeing the commercial vehicle side sales drop by a lot compared to the last few years, but the electric heavy-duty truck sales, they are like 10X, 15X growth because of low base, right? And many of these, again to stress, these are not long haul, heavy-duty trucks. These are trucks running in limited.

Tu Le:
Just back and forth, back and forth.

Lei Xing:
So that's just another segment in the EV space worth watching that sometimes we don't pay attention.

Tu Le:
That's conceptually the same thing that we were talking about earlier with the EVs and the capacity, right? Because CATL is increasing capacity substantially all over the world. There was already an announcement that CATL is looking at, opening a factory in the U.S. How that will play politically, we'll see. But if CATL goes down to the to Alabama says I’m going to hire 2,500 people, you don't think the Alabama Governor would be like, let's do it, let's go. Right? So because Japan is building in Alabama or not japan, but Mercedes is building in Alabama, Hyundai is a building in Alabama. So it's not unheard of. The reason you would build in the southern states is because they're non-union, but it's a brilliant play on CATL, they need that commercial, because they can then utilize capacity towards the commercial, not make a ton of money on that stuff. But it's probably not the highest technology battery cell either, and then they can go after much higher margin with the capacity they have left over. And so that's what we should see with an Xpeng. That's what we should see with a NIO with their mass market brand. They sell at smaller margins in volume in order to ensure that utilization rates at the factories are okay. And then they can go after and be much more flexible on their bread winning products. And so, because I still think it's going to be a hard sell to get non-SOE Chinese domestic, non-SOE non-chinese domestic automakers to sign up for CATL’s battery swapping. So if they're able to get a foreign automaker, that probably means that foreign automaker is a little bit desperate, or CATL gave all that stuff away for free or something like that, because a foreign auto maker, I just think it would be a hard sell. And then the other thing that I will mention because last week you said Paul Lienert had contacted you, and he actually contacted me. So thank you for that reference. But you know how a few weeks ago we said that the west is opening up to China EV Inc, it seems like the west is opening up now to battery swapping. So because people are asking。

Lei Xing:
It's a learning experience for us, let alone the western media.

Tu Le:
And the one thing I will say that makes battery swapping more of a no brainer here than the rest of the world, and I’m including NIO in this, and another plug to the MOBILIT-E conference. There was a one-on-one conversation that Steve Levine from The Electric, a great journalist and expert on batteries has a one-on-one conversation with Levi Tilleman, I saw a few minutes of it. It was great. I'm going to watch the rest of it this weekend or early next week. But Levi Tilleman is the head of policy or vice president for policy of Ample, which is a Silicon Valley-based startup that is doing battery swapping in the U.S., so let me press rewind. The reason I say China lends well is because there are 160 cities in China with over a million people, I think there are 50 or 60 in Europe. So battery swapping, you got to,just think of gas stations, right? You got to build these gas stations or build the swapping stations. You got to fill them with batteries. Those batteries need to be at a certain level of quality and reliability. And then they need to be charged. That's a heavy lift. And then in Europe, when you cross borders, policies, laws are different. So it's not like we can do this. We can partner with Sinopec and blanket most of China with our battery swapping stations. And in China, it’s competitive now, right? Because SAIC, Geely, NIO, CATL, those four right there are heavy hitters. So that makes battery swapping a viable option because these huge companies are doing it.

Lei Xing:
I talk to Paul and another reporter from Protocol and I told them both, my conclusion is that battery swapping is part of the entire charging infrastructure or ecosystem, but it's only going to work for some people and it's not going to be the dominant form, as opposed to charging, that's my take

Tu Le:
The one and to your point, the one key that or one of the keys that I’d said to Paul was it's not an “either or” it's an “and.” So most people want to be able to have or I won't say most people, people would like to have both options if possible. Yeah. So I don't think it's going to be, I only want batteries swapping or I only want charging in. So it's a complementary thing. It's not a competitive thing in my opinion.

Lei Xing:
I did want to talk about my Hertz Tesla Model 3 rental experience.

Tu Le:
Please, and sip on that beer man.

Lei Xing:
Yeah, it's been an eye-opening experience, not only in terms of driving the Model 3, the rental process, but just being here in Southern California and seeing EVs, everywhere you go, there's Teslas.

Tu Le:
California is a different country in the U.S.

Lei Xing:
Right. California is the number one EV state, right? Whether it's Tesla or anybody else, the Mustang Mach-Es, ID.4s, Audi e-trons, Porsche Taycans, they’ve become street cars. Yeah, Lucid, I haven't seen one. But so as soon as this news came out of Hertz, that they were putting 100,000 Model 3s into their fleet, this came out last October, right? I believe we talked about it, I was looking to experience this rental process. This time I’ll tell you is a little bit of on my part that I said it was kind of fact-finding. So one of the reason I came to California was, as I said, as a mini vacation, my daughter’s birthday, she's on school vacation. And there's a good friend of mine who came from Beijing for a personal trip. It was to see him, we've known each other for 10 years, almost.

And so I made that decision to have this trip, and I say, hey, LAX is one of the airports that have the Model 3s. Right? Remember, there's only six locations right now in the U.S. that have the Model 3 rentals on the Hertz platform. And LAX is one of them. I went ahead and I looked at it, and I had tweet it actually much earlier about how much it cost. Right? So I made the rental, and I did a bit of a comparison. It's not cheap. But if you look at the other rentals, the ICEs, it's not much more expensive either considering right now on the Hertz platform, before March 1, charging is free at Tesla super charging locations.

Tu Le:
That's a huge incentive.

Lei Xing:
The rental I think it came out to be, the weekly was a little bit over $800.

Tu Le:
That's not bad.

Lei Xing:
Plus the $25 a day insurance. So it was over $1,000. But since Monday, since actually early Monday morning at 12:00 am, 1:00 am when I picked up my car until now every minute of it has been priceless. I think it's well worth the money because I got to experience, I almost feel like I’m a Tesla stan now.

Tu Le:
Oh don't say that.

Lei Xing:
What I mean is until you drive it, until you're in that charging ecosystem, until you see that big iPad in front of you and the performance, just the driving, the feel, you never understand why Tesla’s been so successful. Now you understand it. The minute I drop exited the shuttle bus, there's this big, huge screen, by the way, I am a Gold Plus member. So on that screen, instead of going to the counter, on that screen, there's a list of names. Mine being one of them, and there's a number next to it. That number is the parking space number where your Model 3 is. And you just go walk to your space where the car is. You go in, the keys are there, you drive away, at the exit gate, you just show your license and the credit card that you reserved the car with.

Tu Le:
Let me stop you right there. Real quick. I know you did a walk around. How was the quality?

Lei Xing:
Quality, it’s new, it was less than 500 miles. Quality is fine, I think quality is fine that okay it's not premium like Porsche, but you don't notice, that's not something that you care about really. And I asked my daughter, what she thinks of is she said two things: the big iPad in the middle that she can play around with streaming music and two, autopilot. I tried it out a few times autopilot on the highways and even on local like a Route 1, the Pacific Coast Highway, right? It was fine. I just had to put my hands on the wheels and, not the FSD stuff, but it worked fine. But the charging, by the way, I have to talk about charging because I’ve done 3 times already. Every time is just so simple. Now I understand why. You just take out the gun and put it in and it charges. Hertz put a limit on the rental cars to 90% state of charge. And their recommendation is charge when you are around 20%. And then, the 3 times, pretty much 30 to 40 minutes to charge the 90%. Once I think was around 40%, when I started charging the other times were about 30%, it was smooth, seamless. And yesterday, I happened to be in Irvine, visiting the friend, right? And picked up some food from a Chinese restaurant, and in that parking lot, there's some new Electrify America, latest generation chargers being put up. And there was an Audi e-tron. There's a family of four standing next to that charging pile and they were looking at the screen and trying to figure all the process. I'm like that's exactly why that Tesla sells the way they're selling. It's just this experience is so much different. I saw a couple of Taycans charging and the guy said it was highest was 130 kW. In the superchargers, I think that I charged at not the latest V3, but the previous generation the highest they went was slightly over 100-kW charging.

But as the state of charge went up to 70 or 80%, the charging power drops to like 40 or 30 kW. It got slow toward the end. But I think it's in terms of this trip and fact-finding, it’s eye-opening, it's worth every penny, I think even though it's slightly more expensive than the other ICE rental cars, but with inflation, wth everything, it's pretty expensive to rent cars anyways. But it's not so bad, it's not so bad.

Tu Le:
Are you thinking about that? Rivian now.

Lei Xing:
No i've never thought about Rivian. By the way. I've never had any range anxiety at all, because I know that California that superchargers are everywhere and even other destination chargers. 

Tu Le:
How long did it take you to get used to the center stack having the iPad?

Lei Xing:
It took me from the Hertz rental at LAX to the Airbnb which was 30 or 40 minutes.

Tu Le:
Then you got used to it.

Lei Xing:
And this is, by the way, my second time ever driving a Model 3. My first time was January 2018. There was some friend from NIO, that's when I visited NIO’s office in Sunnyvale. But this is the first time I’ve driven the Model 3 for extended period of time. I think I'm going to have a hard time going back to the Buick at home.

Tu Le:
I got to borrow a friend's Model 3 for a couple days, and it just works, right?

Lei Xing:
It just resonates with the Xenials right, I think there's a new word out, what's after millennial, it's called the Xenials or something like that. My daughter she's turning 11 tomorrow, by the way. And like she's all into, she’s like let’s get a Tesla because of the pad she can play with, and Autopilot. This is part of the trip, this is part of the vacation just to learn things.

Tu Le:
I'm just really concerned about the rest of the U.S. right? Because the rest of the U.S. is definitely not California.

Lei Xing:
No. You are correct.

Tu Le:
The charging infrastructure is just not great, because I don't know how quickly that can come online and you make an important point. If the UX is terrible and the software doesn't work, and it's not compatible 100 percent of the time, and you don't have real time updates that this charging station is not working or this stall is not working or that stall’s not working. Man, it makes you bitter, right? It makes you upset, gets you upset. Yeah.

Lei Xing:
Going back to the earlier conversation about the amount of device that with cars becoming a device, right? There was never a moment where I couldn't, where things got slow on the screen or it pissed you off. There was never that moment and everything worked as exactly as it did. And maybe the car is new, but still, it makes that rental experience. And considering that charging is free and concerning in California gas prices, close to $5, then you're saying, hey, it's a deal.

Tu Le:
I'm going to tell a quick story, Lei, If you're done.

Lei Xing:
 I'm done. I mean, I love it.

Tu Le:
I'll tell you my eureka moment about the Apple ecosystem. It was my first week, and this is years ago. So I'm dating myself, my first week at Apple. And I had a couple assignments and never used a Mac before. I was a PC guy, and I was never a big computer guy. I was just used it for what it was. And I was used to fatal errors on Windows and stuff not working. So that was my experience with the Windows machine. Every once in a while, it doesn't work, it's not compatible, it freezes. So get into my cube and I'm actually kind of upset because I'm looking at this command button. I'm like, what am I going to do with this? There's no right click button on my mouse. And there's this extra button on the keyboard. What do I do with it? Because I had learned how to do quick commands using the PC just the keyboard commands, right? And so I had to unlearn those PC keyboard commands and then relearn the Apple keyboard commands, but that first week and a half after I got used to nothing ever breaking down like it would work like clockwork. I was like, this is amazing. It just works. And the design was intuitive and made sense. It wasn't like I needed to find things and look for things. And if I was using a Windows or a Microsoft Office App, yeah, I needed to figure things out, but like the OS was great. And so that seems to be your eureka moment for electric vehicles, but Tesla vehicles in particular.

Lei Xing:
And also I learned one pedal driving. The first night, the regenerative breaking was a bit, you needed to get used to it. But once you drive more, you how you let off your foot off the gas pedal, you learn to do the one pedal and I’ve been doing that. Right? And it drives, I'm going to say in terms of suspension is not great, it feels a bit and in terms of tire noise, right? It's not the luxury field, but when you step on the pedal, and it goes and it's yeah.

Tu Le:
Yeah, it just works. My expectations for a $45,000 electric car is not going to be super high when it comes to all the bells and whistles, right? And i'll leave you. I'll leave you with this really quickly, real quick anecdote. My first week at GM again, I'm dating myself. I walk into this foreman cube. It's a big square, each computer is a corner. We're all four of us. I have our back turned to each other. I walk in, find my desk. There are three other gentlemen, all having more than 35 years with the company. And I'm 23 at the time. And one of the guys, his name was Ollie, John Olisensky. I still remember him because he was such a great teacher mentor for me. He comes over. He's like, hey, young whipper snapper, welcome. I have some work for you. And I was like, okay, cool. I walk over there. And he's like, I don't actually have work for you. I just need you to fix something. And I look at, his computer’s all jacked up. I don't know what he did to it, but he couldn't use it. And he was like, hey, I just want to check my Email. So do you know what to do? I was like, I just need to start the computer over and he looks at me and he's like, these technology companies, sometimes it works, sometimes it doesn't. If we sell the car that only turned on 80% of the time we’d be out of business. And so that is kind of like how everybody needs to understand charging infrastructure, right? If it's hard to use, people don't understand it. It doesn't work half the time. Man, if the adoption is going to suck like that, it's never going to grow the way it needs to in the U.S.

Lei Xing:
This is exactly the point that I probably, I’ll forego, maybe I'm speaking not for me, but maybe for quite lot of people is that I’ll forego the quality, and because the charging infrastructure structure is so convenient. I'll give you another, I tweeted out this as well. We went with a few friends to Torrey Pines State Reserve, and I dropped by the Golf Course and got my dad a souvenir. So on the way back on I-5, it was fully charged in the morning. So we drove what, 70, 80 miles from Newport to Torrey Pines. On the trip back, we needed to stop at an outlets in Carlsbad. So I had less than, I don't know, 40% left on the charge. And I was like, let's see if there's a super charger. Low and behold, there's a super charger station right inside the outlets. So they needed to get a couple of shoes. So we went 30 minutes, 40 minutes came back, it was charged to 90%. And then we went back. Right? These are the things that make you feel driving the EVs is so convenient. Right? But that's because of the supercharging network. And the other competitors, they don't have this, yet.

Tu Le:
And we're making the assumption because we're talking about outside the four doors, right? And the challenge for legacy automakers is also making sure that software inside the four doors is not buggy, and it's not. Because remember, the customer or the driver or the user is used to an Android or a mobile phone that reacts instantaneously. So they're going to equate the mobile phone experience to the vehicle experience. If it's this iPad that you're talking about. Right? So if it's different, slower, and buggy, it's not going to be a good experience. 

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