Episode #64 - Covid China production update, NIO Singapore & Qiantu US listing

Tu starts this episode out with a quick Covid update on his situation in Beijing. 

Tu & Lei have a discussion on the production challenges and sales slides for the automakers in April. Lei opens up a bit about what he's heard about Tesla's doubling down in Shanghai and all of the help that they've been offered to get ShanghaiGiga but up and running. With the additional capacity that's anticipated in Shanghai, Tu coins the term Tesla City for the Lingang area where ShanghaiGiga resides. 

The conversation shifts to NIO getting listed in Singapore and the chances that they will be booted off of the NYSE. Tu then asks Lei for a history lesson on Qiantu who had just announced that they'll be going public via a SPAC merger later in 2022. Tu and Lei think it's a pretty peculiar move for them due to the negative shift in sentiment in SPACs.

Tu closes out the pod with a bit of speculation on where any excess capacity coming out of ShanghaiGiga will go - he believes more vehicles will be shipped to Japan, South Korea and parts of SEA.

We apologize for technical issues we had recording this episode. 

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Transcript

CEM #64 May 5, 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 or make any comments. 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 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 sinoautoinsights.com, which I encourage you all to do. An indecisive on going to Norway Lei. Can you please introduce yourself?

Lei Xing:
Good morning and good evening from my side. I am your co-host Lei Xing, former chief editor of China Auto Review. This is episode #64, hope you had a nice May Labor Day holiday break, and that you're not too grounded with the evolving COVID situation in Beijing. You can tell us what's going on on the ground a little bit but let me go through the headlines quickly.

Some early April sales numbers are out: BYD still killing it. The Chinese smart EV startup Big Three, especially NIO and Li Auto, took a major hit, that “hit” being an asterisk, right? And putting salt on the wound, NIO got on that list of companies on the Holding Foreign Companies Accountable Act (HFCAA) by the SEC and yet, Ch-Auto or Qiantu Motor is going against head wind and trying to SPAC on the NASDAQ with this company called Mountain Crest, and more chatter on Tesla's second factory in Shanghai, and there's more, we'll talk about it. And Apple car in the news again with that hiring of the Ford veteran, so the other way around. You want to talk about Beijing for us a little bit and then we go into the headlines?

Tu Le:
Yeah so I’ve gotten, several, over the last two weeks, inquiries, WeChats, WhatsApps, iMessages. So thank you for everyone who's checking in on me and my family. It's great to see that people are caring and want them to know what's going on because they see what's going on CNN and other media outlets that are a bit concerned. But Beijing is not anywhere close to where Shanghai is right now. Shanghai effectively the entire city of 25 million people for the better part of the last month have been on complete lockdown. So streets are empty, no cars are really driving, some delivery emergency workers and things like that, but in Beijing, they're doing it much more surgically and I think, I hope Beijing has caught it a little bit earlier than Shanghai. So, for instance, last week, we had to do COVID test every other day, and then they moved it to the 3rd, 4th, and 5th, so three consecutive days of COVID testing. So I’ve done that. And the boys and my wife are not working, are going to school and working online. And so for you folks in the West, that's probably a little bit of déjà vu, because how I feel what happened with China is that they just kick the can down the road about 2 years. We're still able to order food, a waimai or takeout is still pretty quick. It slowed down a little bit, but not from our standpoint. And the grocery store is still pretty full. And we're able to go to them. So, again, thank you for everyone for checking in on us. I will update everyone. I think it's important that Lei and I update you all every week from a manufacturing production and even to the brand level, if we can, where we hear certain companies are doing better than others. You can see from sales results which companies are actually doing better than others. But from a weekly basis, I think it's important for us to give you all an update on a weekly basis. But right now I can go outside. The apps are very, very important, because if you don't get these tests, they won't let you in anywhere. So they are checking those.

Lei Xing:
The good thing is, I guess Shanghai seems to be coming out of the worst of it, right? It's the light at the end of the tunnel, whereas Beijing, I think in terms of cases, it's been hovering at around a few dozen every day, right? In the past weeks, couple of weeks, so it hasn't gone up. So you used the surgically word perfectly in certain areas that there's been tighter restrictions. But you can't go to restaurants because restaurants are closed. You can still waimai, you can still head outside, which is good.

Tu Le:
It's important for the kids’ mental wellbeing and especially when they're online all day long, 

Lei Xing:
But school’s still online for at least this week.

Tu Le:
So people are hopeful that it'll only be a couple of weeks. So Chinese and you check me on this Lei, international schools in China, they'll get out mid-June and local schools, local Chinese schools won't get out until late June, early july. So I believe that we're just going to go online for the rest of the school year. My friends are hopeful that schools will open back up before the end of the year, but we're only talking a month. I think American schools and this is where I want you to check me. They get out end of May, early June Lei?

Lei Xing:
Yeah, usually a little bit earlier.

Tu Le:
And so this is kind of the state of where we are. What's important to also understand and Lei you help me fill in the blanks in Beijing, Mercedes builds, Hyundai builds. And then let's include Tianjin as well. So what other brands are building in Beijing Lei? Are those the only two major foreign automakers that are really building cars, in Beijing?

Lei Xing:
Yeah, that's pretty much Mercedes, Hyundai, and Tianjin Toyota, right? 

Tu Le:
That's right. 

Lei Xing:
Some Chinese brands BAIC are in Beijing.

Tu Le:
For those wondering why I included Tianjin is because it's about 1/2 an hour train ride from Beijing. So if we want to and COVID, there's no borders for COVID, right? It's probably just easier to include Tianjin, because it's also an automotive hub.

Lei Xing:
Regionally, the Jing Jin Ji, which is the Beijing, Tianjin, and Hebei cluster is becoming a kind of a regional important location.

Tu Le:
It's an automotive center, it's an automotive center.

Lei Xing:
Right, and I heard, I don't remember the company or entity that was moving to what's that city where Baidu is testing outside of…

Tu Le:
Yizhuang?

Lei Xing:
No, not Yizhuang, but in Hebei Province that new town.

Tu Le:
I know what you are talking about I forget too.

Lei Xing:
My Chinese is getting worse

Tu Le:
You are so American now dude, watching too much sports.

Lei Xing:
Yeah. So which company do you want to go into first? You want to talk about, get Tesla out of the way?

Tu Le:
Let me piggyback off your Jing Jin Ji statement because the central government is planning to make that area and there's about 130 to 150 million people in that area, Hebei, Beijing, and Tianjin combining that into this mega city. That's their grand scheme.

Lei Xing:
Xiong’an, I just remembered it. 

Tu Le:
Yeah, that's right. So they are planning to turn that area into a mega city of over 100 million people. And it's going to be the mother of all urban planning and transportation planning, public transportation projects full stop. And so that's still going to happen, but obviously daily life takes over, but let's talk BYD and then Leap who are…

Lei Xing:
Sales a little bit? BYD is in a league of its own. There's nothing more to say that they're looking good so far on trajectory for at least 1.2 million, if not 1.5. If they don't hit a snag, I think they're well on their way. Look for even higher numbers in May and June. And I think Shenzhen handled it pretty well, right? When they had that first wave, what almost 2 months ago maybe. And now they're right, my friend, he quarantined in in Shenzhen for 3 weeks and went back to Beijing. So…

Tu Le:
But technically since Shenzhen they had the official lockdown, right? But there was also before that official lockdown, there were areas that had been locked down for weeks prior.

Lei Xing:
The only thing I’ll say about BYD in a negative sense is remember they are expanding both their vehicle production capacity as well as battery, all over China, right? You've seen those numbers, whatever GWh that are planned that are being opened. This is good and bad, right? Because it puts you kind of, speaking of the COVID outbreak, there's a little bit of risk involved in that, but they have to do it. 

Tu Le:
These are the types of decisions that the management have to make, right? If I doubled down. So the opposite of a Tesla where they double down in Shanghai, the reason Tesla double down is because, we'll get into them, but, BYD did the opposite, right? We want to diversify, we want to build in other parts of China. And the reason they would do that is because if there's a lock down in Shenzhen, a year, 2 years, 3 years from now, their entire operation would be crippled. But if they diversify, then they can still build, they can still manufacture. But there's the other risk, right? These are the pluses and minuses that all the management teams are thinking about and think about it from a standpoint of not only in China, but globally. If I build in eastern Europe, it's much cheaper, but guess what, there's a war in the Ukraine now. And so there's risk there that where there wasn't risk 2 years ago, and then southeast Asia in 2012, there was a huge tsunami in Thailand, right, in Japan. So there's all these considerations that need to be made. And when you make them in the immediate future, it could be, man, it's paying off dividends it's great globe. But then, the world happens, daily life happens, natural disasters happen, and then you run into these shortcomings that your decision 5 years ago turns out. So it's just really hard to make the right “decisions.” I think BYD is still crushing it, LeapMotor, they were only down what, 10%?

Lei Xing:
LeapMotor was actually, right, exactly. It wasn't that bad. The other news on LeapMotor that was been this week was the CTC cell to chassis that they announced similar to what the Tesla’s what, structural pack 4680, right? That's something that only a few have announced. So, but I think this will be temporary if let's see how NIO and Li Auto recovers in May. I don't think it will be return to a 100% normal. I said, I think last episode that it would take roughly the entire second quarter to kind of get back on track. So expect to see continued, if we only talk about rankings, I tweeted that the rankings are meaningless given the current situation, but you know, it wouldn't be surprising to see NIO and Li Auto still kind of behind somebody else, whereas they used to lead in the rankings.

Tu Le:
And we have to also take into consideration the level of focus of the Big Three Li Auto, Xpeng and NIO, because they have to, for NIO, in particular, they have two new vehicles that are launching later this year and a new factory, the degree of difficulty is off the charts when it comes to managing the pandemic. Li Auto, really quickly, Li Auto, they only have one car. They've been building it for over 2 years. They're really good at it. So getting the second one, is more than doubling the degree of difficulty for them. And for Xpeng, it's the G9. They're also going to be building it in their own factory. So the degree of difficulty is high?

Lei Xing:
Exactly, and that's exactly the same comment made from an internal source, from NIO, it's a person with the XPT the motor in house motor. And he said it's, the NEO park is right now, it's on track, but it's very difficult, so.

Tu Le:
I'm in complete agreement with you Lei that May is not going to be, even with zero COVID May is not going to get to 100%. Because they're learning on the go. They're trying to figure out and bulletproof the closed loop, the processes for COVID testing, and make sure the testing services get back the data in real time so that people can be quarantined if they need to be quarantined right away that they're not working for several hours, essentially, in contaminating other people in the facilities. So May could be the turning point if the numbers can keep going down, because stabilizing is one thing, but the numbers ultimately need to go down. And just so we have a better understanding of how far they went down the sales numbers from March to April. Li Auto was down 62%, Xpeng was down 42%, NIO was down 49%, GAC AION was down 50%. So pretty significant numbers, and it matches with the legacy autos that we saw last week, they're also down 40 and 50%. So I’m talking about the BMWs and the Mercedes and things like that. So across the board, double digit, high double digit sales reductions.

Lei Xing:
And NIO, if you look at their numbers, they just had their 200,000th vehicle produced. And at the end of April, their cumulative delivery numbers were nearly 198,000. So you can figure out how much were in inventory, not much. So they still have all these waters to fulfill. It's tough.

Tu Le:
It’s important to explain that if you're smart or you want to think ahead, you're forcing not forcing, you're pushing your suppliers to build ahead when they're able to, and then you're hoarding those parts, right? Because in a just in time environment, you would normally run out of parts within a week. And so if they're able to keep going, they're slowing down the line. That's one thing. But then if you hoard parts, it takes capacity out of the system, and then it increases the price of the rest of the parts. When we're talking about supply chain challenges causing pricing increases, it's not just raw material, it's also this effectively an artificial increase in price, because more people are building ahead and hoarding parts, which takes out. If this guy, if Lei seating supplier normally builds 10 seats for Tu Le Motor Company, and Lei Motor Company, then I tell him and, I take all 20, there's no capacity to build for Lei Motor Company. And so now he has to charge more in order to get Lei Motor Company his 10 seats, right? So I think understanding that, so it's like this self-fulfilling prophecy, like this vicious cycle that increased cost, right?

Lei Xing:
We haven't seen the Tesla numbers, but Tesla numbers in terms of percentage reduction from March is going to be huge I think, probably, they were at least 50,000 units, if you look at March, which is artificially high, because it's end of the quarter, but still a month on month, it probably would not look good, but at least we can go to Tesla a little bit. Tesla still getting that love and I think they're still in this honeymoon phase with Shanghai, and they're getting a lot of support based on the Reuters article based on right, the letter.

Tu Le:
The people we talk to right?

Lei Xing:
And so the latest chatter just now I’ve heard of the second plant, which is roughly what, another 450,000 capacity. You can call it a second plant, you can call it a phase II. It's to the south of the current plant. But the latest chatter is, get ready, the second plant is only an appetizer, the main course I'm hearing could be a third plant still in Shanghai, ok?

Tu Le:
Hey, Lei.

Lei Xing:
I don't know whether you heard about this, but this is the latest chatter I've heard and they are probably betting on Shanghai.

Tu Le:
I have heard this and I’m coining it right now: Jinggang area is going to be, Lingang District or Lingang area is going to be called I’m calling it Tesla City now, boom, right there. It's going to be called Tesla City. And I just coined it. But no, I’m hearing the same thing. For those that are Tesla enthusiasts, you should listen and read some of those articles out there. I wrote about it in the newsletter. The level of the amount of bending over backwards that the local authorities had to undertake in order to get thousands of Tesla workers back to the factory, clean the factory, monumental I’ve never ever heard of China bending over backwards for a company like that, or whether Shanghai, whether it's Beijing, whether it's Shenzhen or Guangzhou, whatever, I’ve never heard of this. And I was told that of the 666 suppliers that were on the original white list that had priority to get back online, 200 or about 200 of the suppliers on that list were directly Tesla suppliers. This is quite, so Tesla is doubling and tripling down. And I did go ahead

Lei Xing:
The eventual capacity based on that chatter is that in Shanghai alone, you'll get to 2 million potential capacity. 

Tu Le:
Tesla City.

Lei Xing:
That's mind boggling. But it's only 1/10 of their 2030 target.

Tu Le:
They're going to run out of land in Tesla City and they're going to have to build capacity outside of Shanghai in order to get to that 20 million number. Full stop.

Lei Xing:
You bet different cities are courting Tesla right now.

Tu Le:
I would think that Shenyang, I would think that Jilin Province is just chumping at the bit, right? Because there's already, it's already an automotive hub. And Beijing is probably also and there would be reasons for Tesla to build factory in Beijing, right? Keep those government relations up because as you know, whether you're headquartered in Shanghai, your multinational headquartered in Shanghai, your most of your team’s in Shanghai, you also have an office in Beijing, and that office is called government relations.

Lei Xing:
Isn’t Tesla also setting up an R&D entity?

Tu Le:
Yes.

Lei Xing:
That's still in progress in Beijing.

Tu Le:
This is where I’m confused, Lei. Are they building two, one in Shanghai and one in Beijing then? Because I remember that they had also said that they were building a technical center in Shanghai, but the deep ties between Tesla and Shanghai and large China over the next several years, they're going to get deeper. And aside to this Tesla 2 million units, CATL also had made an announcement that they're going to try to build 670 GWh of capacity by 2025. Just for the sake of context, in 2021, they had 170 GWh of capacity. They plan, CATL plans on raising RMB45 billion. If you're wondering, right now about I can buy seven RMB with $1, no, it's 6.5 or 6.6. So I can buy 6.5 RMB for $1. So RMB45 billion is about $6 or $7 billion U.S. they're planning to raise in order to support the increasing capacity. And if we piggyback that off of that CATL announcement off of what Mary said this week that they're building four plants in the United States: Ohio, Lansing, Tennessee, and what was the other one I forget, but they're building four factories that will build battery cells with LG right? So everybody's building more capacity. And I will drop a little bread crumb here, Lei, the person that we spoke to about 2.5 weeks ago. Said that there's not enough raw materials for all the capacity that's being forecast to be built, right? So there's going to be, so raw material prices over the long term should increase.

Lei Xing:
And so much about China leading the battery, so CATL 600 whatever GWh. Remember many episodes ago, we mentioned Svolt which is the kind of the subsidiary of Great Wall Motor, but quite independent. They were planning something, was it 400 GWh by a certain year?

Tu Le:
I think it was for 450 or something.

Lei Xing:
Yeah, remember, right, we talked about it. I mean you add those two together, it’s 1T, isn’t it? And Tesla alone, I think they mentioned was it in their battery day, something of TWh of.

Tu Le:
We're getting to a lot of zeros, that's all that matters. And remember that CATL, I believe they said that 20% of the revenue came from Tesla. So they're planning on growing together. 80% of global capacity, the increases in capacity is going to be LFP batteries. But if we look at the current market share, CATL is about 35% globally for Q1 of 2022. Next is going to be LG at about 12%. And then BYD also has 11 or 12%. This creates huge opportunities for BYD’s blade battery, right? Because if you're supplying, if CATL is supplying you batteries in China, you probably don't want all your eggs in one basket. And so, you want a dual source always. So you as the customer have a little more leverage, right? Because if you single source such an important commodities, CATL’s got you over a barrel, and they can dictate terms, pricing, supply to you. So you never as an OEM or a customer ever want to be in that position with the supplier. So if you look at CALB, if you look at Gotion from the Chinese standpoint, right? These guys have huge opportunities to take share, because number one, the pie is growing, the pie is growing.

Lei Xing:
Gotion, by the way, still that mystery 200 GWh with this American automaker that we’ve been speculating on, and by the way, Gotion is also supplying VinFast and some other.s So they also have this huge capacity planned or these wins, right? Planned. So that's another huge number. So shall we go to NIO quickly? Because two consecutive announcements, one, the response to the delisting, and just this morning, the Singapore secondary listing. What does that tell you about the possibility of delisting from New York? What do you say? And what's your take?

Tu Le:
I think it's a stare down right now. And I think in the past, the U.S. government would always concede. And so the Chinese government is just waiting for the U.S. government, whether it's SEC to fold. I don't think they're going to do it this time. I think they're going to hold firm. And I think because right now, they're both posturing, right? The SEC is, every week they add 20 companies, they add 30 companies, they add 80 companies. And so total, I think there's over 200. Again in the past, but we have to remember that the U.S., every four or every eight years, the president changes. And so attitudes changed. And so the long term attitude towards these exceptions that the Chinese companies have, because that's what they are, they are exceptions. They're not, they're getting special treatment. So let's be clear on that. And the U.S. is just requesting that they get the same type of access that they get for most other companies that are traded in the U.S., publicly traded companies in the U.S. and the Chinese government is saying, well, based on national security, we can't open our books up completely for x companies, right? And so I don't believe the U.S. is going to blink on this. I think that's also why NIO is effectively mitigating risk, right? Because they want liquidity. They want this access to capital, right?

Lei Xing:
So you would say that this response in the Singapore listing could be a sign that they are preparing in the, I believe, still unlikely event that they'll delist. Because to me, this is seemed to be formality, more than anything else, right? Because NIO does say that they will abide to whatever the existing rules in place, bu so far this year, their share price has basically, it's almost near 52 week lows.

Tu Le:
So the market is believing that they're going to get delisted, right? Based on everything else, in addition to this delisting potential, right?

Lei Xing:
Yeah. But I still think that this is too early, still bit too early. This is all the formalities that are going through. 

Tu Le:
Did you also see that Hikvision and Dahua might also be put on a more extreme sanctions list?

Lei Xing:
Yeah. So we're not trying to single out NIO here, but just the whole narrative right, the whole, whether the geopolitical, the U.S. China relations, all of this. And yet, Qiantu is still wanting to SPAC on NASDAQ.

Tu Le:
 Headscratcher. But let me , at 500,000 foot level. As domestic companies, you can be U.S. domestic or whatever, right? But the U.S. markets are obviously the largest and you can get the most liquidity out of the U.S. markets. But as Chinese companies or Asian companies, in general, they want access to the USD right? Because that's kind of the fiat currency for the world. And so it's important as they go global to have access to USD, it's harder to access the global markets if you're only using RMB right? There's specific reasons for these companies to do that. It's not prestige thing. It's not a market cap thing only, right? There's also practical financial transactions that are easier if you're able to utilize multiple currencies. And so there's a lot of different reasons to be traded on the U.S. market, a U.S. exchange. The Qiantu, do you know the history of this company, Lei? Let’s educate us, please.

Lei Xing:
Quickly, the history so they were, so there's two companies, right? There's CH-Auto, so in chinese, Changcheng Huaguan, transliterally means great wall China crown. But their English name is CH-Auto. So the C and H are the initials, right? Changcheng Huaguan. This is a company started by Lu Qun in 2003. So ironically the same year Tesla started. CH-Auto is kind of a design and engineering house, Chinese domestic design and engineering house started by Lu Qun who graduated from Tsinghua University’s automotive engineering. So this is a traditional car guy. And his CV says that he submitted thousands of patents, ok, and they’ve done work for companies, design work, engineering work for companies like Geely. And then he started this Qiantu Motor, Qiantu meaning future, right,Qiantu Motor in 2015. And they were actually one of the earliest to get the license, the EV production license, I think they were number six of the initial 15 that got the NDRC and MIIT production license back in 2016. 

Tu Le:
Qiantu is an OG.

Lei Xing:
They launched this K50 electric, China's electric sports car, super sports car in 2018, August, selling for well over RMB600,000, and to date, I guess less than 150 units have been sold. So it's been 4 years since the launch, almost 4 years.

Tu Le:
Let me explain the Qiantu K50 a little bit. So it's a two seat or four seat? I think it's two seat right? 

Lei Xing:
It's a two seat. 

Tu Le:
So coupe, two door coupes around the world is very niche. And it's the same way in China. The K50 is a two door sports car, not very big, and performance wise, not very amazing. So for $100,000, you get middle of the road two-door coupe sports car. That was, so, to launch a two-door into a market of SUVs, into a market that’s dominated with SUVs, was kind of a head scratcher. And then in Sanlitun and you probably visited when you lived here, they had. So Sanlitun is effectively, what's a good? It's like Times Square, but not Times Square.

Lei Xing:
Times Square. You can say it's Times Square.

Tu Le:
So it is where all of the retail locations. Adidas had the largest store in the world in Sanlitun. It's closed now for renovations. And so we're talking Apple store everything. They have an intercontinental hotel. There's boutique hotel called the Opposite House. So Qiantu opened a retail store/bookstore/coffee shop there. This was in 2019. I went in there because that's what I do. And I kicked the tires and I looked at it and I was like the dragonfly on the hood was crooked. The door for the charging unit, that was a little bit loose, and it was cheap plastic. It was like molded plastic. And you could tell that the plastic didn't or the paint on the plastic didn't hold as well on the sheet metal. So it's like almost like two different sheens, two different colors. And I’m like, man, and I hadn't heard any good news about this company. It was like a LeapMotor, right? You just heard about it. You saw a couple of them, but you only saw a couple of them because you lived in Beijing right, in any other smaller city in China, you're not going to see any of them. And so they've been dead for 18 months.

Lei Xing:
So first of all, the product was a disaster, I think both in terms of positioning and offering this model at that price. But then what you described is exactly one of the biggest reasons why it's failed. And later on, I think they faced not paying their employees, suppliers were asking for payment and even this guy, he was, he got onto one of those lists where you're restricted to consumption lists, what do you call that, right? And then I think he used his personal, I guess, connections to ask for has Tsinghua schoolmates for the supposedly Round T financing, right? They even launched a Round T  or RT edition of the K50, that his schoolmates can own and then culminating with this announcement with this SPAC based in New York, which is also, the CEO is a Chinese, Dr. Suying Liu.

Tu Le:
Who's on his fifth SPAC.

Lei Xing:
 Yeah, the company last year merged with Playboy, if you look at their website. I don't know where this is goin.

Tu Le:
 Let me also fill in some blanks here from a western standpoint. So they had, so CH-auto in China’s position as a consultancy, right? It's a design house, but blanket term it's a consultancy. And so Qiantu, so CH was selling licensing to the Qiantu brand and product to western or trying to, to western companies. And there was a company called HAAH that they were working with in California. HAAH, was like a dealership conglomerate, but they were trying to move upstream. I believe that fell through because HAAH couldn't get the financing.

Lei Xing:
And they were trying to bring in the EXEED rom cherry, but that didn’t work out.

Tu Le:
So HAAH was basically carpet bombing, trying to find a Chinese EV maker to license their technology so they could produce it in the U.S., that fell through. And I believe Mullen then moved in to license the Qianbtu, but rebadge it, right? It's not called the Qiantu, it's called something else. And two episodes ago, I believe you had mentioned to everyone that Mullen had a Hindenburg short report dropped on it last month. So then we joked around, I remember, 2 or 3 episodes ago, we joked around that every single U.S. EV entity has had some sort of investigation into its finances. It's a head scratcher.

Lei Xing:
It's a head scratcher also in a way that if you look at Qiantu, if you look at WM, these two CEOs and founders are traditional car guys, so you would think that they, right, that they could do it better. But it's the IT guys, it’s the William Lis, it’s the He Xiaopengs, it’s the Li Xiangs that are making it.

Tu Le:
I've been thinking about that Lei. I've been thinking about that. Maybe it's the auto guys you just can't get that type of capital, because tech capital is 2, 3, 4 or 5X what typical auto capital might be. I'm speculating, right? 

Lei Xing:
The K50, right, product wise, too niche, quality is too bad. Now, they're trying to launch the K20, which is even more unorthodox model. It’s hard to describe what it is.

Tu Le:
They Frankensteined a bunch of different designs together, right? Because they wanted to diversify the product portfolio. Try to make it more attractive for the SPAC probably.

Lei Xing:
And the end of the day, Lucid, for tech companies, NASDAQ is still the first priority if you want to go IPO, and obviously capital is what they need, money is what they need. And I feel like this is kind of the last hurrah of Qiantu. They are not dead, but…

Tu Le:
Let me also provide some unofficial color. I received their pitch deck over a year ago. So I mentioned that they're been raising trying to raise money for the last, 15 or 18 months. And it's not great. I'm sure it's changed since then, but I, and for those that are wondering Tsinghua is like China’s MIT, it's the best engineering school in China. A lot of smart guys have started companies, technology companies here in China graduated from Tsinghua, so think MIT and so I also say that I was approached by some SPAC owners over the last several months to help them find a Chinese technology company to SPAC into, like we're targeting X to Y valuation, right? This is the window we're looking at and yeah, I reached out to a couple companies. And even they, companies that most people on this podcast would recognize, they're all hesitant to do any type of western IPO and so for Qiantu to go through, or CH-Auto, more appropriately, to go through with this, it just seems kind of like a money grab to be quite frank, because those SPAC owners, I believe it's a year old, they have 2 years to find a company to merge, merge with or they have to give that money back. So maybe they're getting a little bit desperate as well, but China company, China tech company, those two things in a SPAC are like oil and water right now, oil and vinegar. That's why it's weird. 

Lei Xing:
My conclusion is one, I can't see this being successful and two, I can't see the products being successful, especially considering the current environment and in competition. So I don't think this is going anywhere, except for, whatever you want to call it, PR or. I've never been negative, I’ve always tried to be positive, but I got to say, I respect the guy, I respect Lu Qun, he's spoken at our conference before back in the days.

Tu Le:
But this is his baby, right? So maybe he's getting desperate, this is his baby, right? 

Lei Xing:
The reality is: not everyone's going to survive. No, we cannot have everybody be successful.

Tu Le:
They're targeting a $1 billion valuation. That’s a little bit more than what Faraday (Future) is going for right now on the public markets. So it’s 9:52 Lei, we will open the room up to anyone who's keen to have any comments if anything else about this CH-Auto, because I’ve heard a couple other things that aren’t worth mentioning until I hear from a couple more people that I trust. But other than that, if you have any questions or comments, raise your hand, and we'll bring you up. We can have a conversation.

Lei Xing:
The other, yesterday was Fisker, today was Lucid, the American EV startups, I think, shared some interesting numbers, right? Fisker is actually trying to increase, triple their plant production in 2024 to 150,000 units. And one interesting thing that was shared on the call, I think, was, in addition, they have a deal with CATL, right, on the LFP version of the Ocean. I think they are also talking to other suppliers as well, so that's interesting. And they talked about a little bit about Foxconn and Lordstown Motors. They talked about PEAR and Henrik Fisker said PEAR is what, PEAR to the auto industry is what the iPhone is to the cell phone industry. That's what he said. But he also said no deals or talks with Apple.

Tu Le:
I believe that Fisker, if they can work with Foxconn very closely because they're taking a risk, right? Because Foxconn, they don't have a lot of deep experience building cars. They have zero experience building cars in the U.S. and they were pretty savvy by buying out Lordstown Motors for pennies on the dollar for that Lordstown factory and then re-renting back factory floor space for Lordstown to build their own car, that's genius. How do you do that? I'm going to buy this at pennies on the dollar, and then I’m going to lease back floor space so you can build your car. That's awesome. But there's just no, at that price point, right? Because GM is still at least 2 years away from launching a Blazer, launching any type of mass market EV, so Fisker has blue ocean for the foreseeable future. Can they get launched on time in the right quality? I think there's huge opportunity for them.

Lei Xing:
So they reiterated November 17, 2022 is the SOP, it’s still on track. So they've got what more than, what's the number they get, 45,000 orders of the Ocean? And Lucid basically said 360 delivered in Q1 and their production target or production guidance is 12,000 to 14,000. That's roughly $2.9 billion by the end of this year revenues. So, but considering this is a model that's selling $150,000.

Tu Le:
I think that's a pretty good production number for them. If they can hit 14,000 units by the end of the year, I think that's pretty significant

Lei Xing:
Lower than what they had before, 20,000 was before.

Tu Le:
And you saw a sasquatch, right? You saw a RIVIAN, two of them in your neighborhood.

Lei Xing:
Yeah, that's crazy. So I can feel that, I’ve seen quite a few IONIQ 5s already, I see Teslas everyday, even this small town, right? So EVs are coming.

Tu Le:
Let me bring up to two quick points in my newsletter that I thought were pretty interesting. First of all, Singapore for those that are familiar with Singapore, it's very expensive to purchase a vehicle in Singapore. So the example that the article that I gave was that the Tesla Model 3 made in China Tesla Model 3, by the way, is about $55,000 to purchase in Singapore, not bad, whatever. But the COE, the certificate of entitlement, which is effectively the license plate, is $63,000 to purchase. So to buy a Tesla Model 3 made in China Model 3, is about $120,000 right now. Imagine and the engine size and the weight of the vehicle determines the how expensive the COE is. So it's not a flat fee. And so if you buy an S-Class, we're talking probably close to $300,000 to buy that vehicle. But they have ambitions to be 100% electric by 2040, okay? And they buy about 100,000 cars a year. So they are going to reduce the COE cost for EVs. So if people are wondering where Tesla or Shanghai Giga is going to export, two now that Berlin Giga is up and running. Look to Singapore, look to Australia, look to Japan, look to Korea, to take more units from Shanghai Giga. And another interesting thing that is worth us keeping track of at a distance Lei, is Tata Motors has said this week that they're going to be getting into chip manufacturing or fab, and they're going to get into battery cell manufacturing.

So how does, what how did CATL take that? Because the reality with India is that there's 1.5 billion people, there’s a messy democracy. There's still a bit of corruption. And the infrastructure is not anywhere close to where it needs to be to take for real. So the vehicle of choice in India predominantly is the two wheeled petrol moped, okay? They have companies that are launching left and right that are selling electric mopeds. OLA being the most noticeable, but Gogoro has partnered with Hero, the largest moped manufacturer and license their platform. So they're going to be, if you're wondering where else battery swapping will work, it'll probably work in India on two wheels. But there have been numerous battery fires on these mopeds. And everyone that lives in China knows when they've driven into a underground parking structure. There are signs all over the place that say you cannot park a moped in the parking structure, underground parking structure. This is the exact reason, because maybe a NIU, maybe a what is the shoot, what is the Xiaomi one? Xiaoniu and eight? Is it eight? Anyways, but these higher-end ones, they're going to be, their quality and reliability is world class, so they can ship all over the world. But there are a lot of Chinese brands that would never past quality, reliability standards in Europe or the U.S. Those are the ones that you worry about. And India is the same way. So they see this gold rush on clean energy vehicles, mopeds. There's a lot of these companies that aren't putting the level of scrutiny necessary on engineering and validation. And they are putting these basically prototypes on the road. We're seeing a lot of fires now. And there's a survey recently, I forget who did it about Indian consumers and whether or not they'd be open to buying an electric moped. 2% said within the next 6 months I’d be open to buy any electric moped, and they're all like, it's dangerous. I wouldn't put my family on that thing. If we take into consideration the error rate for that survey, it's effectively zero. There's no demand for electric mopeds in India, which is heartbreaking because Beijing and 2014, 2015, the pollution was absolutely horrible. You remember this. It's worse than India. It's worse than India now in certain cities. And so it's heartbreaking that they're not able to sort things out in the short term anyways, right? Long term it'll play out, but there are still a ton of dirt roads in many parts of India, where having a moped, let alone a Tesla Model 3 is probably impractical.

A lot of different things going on in India, but 1.5 billion people, we've seen it. If they're all pushing in the same direction, and the governments are super supportive. Man, things can happen quickly.

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.