Tu starts off episode 65 with an update on his status in Beijing and the latest news about auto manufacturing in Beijing and Shanghai including the shutdown of ShanghaiGiga due to a shortage of wiring harnesses.
Tu and Lei them move onto BYD’s Changsha problem that has nothing to do with Covid. Due to protests from local neighbors of the factory, BYD was forced to close it factory while an investigation is underway to determine whether or not they’re permitted to be there building cars.
Lei shifts the discussion over to LI Auto’s earning that were just released and highlights the announcement about making an even more affordable EV similar to NIO who also had more information leaked recently about their mass market brand targeting the 200 - 300K RMB market segment.
The podcast moves onto what Cadillac is doing to prep the market for the Lyriq launch and some of the new vechicles launched by Denza, Arcfox, and LeapMotor that all make bold claims about redefining their market segments.
Tu moves the focus to Volkswagen’s announcement about reviving the Scout brand and Lei weaves in his takeaways from the FT’s Future of Mobility conference that featured fireside chats with Elon, Ola, and Herbert and they go into a deeper dive about Elon’s interview and some of the contradictory statements he seemed to make about ShanghaiGiga.
Tu starts off episode 65 with an update on his status in Beijing and the latest news about auto manufacturing in Beijing and Shanghai including the shutdown of ShanghaiGiga due to a shortage of wiring harnesses.
Tu and Lei them move onto BYD’s Changsha problem that has nothing to do with Covid. Due to protests from local neighbors of the factory, BYD was forced to close it factory while an investigation is underway to determine whether or not they’re permitted to be there building cars.
Lei shifts the discussion over to LI Auto’s earning that were just released and highlights the announcement about making an even more affordable EV similar to NIO who also had more information leaked recently about their mass market brand targeting the 200 - 300K RMB market segment.
The podcast moves onto what Cadillac is doing to prep the market for the Lyriq launch and some of the new vechicles launched by Denza, Arcfox, and LeapMotor that all make bold claims about redefining their market segments.
Tu moves the focus to Volkswagen’s announcement about reviving the Scout brand and Lei weaves in his takeaways from the FT’s Future of Mobility conference that featured fireside chats with Elon, Ola, and Herbert and they go into a deeper dive about Elon’s interview and some of the contradictory statements he seemed to make about ShanghaiGiga.
CEM #65 051222
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. I am the managing director at SinoAuto Insights, a Beijing-based consultancy that helps organizations bring innovative 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 sinoautoinsights.com, which I encourage you all to do. Lei, can you please introduce yourself?
Lei Xing:
Yes, hi, everyone, this is Lei Xing, your co-host, former chief editor of China Auto Review. This is episode #65. Before we start, Tu, you want to give us a bit of an update on the situation on the ground since we last talked?
Tu Le:
Sure. So I want to emphasize that our brothers and sisters in Shanghai have it much worse in general terms than we do here in Beijing, there are certain areas in Beijing that are in complete lockdown. So complexes, neighborhoods, but we're able to go outside. We're able to go to what they deem essential stores, so grocery stores, things like that. There's still takeout. So I can go to a Starbucks, order a coffee and get it taken out. I can't sit in the actual store or the Starbucks. So a lot better, although you and I just WeChated about this or direct messaged each other about this at, yesterday there was a rumor that went around among everyone that there was going to be a lockdown starting this weekend. There were huge lines at the grocery stores. There were long ques and waits for food delivery and grocery delivery. But what's happening is we're being tested every day. And people have asked me, do they come to your door? And is it mandatory? It's not mandatory. It's effectively mandatory, because if you do not get tested, you can't get into any complexes or compounds or stores or anything like that, because your health app will show that you haven't been tested in 24 hours, 48 hours.
So the testing is not mandatory, but it's de facto mandatory. If you want to get around anywhere. With regards to production, we have not heard or I have not, and I'd love to hear your thoughts, Lei. I've not heard about any other major stoppages here in Beijing. We've heard about Tesla’s
Lei Xing:
Correct.
Tu Le:
We've heard about Tesla’s in Shanghai with the wiring harness, but nothing. So we're chugging along. I wouldn't assume production is full capacity. So May is going to be pretty weak as well for sales in my opinion, that's kind of the update for Beijing. The boys are online, we're all working from home. The deliveries still seem to be fairly efficient, maybe another half an hour wait longer than normal. But food delivery is still good. So we have enough food, but we're also trying to help some of our friends who have opened restaurants in F&B, so we order take out here and there, because rice and Chinese dishes everyday is, variety is the spice of life, right?
Lei Xing:
Life goes on, life goes on. But I mean nobody uses the word “lockdown” anymore I don't think. The official statements are using all these other right? If you know what I mean.
Tu Le:
Right. It's a marketing thing.
Lei Xing:
Yeah but anyways maybe it's nice that you talked about production and sales. We talk the April sales a little bit, maybe relating also to Tesla, which is in its third production stoppage since mid- March. Remember, they had a stop of production two days in mid-March, and they stopped at the end of March for until April 19 for what, 22 days. So 19th they started. And then just a few days ago was stopped again because of the Aptiv wiring harness.
Tu Le:
They never confirmed that, by the way. But.
Lei Xing:
Well Aptiv did confirm that they had that positive case on May 8, which stopped the wiring harness production, but their connector plant still was fine.
Tu Le:
So when you think of Aptiv, generally speaking, I’m not saying you Lei, but to our audience Aptiv, traditionally in the back in the day, was Delphi and Delphi, was an old GM subsidiary that got spun off. And then Delphi had the old traditional automotive supplier business and then there was this Aptiv that was doing autonomous vehicle, accessories and hardware software stack. So those companies got split and BorgWarner acquired Delphi’s old assets and then Aptiv became this new company, but it seems that there are still some ties to the traditional automotive sector that Aptiv has.
Lei Xing:
Wire harness is what, the cream of crop for Delphi or Aptiv. And maybe, people didn't know that, that they are, I think they have quite a high percentage market share in that particular product in China.
Tu Le:
And for those that have never seen a wiring harness. Think of it as the spine of the vehicle, it runs along the front to the back of the vehicle. It has wires coming out of everywhere because everywhere there needs to be an electrical connection in the vehicle. And so it's basically a bunch of wires taped together with connectors and things like that.
Lei Xing:
So it would be the blood veins of a human right, as it to a car. But anyways, so Tesla we saw the numbers, 1,500 units sold, 10,000 units produced within what, the last 11 days (of April). So that's roughly what 1,000 units a day. I think their normal capacity is probably close to 3,000 units a day, if I get my numbers, right? So they're far from their normal capacity. And I read up on some background on how they restarted production and it's complicated. So remember that Reuters’ article on a letter to Shanghai government and how they coordinated. And these 8,000 or so, employees who live in surrounding apartment complexes, they had to be shuttled into the plant by these buses, because they, remember they are in these apartment complexes that are in, now Shanghai and also Beijing have three different zones, right? The prevention zones, the control zones and the lockdown zones. And it's complicated that, and some of the employees are still in lockdown, or that they still can't get to the plant. So hence, they don't have that the manpower and I heard that these employees they get RMB300 a day in extra stipend, a six-day working week and then one day kind of resting, but they're all sleeping and eating at the factory, taking showers, however they do it. There's a lot of support, but imagine as you as an employee and the conditions that they're in to be able to kind of like help Tesla cause Shanghai accounts for more than half of the output, right? This is a serious issue and Elon keeps saying that their 1.5 million is still intact, but I’m not sure if they can’t get back. And especially with the hiccups that we keep talking about that this is going to happen. This is looking really
Tu Le:
Your calculation of, you said 3,000 jobs a day or 2,000?
Lei Xing:
Less than, let’s say 2,500.
Tu Le:
A bit of background. When I was working at a factory, getting one job per minute off the line was running pretty fast. They're running more than one job a minute. They've effectively lost a month’s worth of production. And if they're running at almost 3,000 jobs a day. So if you think about it, 8 hours shift, we're looking at 600 jobs an hour, 600-800 for Tesla times three shifts. Yeah, we're getting close to that 3,000, but they're running superfast, right? This factory is really efficient. Now, we can look at the quality later, but I’m saying a from a production standpoint, they're running really, really fast. So the faster factory runs, the more efficient everything else has to keep up. And it's really, really difficult to build momentum, stop, build momentum, stop, build momentum. And that's what's going to be happening for the next several months for Tesla, for Volkswagen, because we saw Li Auto which ships, which produces in Changzhou which is near Shanghai. And they get parts from Beijing. And I think they had to slow down their line because they weren't getting those parts in a timely fashion, at least from a normal production standpoint. So it's intertwined and the longer this last throughout China, the more tangled the supply chain is going to get. And aside to your description of at the plant level Lei, how they're sleeping, eating, showering, there are delivery folks in Shanghai that are sleeping in tents so that they can keep their jobs. Because if they go back to their homes, they will be locked down. And so if you go to Shanghai right now, there might not be any cars or a lot of cars driving around, but it'll look a little bit like San Francisco probably because it's going to be tense along some of these roads that you walk around and drive around. So it's still pretty extreme and with Shanghai this week actually became much more restrictive again, right? It was better better better, then the last couple of days it got restricted again.
Lei Xing:
This is what I was trying to say this extremity in the sense that what these workers are going through to be able to support production reboot, right? These conditions that they're in. And sometimes we talk about this, but a from a humane perspective, it's, right? But we need these production going. We need these sales delivery going to keep the economy running. And these are all at the expense of these conditions, good or bad, right? And I think Tesla, despite their 1,500 units, like I said two episodes ago that these rankings, these sales are meaningless, right? They might be at the very bottom for a month, but they still shipped what, a few thousand Teslas out, right, the other day. So whatever this the condition that they can still accomplish, there's a lot of coordination and support, external support involved.
Tu Le:
The local Shanghai government is bending over backwards to get Tesla and a handful of other companies back online. So.
Lei Xing:
Yeah, and also I think going up a level, industry as a whole. I don't think anybody wants to see and I personally don't want to see Tesla fail or because it will be right, at the end of the day, in order to push this EV transformation, everybody has to do well, right? It doesn't make sense to gloat and right and laugh, and then what we can say, BYD’s doing 100,000 units a month, but it's
Tu Le:
Even BYD this week, non-COVID related.
Lei Xing:
We're talking BYD for the wrong reasons. And there's also a negative press on this Tesla owner who kind of issued a letter of apology or something, a mea culpa.
Lei Xing:
Yeah a mea culpa. You want to go ahead with BYD, you want to continue?
Tu Le:
Yeah, one of their most important factories is in Changsha, which is a tier 2 city, meaning that it has around 7-8 million people there. They build a lot of hybrids out of that factory, DM-i's. And so they were shut down because there was a protest by Changsha ren or the people of Changsha because the factory was polluting. And so they had to shut down. I don't know if they're back up to be quite frank.
Lei Xing:
But a different kind of emissions scandal. But I want to stress that this is an ongoing investigation and there's no verdict that it was BYD’s fault, because the details are that this plant was up, and then that xiaoqu or the complex was, erected later, after the plant was up. And it was like what, 500 meters next to it, the closest building. So there are some issues.
Tu Le:
So they're right on top of each other basically.
Lei Xing:
So this is something that's often we don't really talk about this how things are developing so fast. And this could be one of the consequences of going too fast. And then where does the inspection and all the rules, are they in place, was this building, was this apartment complex, did they have all the permits to be built so close to the plants and is BYD's plant doing something wrong itself? We don't know yet. But right, that's the bigger scheme of things is, things are moving too fast. And now you have these consequences.
Tu Le:
And to be, again, for the sake of full disclosure, it's not the fault of the people that moved in next to BYD, they just want a clean environment to live, right? And so it's important to note that most of these people are just wanting a normal life. The building developer, maybe he cut corners, maybe BYD did something. But one thing that's important to note is that that factory is running at full capacity. That's why there's probably some emissions coming out of it. So that should indicate that they're still running really tightly.
Lei Xing:
Supposedly, they have met all the requirements in terms of whatever emissions levels that are.
Tu Le:
But the thing is to your point Lei, they might have moved the goal post, right? Because they didn't have those emission requirements when that
Lei Xing:
That’s the other issue.
Tu Le:
Building complex was 500 meters away, right?
Lei Xing:
And the fact the matter is, we've seen, right, all the battery plants that are going online, all the assembly plants that are going online, massive for BYD this year, and they want to get to 1.5 million units. But at what expense? Will there be any consequences? We have to think about this, right? They're all good. They're going to be the leading probably NEV, they were the leader overall, right? They beat FAW-Volkswagen in PV sales, according to CPCA, so.
Tu Le:
The western media needs to really highlight that, right? Because FAW is a SOE and Volkswagen is the big dog in China. So for them to be able to do that, is mind boggling to be frank. So let's give it a month or two to figure out what's actually happening down there, and then we can update everyone as we hear more.
Lei Xing:
Changsha is one of the most important plants for BYD because of the DM-i so we'll see the May numbers see whether they'll be affected. I'm not sure the exact current situation. I believe it's being investigated, that the investigations are ongoing. So I would assume that part or most of it is shut, maybe I could be wrong, but the overall industry sales of both CPCA and CAAM gave the numbers, the trend as were expected, right? 40 to 50% off in April for overall PV sales, overall industry sales. NEVs were also down, but as a percent share actually went up, I posted some numbers, but that's the general trend, but Q2 will not be as good as expected. If we go back to the beginning of the year, I’m assuming it'll be under a million units. Q1 I think was 1.2ish, 1.3ish, April was just under 300,000 units. March was well over four, I think, was 450. So you saw the drop, and I think May, I don't know, May, it might be better, but not so much more. So entire Q2…
Tu Le:
If we extrapolate Li Auto’s guidance for Q2, they said 21,000-24,000 units for Q2. And they had 31,000 deliveries in Q1. So we're talking a 30% reduction effectively. Will the rest of the market be that way with BYD and Tesla, having their own challenges beginning in Q2, it could be still pretty messy, the Q2 numbers, anyways. So it's important to keep score, but I don't know how significant these numbers are
Lei Xing:
Just informed by our good friend Taylor of a leaked email of BYD's targets. They're huge for May to July, 150, 175, 200,000 units in each of those 3 months. I don't know, wow, but anyways.
Tu Le:
That means that they plan on taking share from other people, right?
Lei Xing:
Regardless they will. Full year. I am the latest prediction that I’ll have is it'll be tough to get out of the 5 million units. It could be below, at the beginning of year, we said it was 6. But the way it looks now, I don't know.
Tu Le:
So we have to remember that BYD is next level. Tesla is obviously building 3,000 cars a day at their best. So these other companies aren't as efficient. If we're looking at comparing BYD to everybody else, I don't know operationally, they're just going to be running away from everybody, right? Because they know how to build batteries. They know how to build cars. These other guys are brand new at this stuff, right?
Lei Xing:
And if you look at it this way, the other legacy, maybe most of, the foreign, the big ones, I’d say Volkswagen, but their volumes are still significantly on the ICE side. So when they have these, similar percentage fall, these are all ICEs, right? So then BYD goes up further in terms of market share. That's why you saw an interesting, actually, a number that was put up by CAAM was the share of Chinese brands in the PV market actually was 55.7% in April. So that was nearly 15 percentage points up from the same period last year. I think that's mostly due to Tesla not, only doing 1,500 units, right? So there's a big spike, but I guess you mentioned Li Auto. They reported earnings, and maybe we speak of Li Auto with respect to NIO’s announcement of their sub brand project, the 1,860 mu, which is 1.24 million square meters in Hefei. I think the only thing that was worth mentioning from the Li earnings was their outlook on that, their next products. And their RMB200,000-300,000 car, EV which is also what NIO is planning to do by what 2024, right? So we're seeing more of these announcements or clearer picture into the next stage of plans for these smart EV startups. So they're going down market a little bit. And specifically, right, the NIO’s announcement from the Hefei government said we're going to compete with Tesla and Volkswagen for that sub rand.
Tu Le:
Isn't it called Alps?
Lei Xing:
It’s rumored but not confirmed.
Tu Le:
Is it the Alps or is it Alps?
Lei Xing:
I don't know. I think NIO can do much better than that with the Alps name. Because NIO sounds awesome, right, as a brand name. Just like…
Tu Le:
They could write us a check, we could come up with something English and Chinese right?
Lei Xing:
And also what interesting was Li Xiang compared their model introductions to the iPhone Max, Pro, Mini, and they'll cover the RMB200,000 to RMB500,000 price range.
Tu Le:
I think it's worth mentioning Lei that the attrition rate for these Chinese EV startups and not even Chinese, for the EV startups at the margins, because we're seeing valuations and share prices bottom out all over the world.
Lei Xing:
NIO’s taken a beating this past week.
Tu Le:
So I did a bit of research here. The EV companies that I’m talking about on the margins that most people know about, Canoo, they're at $717 million valuation, down 64% over the last 6 months, Lordstown down 162%, Faraday’s down 78%, Tesla down 28 last 6 months, NIO’s down 67, Xpeng 57, GM is down 44, Volkswagen down 36 over the last 6 months. And so these EV companies that were riding the coattails of the entire sector are going to get wiped out. The ones that we don't hear about, the ones that you and I have heard about, but we're skeptical that they're going to be successful. They're probably going to get wiped out Lei. And so it's going to make the survivors even stronger. And so when NIO and Li Auto come out with these more mass market brands, what we're going to see is that I trust NIO, so then that means that I should trust the Li Auto brand or the sub brand for the mass market. And so this gives them an increased opportunity or bigger opportunity. How's that?
Lei Xing:
Yeah. And if you look at what the companies or the brands are doing in recent days, Xpeng ois offering the XPILOT as a standard feature now, right? This was big and the LYRIQ, which had their pre-production rolling off on May 6. They just published a set of owner benefits. I don't know if you saw it or not for the China made version, there were quite a few, I think that people were bit surprised. They're going to give you this or give you that, right? These are all kind of the competition that are going on behind the scenes, jousting, of what my product is going to offer to compete. And LYRIQ is making the move.
Tu Le:
Because they just don't want the market to completely cease. They need people still interested.
Lei Xing:
Maybe this is a good spot to talk about on the recent EV launches or unveils, right, the ARCFOX Alpha S Huawei Inside or HI edition, the VOYAH Dreamer, Rising Auto R7, LeapMotor C01, right? Each of them has their own kind of unique selling point or aspect. But right, three of these are almost like sedans, and one is not an SUV, it’s an MPV, supposedly the first, supposed to be starting this new trend of all these MPVs coming out, right? The Denza D9, iMAX8.
Tu Le:
It's basically what the Audi urbansphere was kind of sort of, right?
Lei Xing:
The LeappMotor C01 is in the RMB200,000 range. They started what, the pre-sale, ARCFOX Alpha S HI, it's been delayed over and over since the launch in April last year, unveiled in April last year. And if you saw the press conference, Yu Chengdong, the guy from Huawei, he was boasting that this is going to have the best autonomous driving features ever. Right, with three LiDARs.
Tu Le:
You can't get better than ever.
Lei Xing:
And VOYAH Dreamer’s like we're going to be redefining everything in the MPV space. LeapMotor is using that CTC, it's just I couldn't keep up all these announcements, more coming next week, right? The Denza D9 and then the Seal, BYD Seal is finally being revealed next week. And then other than that, what else do we want to talk about?
Tu Le:
So we can talk about Volkswagen and the Scout brand.
Lei Xing:
This is a chess move that's hard to understand, to be honest. Risky move.
Tu Le:
I wrote in my newsletter that they're moving instead of saying force feeding Chinese consumers and U.S. consumers, these are the products that we like that we believe you'll like. They're kind of going on and trying to be customer focused, right? This is where the market is. This is where we're going, but Ford's not going to take that lightly, GM’s not going to take that lightly.
Lei Xing:
This is 2026.
Tu Le:
But Diess is, so the chess that you're talking about is really Diess saying we cannot have the China market be 50% of our profits. It is just way too risky. And so in order to build that volume, because they have about 5% of the market in the U.S., and so they're not super competitive in the U.S., this is one of those moves that I think they're hoping will build volume, will drive volume, but yeah, it's just.
Lei Xing:
So this is a new brand, not a new brand, but a re-branded brand.
Tu Le:
It's almost like GM bringing back Hummer.
Lei Xing:
I feel like this unit that they're launching like this new brand. They'll have an independent company and most likely a new plant. I feel like this is their Volkswagen Anhui for the U.S. so everything is new, new unit, new manufacturing, new brand, new segment, RUV rugged SUV, but going back to your point of spreading out risk and what's happening in China? He, going back to the FT Car of the Future Summit, that he was asked a similar question on this about being over dependent and also the company's kind of the position in the U.S. where they want to get to 10% market share, I think he did mention that it wouldn't be out of the question to have another plant outside of Chattanooga. And maybe this is already what he was referring to of this Scout, right? China, it was pretty much diplomatic. Also, Ola Kallenius was asked the same question, and it was all about China is the most important market. It will be in the next decade or or more, and they're going to continue to invest. But it looks like for Volkswagen, at least the pendulum is really, I guess it's really swinging towards the U.S. more than any time before. Let's just say that, right? With the Scout, with the ID.BUZZ, with the local production of the ID.4.
Tu Le:
So a more general statement about this is one of the other posts I had in my newsletter was a survey that the European Chamber of Commerce did for or European companies in China.
Lei Xing:
And I saw that yeah.
Tu Le:
And they said, many of them said due to the risk due to the instability that they might actually rather invest in the U.S., and they emphasized stability and growth. So the U.S. is supposed to grow at 6, or 7 or 8% this year. And so, man, we just had an insurrection a year ago, so stability, that's a weird thing to say. But we could see much more emphasis on the U.S. market from these EV makers or these legacies, non-U.S. legacies anyways. Because the other thing that I just saw this morning Lei, or last night actually, was that Hyundai is going to announce next week that they're going to commit $7 billion to build an EV factory in Georgia.
Lei Xing:
I kind of heard about this at the New York Auto Show when Munoz was speaking, I think he kind of alluded to this, so not surprising.
Tu Le:
And so a couple things about that Scout. They need to learn, Volkswagen is they, Volkswagen hopefully has a small internal team that's analyzing what went wrong with the ID. series and launch in China, because that's what they're going to be doing and effectively for the U.S. market with the Scout brand. Because U.S. automakers, their bread and butter is SUVs and trucks. That's what they do really, really well, right? Forward to the tune of 1,000,000 cars a year, almost a $40 billion business. So they have to look at lessons learned why did we not have a successful launch of the ID. series? Because the reason I bring that up is because the Chinese companies are very connected, connected in the features. And they just didn't bring the juice for that launch the ID. series. So if they're going to compete in the U.S. with SUVs against a GM before a Dodge or Ram, they need to bring it.
Lei Xing:
I wonder if this was already being pondered when Volkswagen’s TRATON, the heavy-duty truck and bus, right? They bought Navistar 3 or 4 years ago, right? This is under TRATON.
Tu Le:
Navistar is a commercial truck manufacturer.
Lei Xing:
This may be been in the works all along, who knows.
Tu Le:
So for those folks in the U.S., if you're interested in working for Volkswagen, I have a good feeling that they're going to be hiring like crazy over the next several years, truck engineers probably, right? I did want to congratulate Foxconn for finalizing that transaction
Lei Xing:
Lordstown, right?
Tu Le:
This is the ultimate just mind game. So not only am I going to buy this on the cheap from Lordstown Motors, but I'm going to lease back some space to Lordstown Motors, and build the car that you were supposed to build yourself at this factory. That's effectively what they're doing.
Lei Xing:
So Fisker PEAR will be made there, right? This reminds me that we need to talk to Jack Cheng, we need to get him on as one of the next guests on our MAX series because right, this is the latest news that are being confirmed and it will be nice to talk to him.
Tu Le:
Let's drop a little, one last bread crumb about our MAX guests, that I’m going to post our next MAX episode after this podcast ends. It's all about batteries. It's all about raw materials. It's all about supply versus demand in the 2020s, our guest said that it's going to be a bumpy ride for the rest of this decade when it comes to securing battery supply. But the 2030s and beyond should be much more stable. So buckle up guys had a great conversation with him for the first and 15 minutes or 10 minutes of the podcast, all he talked about was how his life is so crazy in the very beginning. So anyways.
Lei Xing:
But I did want to talk about the FTCar, which I followed, sme of the sessions I followed and especially the Elon interview. So in that Elon interview, I counted China was mentioned 14 times. And I think Peter Campbell, he asked quite a few tough questions on China to which Elon’s replies were rather diplomatic and try to kind of avoid, not avoid, but it was kind of expected from what he'll say about China, right?
Tu Le:
Dance around?
Lei Xing:
Yeah, one question was on China’s COVID lockdown of what he thought of Chinese government's actions. And here's what he said: I've had some conversation with the Chinese government in recent days, and it's clear that the lockdowns are being lifted rapidly.” I laugh at that. “So I would not expect this to be a significant issue in the coming weeks.” And he talked about when in the early part of the pandemic, when Fremont was shut down, and he talked about how different companies were treated differently.
Tu Le:
I’m sorry, but he's parodying the narrative from the Chinese government。
Lei Xing:
Yeah and when he also said Shanghai is back with a vengeance that we laughed, right? Yeah, and what you needed to go through to be not even right, forget about vengeance, just trying to get back to partial.
Tu Le:
We should also note that it's not just current production that he has at risk, but he in that letter to the Lingang or the Shanghai local government thanking them, he basically communicated that he's going to get to 2 million units. He's building another Shanghai Gigafactory next door to the original.
Lei Xing:
So right, this was also a question asked and his reply was they're not building a new plant in China per se, but it looks like they will be expanding. But the top priority besides Shanghai is Berlin and Austin. And he said China is going to be about 25-30% of their market long term and the rest of the world is 3/4 of it. If we say long term, 2030, 20 million units, you can do the calculation of how much China accounts by, 25% of 20 millions units as 5 million units, right?
Tu Le:
I think he's going to be hard pressed to not make it like a Volkswagen situation where it becomes a disproportionate amount of his production, but also his revenues. So.
Lei Xing:
UK plant, he said no, Indonesia plant he said no, China using kind of this is going the kind of political side of things again, whether China will use Twitter as an interference to block Tesla’s operations. He says, “I've seen no indications to that effect” and then the other thing he mentioned about China was this burning the midnight oil pass the midnight and 3 am and the Americans they don't want to go to work. That was funny.
Tu Le:
So basically, he's talking about the union shop versus a non-union shopper.
Lei Xing:
He had big love for Volkswagen. He said that Volkswagen is the next sort of EV startup that's doing the most. There's a bromance going on with Diess.
Tu Le:
I took a moment to appreciate the iPod because they're going to stop shipping that, 21 years old. And then it dovetailed well into Tony Fidell’s launch of the book that you didn't get last week.
Lei Xing:
I'm getting another one.
Tu Le:
For those that don't know, Tony Fidell was the inventor of the iPod. So there's probably handful of significant people in Apple history that are part of the resurrection that started in 1998 when Steve came back. Johnny Ive is one of them, Phil Schiller is the marketing guy. Tony Fidell is the engineer. So Johnny Ive is a designer, Tony Fidell was the ME or the mechanical engineer that helped invent or develop the scroll wheel and everything. Just interesting stories because that scroll wheel to me, is probably one of the coolest inventions or developments from a feature standpoint in the last 30-40 years from a consumer products point of view.
And the one thing, the other thing that's worth mentioning was that Biden to combat inflation had talked about getting tariffs, Chinese import tariffs into U.S., and was talking to a few people who, my first thought went to electric vehicles or cars. So there's a 27.5% tariff on cars imported from China into the U.S. And do we think that the import tariffs did what they were supposed to do? I don't think so, right. I think they just artificially raised prices on goods for Americans. And so there needs to be a better way, better mechanism, I think, to push back against the Chinese government on some of this stuff. But if that tariff is lifted, I speculated that the Chinese companies in the next 6 to 8 or 12 months would quickly pivot to, I mean NIO’s already said 2025, right, so they're coming. But man, could you imagine Lei, the companies that were probably super competitive in China? They would start thinking about exporting to the U.S. I think. So I don't know what do you think about that. Do you think there would be like the floodgates would open over the next 4-5 years?
Lei Xing:
I don't know if this is what will affect autos to the effect as to everyday goods. So I don't know. I think living here, right, we see that, COSTCO, prices are going up, gas prices going up. It's for real, right? That's part of the reason why the stock market, right? These inflationary pressures and rising rates, I don't know, cars, we'll probably talk about it a in a few years. The other thing is just Geely’s Renault Korea investment, I think that's the product of Wei-Ming Soh. It's definitely him and Geely working it out. So that’s that, and the other thing is…
Tu Le:
I was under embargo about that, so.
Lei Xing:
So you knew about it. And the other thing is just the FTcar Summit. The first day had the four European CEOs, right? I just want to mention that not the details, but the way the CEOs presented themselves, Diess in a BUZZ, Luca de Meo in a hotel room in Miami and Jim Rowan and Ola was, I guess, in their respective headquarters, their stance was very tight. Diess was relaxed and kind of showing off the “I’m in an ID.BUZZ” that kind of shows why Elon saying, right? That Volkswagen is kind of at least whether it's marketing wise or something else that he's trying to present. This is the Volkswagen of the new era that we're not restricted or bound by anything. We can, right? . I just want to mention that.
Tu Le:
I think Diess deserves a lot of credit. Volkswagens going to be there because they just the largest automaker in the world, but how they will look in 5 to 7 years is going to be completely different. I just think they're going to be much smaller too.
Lei Xing:
The other thing a bit surprising was that both Volvo and Mercedes, they have the 2030 target to be all electric. Whereas Renault, Luca de Meo, he’s kind of against sort of against Europe or was that UK that is trying to ban ICEs by 2035, I think?
Tu Le:
2030.
Lei Xing:
2030 or 2035, but he was saying kind of maybe push it back a little bit. And it's surprising a little bit because Renault with Nissan was one of the first legacy automakers to put an EV on the road. And they actually want to slow down a little bit.
Tu Le:
It's also, when we talk about the Europeans, they're also all in kind of different points, right? Because Renault, Stellantis, they're scrappy trying to really redefine who they are, because they're kind, Luca de Meo, anyways, is new because Carlos Ghosn is effectively stuck in Lebanon and with Ola and Mercedes, they can be they're the one that can be supremely focused, because they only have two brands that they need to build, work and transition to, where Volkswagen it is just a complicated machine that needs to be simplified, it needs to be redefined. It also needs to just move quicker, because when you have this big machine, it just takes longer to make decisions in a digital world. That half second, that second, that 2 seconds think about it from a screen. If there's latency on the screen, you're not going to like it, and you're going to go buy a competitor. So we have to think of a digital world when it comes to even big business that any slow movements are going to be exploited to the max. Think Elon Musk, think these technology companies that are come in and play because they're slow to market, whether it's Xiaomi, whether it's Apple, but you better believe once they have that product on market, they're going to be so fast on iterating, adding features, massaging features, and things like that. So awesome to see. And if we believe that what our guests for the MAX episode that I’ll drop later today said, there's going to be tons of consolidation towards the end of this decade, right?
Lei Xing:
Yeah, also that huge what 20 or 30 million if you combine and I think that's not even including China, right? We did that math with him, with our guest, right? And it's going to be awful lot of shortage.
Tu Le:
It was only the legacies, he said, it was only the legacies.
Lei Xing:
Yeah so awful lot of shortage for materials. So what's going to happen, right? That's why he said this decade, let's watch.
Tu Le:
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 at @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.