Episode #68 - Better May sales, WM Motor's IPO, More Deets on the NIO ES7

Lei starts the pod talking May sales. Overall better numbers across the board but Lei was disappointed a bit in BYD’s sales. Lei then moves to explain the stimulus package that’s been announced for vehicle purchase and who it’s targeting. 
 
 This triggers a broader discussion about the economy and Shanghai & Beijing beginning to open up and the implications of this along with the subsidies. 
 
 Lei moves the conversation over to WM Motor’s planned IPO and some of the history of the company until now and also talks about Buick’s latest announcements from last week and the recent weakness in China of the GM brands: Chevy and Buick in particular. 
 
 Tu contrasts that with the popularity of the Wuling Hongguang Mini EV which should provide GM would a treasure trove of data that can be used across their brands and products to increase sales for the China market.

Tu and Lei close out the pod talking about NIO’s ES7 and the recent announcement by Ford about investment in Michigan.

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Transcript

CEM #68 Transcript
 Recorded June 3, 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. 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 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. Lei, can you please introduce yourself?

Lei Xing:
Yes, sir. Good evening from my side, good morning to you, Tu. This is episode #68, and I am your co-host Lei Xing, former chief editor of China Auto Review. This is a special, another special Friday evening, Saturday morning, dragon boat festival episode.

Tu Le:
Appreciate your flexibility, Lei

Lei Xing:
No, it's really yours that counts, but I just had my Zong Zi, So the rice, what’s the English for it? The sticky rice dumpling, right?

Tu Le:
It’s a dumpling, right? Sometimes they're sweet, sometimes they're savory, right?

Lei Xing:
I had it with the red bean paste. So some of the headlines, early May EV sales are out, and BYD as we expected, was way way way out in front of everyone else. And a big stimulus from the Ministry of Finance, cutting the vehicle purchase tax in half as part of a broad economic stimulus package announced on May 31. Shanghai finally opens, with an asterisk. And WM Motor surprisingly submits IPO papers for Hong Kong listing, and boy are the numbers dreadful.

Tu Le:
Way overdue. 

Lei Xing:
Yeah. But Buick’s making a big move, updating the new logo, unveiling two concepts, one for the U.S. I guess, and one for China. And Shenzhen announces a key AV policy, supporting Level 3 to Level 5 autonomous driving. Another related news, Cruise gets that big permit from CPUC, I think this is the first in America, I believe, anywhere.

Tu Le:
Yes.

Lei Xing:
Not even Waymo has this? Is that correct?

Tu Le:
I think so. I think it's pretty significant.

Lei Xing:
And another big praise from Jim Farley on Chinese EV companies, while Elon gets good luck to the moon comment from President Biden.

Alright. May sales, let's begin there. We've got nine brands that have announced numbers. We'll probably hear Tesla numbers next week right after the holiday, but it looks like things are getting back on track. Not to 100% yet, but numbers were getting better. 

Tu Le:
It's good. 

Lei Xing:
Yeah BYD, for BYD, it was below my expectations, to be honest, I thought they're going to do like 120,000, 130,000.

Tu Le:
But Dolphin sales fell off a cliff. So I don't know what happened there.

Lei Xing:
Then you have the Han selling like 22,000, 23,000 units.

Tu Le:
Almost 24,000.

Lei Xing:
More than everybody else by itself in that list of these startups.

Tu Le:
So the three products under BYD that’s driving sales is the Han, the Tang and the Song or no no, the Han, the Song and the Qin.

Lei Xing:
And they just launched the latest Tang EV, kind of a refreshed version couple of days ago. And one of the, I think surprising brand was AITO, right? They said they got to the 10K in 87 days. So I think that was more than I expected, to be honest, 5,000 units.

Tu Le:
Just some color on the AITO. So Huawei has aggressively moved into the electric vehicle, autonomous vehicle space through a company called SERES. And SERES is an EV company. And they collaborated on a brand called AITO. So it's a bit confusing. But together, those brands, the AITO and the SERES, sold over 10,000 units in May. So Huawei is making its way into the segment, into the sector.

Lei Xing:
Well Huawei continues to say that, reiterate that they're not in the business of, let's say, making cars, but they are, right?

Tu Le:
They're driving a lot of the decision making for sure.

Lei Xing:
It's almost like not wanting to say lockdown, but it's a lockdown. It's a bad analogy, maybe. But so like we said, quite a few times, June should be, again, even better than May, because you have two things going on. You have the continued recovery, things are opening up, thank goodness. And the stimulus, right, which we can get into a little bit. Basically, just a few numbers that you need to know is RMB300,000, anything below that, anything below 2.0L and below gets the half purchase tax savings.

Tu Le:
So this is an all hands on deck subsidy for ICEs and EVs, so.

Lei Xing:
Well EVs there are no purchase tax, right? So it doesn't really matter. But remember that many cities, Shanghai, Shenzhen being the latest I think, have come out with additional stimulus, basically giving you RMB10,000 if you trade in, let's say cash for clunkers. If you're trading a vehicle for an EV, you get RMB10,000. And what's transpired since that announcement on May 31 is many brands have basically done this: they've gotten rid of the purchase tax altogether, so basically the other 50% the brands saying we're going to pick it up for you. So no purchase tax if you buy our band and they're also even throwing in insurance. This, I think saves many ICE brands kind of not doing well. I think it gives them kind of bit of a life. It's also worth pointing out, I feel, like this time, the reason why, so this is the third time that China has done this. The first time was 2009 and 2010. The second time was 2015 and 2016. In both times, it was 1.6L and below. This time, they've gone up to 2.0L and below, right? If you look at those vehicles that are pretty much 80-90% of the segment of the market, passenger vehicle market. And I think a big reason why that is, this is, unlike the last two times, which were more geared toward first time buyers. I believe this time, this is enticing some of the current owners to trade up, okay, so in other words, all about consumption, not only for the people who haven't had, or owned a car before, but for the existing owners. Because remember it’s stabilizing the economy, right? What that the conference that happened. And that's the telltale sign.

Tu Le:
And let's remember that a lot of those small displacement engine vehicles are built by state owned enterprises. It's propping up a good portion of the domestic automakers. It's going to help inadvertently, it's going to help Volkswagen, GM to a lesser extent, GM's share is shrinking, Volkswagen share in the ICE is shrinking. So the domestic automakers are actually gaining on the foreign automakers, the VW brand is losing sales, Buick’s losing sales, Chevy’s sales are close to zero or effectively not doing that well, so.

Lei Xing: 
And that's why Jim Farley said in an article, and I quote: “there's a shakeout coming and I feel like that shakeout is going to favor many of the Chinese new players” and another quote “old automakers absolutely will get consolidated.” So that's, but at the end of the day, it's not to save any brand per se. It's to, again, boost the economy which have taken a toll the last couple of months. 

Tu Le:
This needs to happen though, right, Lei, because there are just a ton of brands both on the ICE side and the EV side. Whenever there's a weakness in the market, those lesser players, they close shop. And that's how, that's how a market driven economy works, right? The weaker players die off, get consolidated and or get acquired for their team, for their IP. So what we should see is a NIO or a Xpeng, Li Auto, a NETA, or BYD, Tesla gaining strength from getting out of these economic downturns, right?

Lei Xing:
I think the word consolidation has been thrown around for ages. It's been really slow if we talk about true consolidation and every time, there seems to be a lifeline thrown by the government.

Tu Le:
The local government, not the central government.

Lei Xing:
Yeah and that kind of survival of the fittest gets delayed a bit. That's why, in that sense, I’m not a particular big fan of this type of stimulus, but then at the end of the day, economy, that's all that matters, enticing consumers to spend and to trade in their older cars.

Tu Le:
Let's just talk a bit more broadly about what's going on. So last week Beijing opened up, June 1 officially Shanghai opened up, and it's lumpy. So saw a lot of pictures, talked to a lot of people. Some of them are free to roam around Shanghai, no problem. Some are still in limited restrictions, but one thing that's very clear is that here in China, everybody's getting tested at least every 48 to 72 hours. It's not required or mandated, but it's a tacit mandate because you can't get into any shops. You can't sometimes get it back into your apartment complex, unless you show that you've been tested within the last 2 days.

And so once that happens in June, we should expect manufacturing to increase significantly, because they've semi sort of and after 75 days have contained COVID in Shanghai and hoping that this entire summer Beijing and Shanghai, other parts of the country are able to still contain it, but it's still going to hang over the economy, because no real policies have changed, at least on combating COVID. So that's where the challenges really will occur, right? Because what we will likely see is one or two factories or one or two brands have struggles, maintaining production while other brands are going at 100%, 110%, 120% capacity, because they don't have these issues or challenges, right, and so we had talked about it earlier. It's like a whack-a-mole thing, right?

Lei Xing:
But it's good to see a lot of people posting pictures of eating out, maybe not in restaurants, but also at least outside of restaurants in open air, at least you can get out, buy stuff, eat, drink.

Tu Le:
We said these pictures are very jarring, right? Because you see these empty streets one day and then all of a sudden you see 2 o'clock in the morning on these streets, people are just hanging out drinking and stuff like that.

Lei Xing:
I say open with an asterisk, because whether it's in Shanghai or Beijing, depending on where you live, the district where you are, the situations are slightly different, right? Even in Beijing now, right, some districts might be of a more restrictive than others.

Tu Le:
This is how restricted it was. Last week Lei, I just wanted to add, DiDi could not enter other districts, so I live in Chaoyang District and if I wanted to go to from Chaoyang to Chaoyang, I could call a cab. But if I wanted to go from Chaoyang to Huairou, then I would not be able to do that, that was as of last week, but it's opened back up.

Lei Xing:
But China needs these factories humming, especially in the auto industry, because again.

Tu Le:
I'd argue that the world needs it humming because of inflation, right? 

Lei Xing:
Exactly. And we said it's going to take the entire second quarter, and that's what it looks like. June should be, barring any surprises, June should be good. June is actually a low, seasonally it’s low, because March, April are usually the highs at least in the first half. But it's got flipped on its head because of the Shanghai lockdown.

Tu Le:
So sales, April, May sales were pushed out to June. And because of these incentives, we should see a little bump in June.

Lei Xing:
And things are looking up, so some of the numbers I’ve seen, the consensus seems to be that at least from CPCA’s point of view, that this stimulus, which the purchase tax cuts in half, which is valid I believe until the end of the year, is going to add about 2 million vehicles. Before it was about 19 million passenger vehicles. So now the latest prediction is 21 million. I believe 20 million. So the two numbers that are very psychological are 20 million PVs, right? And 5 million NEVs, which I believe is still going to happen, there shouldn't be a problem based on the current trends and trajectory. And second quarter may even be above 1 million units based on at least the numbers that have been released so far. Tesla will definitely get back on track. I think they're already nearing what, full capacity now? Shanghai Giga?

Tu Le:
Yeah, that's what I heard too.

Lei Xing:
yeah, so that's good.

Tu Le:
These guys are going to squeeze as much capacity and utilization as they can, as long as they have the able bodies and the parts to build these cars, because they're just going to put their foot on the accelerator, because they're afraid that potentially any outbreak could cut off their production again. So that I think these measures that have been put in place are very helpful, testing, but there's always going to be leaks or people that get tested and have the wrong results.

Lei Xing:
The other thing I think I just want to mention is I’ve seen a lot of Chinese press really drilling NIO on them being now at the bottom of, kind of the rankings. I really don't see it that significant. They did 7,000 units, right, in May.

Tu Le:
I do. I do. I look at it completely differently. Surprised.

Lei Xing:
No, just the way that clickbait titles that I’m not sure it's fair to NIO, right? Because there's so many ways to compare. Sales rankings is only one way that everybody tends to draw conclusions from. But then you look at, we can go into WM Motor. You look at their sales, right? But you look at their profitability numbers, it's a nightmare. Did you see that? I think their 2021 margin was -41%. They had a huge increase in COGS, I think, for 2021, for some reason, and they lost, I think, over the last 3 years that they've shared the numbers, I think it’s RMB17.4 billion that they lost.

Tu Le:
We should specify that WM and NIO they go after different completely different markets.

Lei Xing:
Sure that's why I say don't compare the sales rankings. Don't compare only the sales rankings.

Tu Le:
But you and I over the last 2.5 years were initially pretty long WM. We thought they had a good team in place. We thought their product was decent, but they have these missteps that were perplexing and head scratching, right?

Lei Xing:
They had these things happen to them, if you want to say headscratcher or missteps, right? In the IPO filings, they revealed that they're being, they are in a lawsuit with Geely. And we talked about, I think, for like RMB2.1 billion. They recently recalled some vehicles due to quality, and tons of people have left, right?

Tu Le:
Including my old contacts.

Lei Xing:
And it seems to me that the reason companies they have announced IPO intention wherever the IPOs are, CH-Auto, WM Motor, these are the two companies that are, I believe, on the fringe. And they need money.

Tu Le:
In deep need of money and capital injection.

Lei Xing:
So I don't know. This is kind of like the last straw or something.

Tu Le:
And I’m going to make a broad, general statement. They could go to the private markets, venture capital, private equity to get money, the challenge is for companies like a WM and CH-Auto is that they probably aren't getting the valuation from those private investors that they want. And so rather than sell the entire company to private investors, they would rather risk going IPO so that's kind of the decision matrix that they're looking at. So that also should tell you that their valuations among, you know, investors is not very high. So they're trying to market that their valuation is X, Y and Z to outside investors for IPOs. But you can't be that confident about it.

Lei Xing:
If you look at over the last, what almost a year and a half that we've been doing this China EVs & More, right? What's been happening the news events, right? There's not that much on WM Motor, right, compared to NIO, compared to Li Auto, compared to Xpeng. And the numbers, though on paper they look impressive, right? Their sales actually doubled every year the last 3 years, but at a very low base. That looked good on paper, but if you look at the finances, right? It's something else.

Tu Le:
A small portion of their sales were fleet too, right?

Lei Xing:
Yeah and my perception of WM Motor is that they seem to spend on sales and marketing that to me, a bit weird, some of the sales of marketing they do.

Tu Le:
They got to move the metal, right?

Lei Xing:
And also one of the big turnoffs for me was when they had the W6, they initially marketed it as the first driverless car that you can buy, right? It's autonowashing, what’s the word, autonowashing, right? I didn't like that at all. So and then these quality problems, they have quite a few vehicles, but.

Tu Le:
And they came out of the gate 3, 4 years ago building their own factory. So their balance sheet looks completely different than a NIO or an Xpeng. So another reason not to compare vehicle sales and margins and things like that because their capital structure’s completely different than some of their competitors.

Lei Xing:
They only had just RMB4 billion in cash at the end of 2021. Whereas let's say the NIOs and the Xpengs, they have 10X as much cash on hand.

Tu Le:
That's because they IPOed.

Lei Xing:
Yeah, that's true and that's why you need an IPO because it's like, what, chicken and egg, right?

Tu Le:
My, these are what I had heard. They wanted to go US IPO initially. This was probably 2.5 years ago, that came off the table. And then they wanted to go IPO in Shanghai, but because of the lawsuits, it was going to make it untenable. So they backed away from that, but now because they need money so bad despite the lawsuit, they are still IPOing.

Lei Xing:
And they were also approved to list on the domestic, what's that board, right? And then what happened? So and now, they're going through Hong Kong.

Tu Le:
So the one thing that's very clear, and this will give you an indication of how competitive this is. There were talks about Xpeng trying to move up market, because the mass market sub-RMB250,000-300,000 segment is so competitive, right? We're talking BYD, NETA, Xpeng was was playing there, but it is just brutal at that price point. And then Jidu is coming with a RMB200,000 car.

Lei Xing:
I was going to mention that. And NIO’s launching the mass brand, so you can't hide, right? You are going to face these competition head on. I mean WM Motor is, I think they have their hands full.

Tu Le:
And this is also why VW is just getting whacked. The ID. series vehicles are just getting, like there was a tweet about their MSRP, their dealer price, and then they added more money onto the hood. So Brandstatter is in for, it has to be a complete overhaul of the China market, I would think, strategy. So.

Lei Xing:
yeah, it's what you call it, almost like a what, hot potato, you want to go there?

Tu Le:
So, what they need to do is they need to reconcile what their original timeline for the ID. series is and then pull in new features and try to get them into 2023, or early 2024.

Lei Xing:
Well, they are doing that. The first priority for CARIAD China was to get that OTA done on all the ID. vehicles on the market. I think that's happening probably in the second half, I mean we're almost at the second half of 2022.

Tu Le:
But that's still amazing to me Lei, because that's like blocking and tackling that's not really strategic. It's like a qualifier. If you can’t OTA in China, there are SOE brands that can OTA, so it's just super frustrating for them.

Lei Xing:
I know that CARIAD is poaching people. So another brand that steeped in history is Buick. It was weird because they kind of had that simultaneous announcement. So Buick had the kind of the Brand Day in China and then simultaneously, it announced that 2030 being all electric, but that's in North America with the wild, and then they had the Wildcat EV Concept. So these are kind, you feel like it's one brand, but there's two separate things going on. And Buick is such a steeped in history in China, because it defined the kind of the midsize executive sedan market with the Buick Century. It defined the family entry car with the Sail, RMB100,000 family sedan with the Sail, and it defined the MPV market with the GL8. And the rest is history, right? Buick China.

Tu Le:
They did nothing with it.

Lei Xing:
Well they launched this GL8 Century.

Tu Le:
I believe GM sales in China was close to 4 million units several years ago, and now it's closer to, it's been down 2.5.

Lei Xing:
Yeah I think Buick, it needs to get that kind of the EV mojo going a bit, because it is behind, right?

Tu Le:
The common theme that we want to emphasize, I think, without speaking for Lei, is that the legacies are getting pushed out, elbowed out by the domestic players who have strengthened themselves, number one. And then number two who have used this push to electric vehicles to really catch up or create a new starting line. Now, they're almost at a level playing field, at least on the EV side.

Lei Xing:
One of Buick’s problems was when they launched the three cylinder models, it backfired. Now they went back and re-launched them, the models with four-cylinder engines, because the Chinese consumer perception on the three cylinder engines is very bad. So that was a misstep, which cost Buick sales as well as Chevrolet’s right, to drop. 

Tu Le:
Here's the crazy thing about the foreign automakers. And we're also talking the other Germans, we're talking the Koreans and the Japanese too: is it worth it to invest a lot of capital into the China market moving forward? Because it is just so competitive here. And their sweet spot. The ICE market is shrinking pretty substantially over the next several years. And we already heard Volkswagen and, we mentioned this last week, I think some of these foreign automakers are going to have to really think about staying in this market, right?

Lei Xing:
And if we compare, let's say, Buick and BYD, then right, BYD is more high-tech it's more electric, right? And the pricing competitiveness.

Tu Le:
The crazy thing about GM is that the joint venture, the Wuling Honggaung, the $5,000 car drives a decent bit of their volume, right? If we're looking at their sales volume.

Lei Xing:
Yeah, and the way with which Wuling moves is light speed compared to these Buicks and Chevrolets, right? How many different variations of the Hongguang MiniEV have they come out? They've come out with the Air EV for what, Southeast Asia?

Tu Le:
For Jakarta.

Lei Xing:
These type of things that they're moving very fast. Whereas the Buicks and the Chevrolets are a bit behind. 

Tu Le:
And this is the biggest thing for me that they're probably analysis paralysis. They just got to move, like make bold moves. So Wuling, for two years, they've sold 30,000 of these Hongguang MINIEV like clockwork. You could set your watch to it. They're entering Jakarta. They just said that on June 1 with this Air EV so it’s probably a bit higher end than the Hongguang MINIEV  but by the second half of 2022, they said they're going to enter other international markets.

So they're targeting over 1 million sales by next year. I think they're 800,000 units or something like that for 2022 or 2023 or something like that. So these moves need to happen fast. And we're talking a car that is basically a Frankenstein parts bin car with a range of 100 to 120 km, 150 km. So don't think of margins, don't think of how effective something is. Think of how sticky this vehicle has gotten in a short period of time. That's what they need to kind of shift over to their other legacy brands and products and see what happens because they have all this data for the GL8, for the Sail, for the Century. So why are you not able to understand what the market wants in China when you understood it so well for the last 20 years? So that's not a knock on one brand or one country's brands. It's just legacies in general. Maybe it's just that Chinese automakers have just really caught up full stop, right?

So let's move it to, a couple of announcements, not announcements, but news that I wanted to kind of bring up. Panasonic is going to be building a factory in neither Kansas or Oklahoma for support of the Austin Gigafactory, makes a ton of sense. In my prior life, at General Motors, I supported logistics for the Fairfax factory and a GM factory in Kansas City and the Oklahoma City factory. The reason they're looking at, one of the reasons Panasonic is looking at Oklahoma City and Kansas is because Oklahoma and Kansas is because there's a history of automotive manufacturing in those states. Tesla is also opening up superchargers  in the UK, I think that's pretty cool. They're already opening up their supercharger network to non-Tesla cars in the Netherlands, in a couple other European countries. So they're doing it now in the UK and let me ask you Lei, what do you think of the ES7, there's a lot more information out on it. I just don't know how that's very distinctive. It's like this tweener between the ES6 and ES7, but I just see potential sales cannibalizing ES8 and ES6.

Lei Xing:
So now the spotlight is on the ET7 and ET5, where ES7 I feel like it's exactly, it's in a bit of an interesting spot.

Tu Le:
Like no man's land a little bit.

Lei Xing:
Yeah, it's NT2.0 so it looked like a nose job on the ES8, right? The way I would describe it, but I don't know, I like the ES6 and EC6, as in terms of styling and size, ES8 will be too big, I don’t know.

Tu Le:
I do like the ES6, EC6 that little coupe SUV thing, crossover thing is a little weird. That shape is a little weird to me. I prefer the ES6, but see and this is where I wanted to kind of counter your point about we shouldn't look at sales, especially for NIO month to month. But 7,000 is actually pretty low. I think they were averaging, I think, 10,000, 11,000 units. And there's two potential issues, right? One of them. And it could be both at the same time. They're not managing their supply chain very well. And or they're just not selling that many units anymore, right? Maybe they've plateaued a little bit. So either way to me, that's a big concerning, right?

Lei Xing:
I've said this, I'm going to say it again: the magic 10K, if you can't do it consistently, I think that's a very fair benchmark for any of these startups, right? We talked about why hamburgers are quarter founders. If you can consistently do 10K, you feel better, right? Psychologically, it's a five digit rather than a four digit.

Tu Le:
And that's why, because they can't even get to ten. So that's why, if it was 10, 11, then so be it right? Then I'm not so conserned, but 7,000 is pretty low, right?

Lei Xing:
But again, at the price point, they're selling over RMB400,000, right?

Tu Le:
And the other thing that is interesting that kind of goes against NIO is that they still have pretty significant runway because BYD is going to come up with the premium brand. Xpeng has announced that they're going to move up market. So they're going to compete more directly with NIO, but there's still not a domestic automaker outside of HiPhi, which didn't announce sales, which probably tells you that they're not selling very well. There's no other domestic automaker or EV maker that's in the premium segment. So NIO should be just crushing it. I don't know.

Lei Xing:
Well Great Wall has that Salon kind of the high end and then BYD’s obviously coming out with the high-end.

Tu Le:
So I'd written in the newsletter that I was a bit concerned because for those that don't know, I grew up in Michigan, Pontiac boy. So just outside of Detroit, so I pay very close attention to the U.S. auto industry, specifically what's going on in Michigan in those lean states, like in the Midwest, Ohio, Indiana, Wisconsi. And I was worried about Michigan missing out on some of those investments that were made, announcements anyways. And so earlier this week, Ford announced that they'll be investing, I think, $2 billion in the state of Michigan adding 3,000 jobs. So what we're starting to see is foundational moves by automakers, battery cell manufacturers. You and I heard some things from our good friend about some aggressive moves by some EV makers here in China to the U.S. market. So I think in the next, let's say 36 months Lei, it could get really exciting, really fun to watch the U.S. market kind of evolve.

Lei Xing:
Jim Farley, right? In the article, he said China EV makers, if you look at it $25,000 build material for an EV in China is probably the best in the world. I think they're incredibly undervalued. They haven't shown any interest in exporting other than Norway, that pretty soon that'll be wrong.

Tu Le:
His international team’s feeding him bad intel.

Lei Xing:
So quickly, the only other thing is, so the Shenzhen had this Administrative Regulations on Intelligent Connected Vehicles, ICVs, that's a China terminology. The only thing I'll mention is very interesting to me was this is for conditionally automated driving, highly automated driving and fully automated driving, which essentially are L3, L4 and L5, respectively. And the responsibility for the L3 says that the driver will be responsible for any accidents, which is very interesting in the conditionally automated driving condition. I've not seen this anywhere else. And if you remember, right Mercedes, when they launched L3, right, they said they will be responsible, right, during that situation.

Tu Le:
It's in Europe, in the United States. That's still pretty clear the responsibility. Once you get to L3, shifts to the automaker or the product owner.

Lei Xing:
I haven't read this thoroughly, but it looks to be one of the first policies, local policies, supporting kind of L3 autonomous driving. So we'll see how, it is a draft for common edition right now. So we'll see what happens, but it's Shenzhen is ahead leading the way leading away. So the only thing I can add is on the purchase tax. I'll give you a comparison. So the RMB60 billion that Li Keqiang announced in that a previous meeting, gradual reduction of RMB60 billion in purchase tax, to put there into a perspective, in 2021, China's purchased tax revenues was RMB352 billion. So RMB60 billion of that you can do the math, right, roughly how much.

Tu Le:
This indicates to you how severe they feel the downturn is. Because if we are exchanging USD to RMB that's like $9 billion. And for if we're keeping scores since 2009, the Chinese government has probably invested $80 billion to build out this EV sector, the battery cell manufacturing sector, not an insignificant number, $9 billion to really goose the market. That's a big commitment.

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