Tu and Lei start the pod with their thoughts on Li Auto’s big unveil for this year, the L9. The conversation evolves into a broader discussion about Li Auto’s future ambitions and how they compare to their domestic competitors who are more focused on the international markets.
The discussion moves over to some recent moves by Volkswagen and Mercedes that points to their continued emphasis on the China market. They discuss how one makes sense but the other may do the opposite of what is intended.
Tu and Lei then talk about the challenges that Volkswagen faces in the China market and what they should be doing to prep their local team for long-term battle and fight to maintain share even as the players around them seem to be moving faster with better products.
The next topic Tu and Lei discuss is the Qilin battery announcement from CATL that’s going to be in customer’s vehicles next year.
Tu spends the last part of the pod listing out what he thought were the most interesting things that he thought happened during the week including news about Tesla in India & China, Foxconn/Lordstown Motors, ELMS, NIO in the news for the wrong reasons and DeepRoute’s move to short haul, autonomous trucking.
Tu and Lei start the pod with their thoughts on Li Auto’s big unveil for this year, the L9. The conversation evolves into a broader discussion about Li Auto’s future ambitions and how they compare to their domestic competitors who are more focused on the international markets.
The discussion moves over to some recent moves by Volkswagen and Mercedes that points to their continued emphasis on the China market. They discuss how one makes sense but the other may do the opposite of what is intended.
Tu and Lei then talk about the challenges that Volkswagen faces in the China market and what they should be doing to prep their local team for long-term battle and fight to maintain share even as the players around them seem to be moving faster with better products.
The next topic Tu and Lei discuss is the Qilin battery announcement from CATL that’s going to be in customer’s vehicles next year.
Tu spends the last part of the pod listing out what he thought were the most interesting things that he thought happened during the week including news about Tesla in India & China, Foxconn/Lordstown Motors, ELMS, NIO in the news for the wrong reasons and DeepRoute’s move to short haul, autonomous trucking.
CEM #71
Recorded June 23, 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:
Good morning and good evening from my side. I'm your co-host Lei Xing, former chief editor of China Auto Review. This is episode #71. This week we are talking the big, literally and figuratively, Li Auto L9 reveal.
Tu Le:
Big boy.
Lei Xing:
Volkswagen and Mercedes making big interesting executive moves with China in mind. CATL's next biggest product for the Qilin third gen CTP, and big policy announcement again by Li Keqiang at the state council executive meeting, and VW’s biggest fully-electric sedan, the ID. AERO aka the ID.7, will be making its big debut next Monday, and a big investment from BMW China on that RMB15 billion Lydia Plant in Shenyang, that's big money. Those are the big topics. Shall we jump into L9? First impressions, first impressions. What's the first word that comes to mind? Big?
Tu Le:
So let me describe it in the context of watching the JIDU ROBO-01, and then the ES7 the weeks before, weeks prior. It's consistent with the ES7 where there's a family positioning, great family car, great for traveling, driving around. And the differentiation between the ES7 and the L9 was the entertainment options, I think, in the L9 versus the NIO right? I think they wanted to really lean into, this is all the other things you can do. You can play video games, you can karaoke and it's so comfortable. There's captain’s chairs in the second row with reclining capabilities. There's a refrigerator drawer that's accessible to the second-row passengers. And so other than that, it was big. And it's still an EREV. And so that's where, to me, they're still crawling when everybody is walking. So what about you, what are your thoughts?
Lei Xing:
The three words that come into mind are psych, family, and simplicity. So psych meaning we knew about this model weeks in advance. They started teasing the model, different features. We have talked about the HUD, probably one of the biggest in terms of size spanning almost the entire steering wheel, right? That was teased many weeks ago. We knew that in May, they had this weekly updated teases that they were running on their social media channels. That's part of it. And the other part of it is just Li Xiang being Li Xiang and psych, meaning also the comments that he makes on this car, on the positioning, on competition. So it feels like he is actually closest to being Elon Musk of China. If we're talking about straight up comments. So he mentioned about the RMB5 million glass ceiling or right, the GLS Maybach…
Tu Le:
Why don’t you you explain that to the audience.
Lei Xing:
Well he mentioned that at the end of the press conference that have your friends who own a GLS Maybach, Land Rover Range Rover, BMW X7, come and test drive the L9, and then tell me that it's not the best model ever under the RMB5 million price point. So the joke on the street is when you get this car, you feel like you've got gotten RMB4.5 million in return. So that's the psych part of it, I think, right? And this had come only a week after William Li had said the ES7 would be the glass ceiling for the RMB400,000 to RMB500,000 range.
Tu Le:
Poke, poke, poke.
Lei Xing:
Yeah so they're kind of poking at each other. And I just checked the pricing for the Cadillac LYRIQ, it's exactly in that price range. So as a consumer or as if I’m a Cadillac employee trying to market this model, I'm feeling very concerned.
Tu Le:
I don't know about that Lei because I'll be honest because my counterpoint to that would be that I don't think the LYRIQ is leaning into being this ultimate family vehicle. I think it's a right sized SUV for the up and coming Chinese executive because first to your point, Li Xiang called out by name the brands that he's trying to target customers for. I don't believe and I should have looked this up, but I don't believe the LYRIQ is 5,200 mm, meaning that it's 5 meters long. So I did a big comparison really quickly for those Americans that are listening. A Chevy Tahoe is about 5,300 mm, so it's probably 6 or 7 inches longer than an L9, but it's about as big as an S-Class, as long as an S-Class. So the footprint is huge. It's a big car. I don't think the LYRIQ is that big. But, yeah, I think it's segment busting because these are large SUVs. The pricing is less than half of those that Li Xiang is targeting in his unveil. So.
Lei Xing:
Also, psych in the sense that they had announced, Li Xiang him personally, he said earlier this month we are expecting 10,000 deliveries of the L9, alone, in September. Let's go back to Cadillac wouldn't make that statement, not even close. That it’s going to say we're going to be doing this in a certain month. That's the difference. That's the psych.
Tu Le:
I actually I think that also is a reference to NIO not getting to 10,000 a month, the last few months.
Lei Xing:
And exactly, if Li Xiang can do it with the car price in the mid-RMB400,000, why can't NIO? And that goes to the simplicity word, which means Li Xiang has been competing with the one ONE all this time, just one model. And they're doing it again with L9. There's no, you only have to pay RMB10,000 more for certain colors. Other than that it's, just one car with all those features included. You don't have to select anything, right? Also the reason, it's important to point out, the reason why they are confident in the 10K deliveries also has to do with production. And they have a joint venture with CATL that's right next to their plant in Changzhou. They have their own the Xincheng range extender, engine production, right? So it's the simplicity. They have better control. Again, just this family positioning, right? Everything, a small family, a mobile family, a comfortable family, a safe family. That was the four key points that they made in the press conference.
Tu Le:
I'm going to piggyback off of your simplicity comment and also say that they're not, they don't have global ambitions yet. They do. So their strategy is much more simple than a NIO and everyone else that they're trying to chase. They can focus on the Chinese market and build out a foundation that I think is going to be really, really tough for the foreign automakers to push them out of because of pricing. And design wise it's a decent looking car but it borrows a lot, number one. Number two, I don't really see that much of difference from the Li ONE to the L9, from a design standpoint. Interior I do, obviously, but exterior, it's like just a bigger version of the Li ONE, so.
Lei Xing:
So it's, in terms of cannibalization, I think they maybe have less to confront because NIO has now six models, where the two models now they're what, RMB110,000-120,000 difference.
Tu Le:
Yes, which is about $16,000, which is not insignificant.
Lei Xing:
Right, and they're still trying to attract the customers of those models that we mentioned earlier from the foreign legacy premium brands. It seems that they're pretty confident that they can do. So two models, let's say, 10,000 each, they get to 20K and they're not cheap.
Tu Le:
And that's the reason I said that they are segment busting with the L9, because they're going after the ultra premium large SUV market, not ultra-premium, let's just say, premium luxury large SUV market at half the price. And so if the X7 sees any softness, the GLS sees any softness, and for sure they're going to take customers from both of those brands and products for sure, if they take a lot, then BMW and Mercedes are going to have to de-content and then repackage those two cars in a more affordable product in a more affordable version.
Lei Xing:
The specific positioning of the L9 is for families that have two kids and three generations. So and going back to Li Xiang himself, first, he’s probably the most knowledgeable about customers among all the CEOs of the smart EV startups out there. because he was from Autohome. And you know the current guy in charge of marketing, the guy in charge of PR, they're all former Autohome chief editors. Did you know that?
Tu Le:
I did not.
Lei Xing:
So that's interesting. And they have a KOL who's done a lot of videos for them, also used to be with Autohome.
Tu Le:
But I think that you're making a good point. I think this is worth noting that their management team is much more China-focused than it is international, because if we look at a NIO, they've already started hiring or they already have executives in Europe. They've already announced hiring in the U.S. and stuff like that. And so I think this kind of reflects on their priority of China being the number one market.
Lei Xing:
And I also read somewhere, this number could be wrong, but I read somewhere that they've already produced 1,000 of these L9s to do what, to, a week in advance of the press conference, they had already media test drives and to reviews on the vehicles and their PR team doesn't, they don't seem to have normally a PR company that kind of hassle the media and say you want to post this or post that, they just let you do it and they don't, they just let you post whatever content straight. So from that standpoint, they're kind of very transparent. And I think the marketing leading up to the launch, the cadence and all these reviews that are coming out was talked a lot as well itself. And just yesterday, right? Li Xiang tweeted CATL’s announcement on Weibo, basically confirming they are a customer. So things like that.
Tu Le:
And just a reminder to the audience, this schedule that you're talking about, they probably had it in place because of the auto show and they had to massage it a little bit. These breadcrumbs that we saw over the last several weeks, they were probably already sorted out before the auto show was postponed indefinitely. And so they still needed to slot them into certain dates. And maybe that's also why they have these cars available because the auto show was supposed to be in April. And so when you say 1,000, that's a lot, but normally the first vehicles off of the line that are production ready, they're called marketing cars and they'll ship them around the country. And this people and media will get a chance to look at them, drive them. And that's kind of the traditional way it works in the West, right?
Lei Xing:
And it looks like barring any COVID disruptions that they will be able to ramp this car up faster than the ONE. So that's probably also part of the confidence in them saying that they can do 10Kin September.
Tu Le:
There's going to be pressure on them to raise that number significantly because they have a factory in Beijing that's going to be coming online in 2024 I believe, so it's, and two products is going to be really tough for them to get into two factories worth of volume. So there needs to be some tricks up their sleeve, either an international strategy or a third and maybe a 4th product. We know that they plan on introducing a new product every year, but are they just going to be derivatives of this L9, smaller versions? If that's the case, they could get pretty stale, pretty quickly to the Chinese consumer.
Lei Xing:
Starting next year it will be the two per year from the shark and the whale platforms. If you remember.
Tu Le:
They'll have a BEV next year.
Lei Xing:
BEV which will be powered by the Qilin battery, right? Basically, they already confirmed that. So one feature that I wanted to mention was interesting, different from the ROBO-01 and the ES7 was the so called five screen, holistic interaction, immersive interaction. And they had this feature where you speak and you point to the sun roof. You just say close it, things like that, right? Also, gesture controls just if you on the passenger side, if you swipe down a video, then it'll come up on the rear screen for the kids. I don't know how it's a bit different than many others. And this whole, starting from the ROBO-01, this whole thing about not needing buttons anymore, voice-based interaction. All of these are a starting to become standard almost.
Tu Le:
They're starting to experiment and commercialize some of these newish type of features.
Lei Xing:
Again, this is where the Snapdragon, they're using the 8155, but was it the ROBO-01 that uses the 8295? I'm already mixed up because it's been so many announcements.
Tu Le:
We need to create a master spreadsheet between me and you.
Lei Xing:
But it just felt like every week this reveal just gets better, where you think the ROBO-01 was good and the ES7 comes out. And that's pretty good. And L9, you're like wow, all these features. So next Monday is the ID. AERO, and I’m thinking, what are they going to have now that the ROBO-01 and the ES7, the L9, they've already become the benchmark in so many of these features. What is the ID. AERO going to have that's going to compete?
Tu Le:
I think what's important to note Lei, is that we both know that the VW folks have handlers, external comms teams that help them with that stuff. And so let's hope that those comms teams, because I’ve spoken with some of them, and they do not follow the sector. Some of them don't follow the sector as closely as you and I, so hopefully they do. And they have a measured response, because how large is it going to be? How small is it going to be? Is it worse? This is going to be a flagship vehicle for the Volkswagen brand, so it needs to be pretty big event, right?
Lei Xing:
The fact that it's going to be the ID.7 makes me think that it’s competing with the ET7, because it's their executive limousine, electric limousine.
Tu Le:
I posted in my newsletter this week, a review of the ID.5, which is a direct competitor to the Model Y and the IONIQ 5. It just doesn't bring the goods according to the car magazine reviewer from the UK and so this ID.7, I don't, again, if it's a derivative of the current ID. series, I just don't know how it's going to be able to compete on day one here in China. I am curious to see how they make comparisons to what's out there currently and what's going to be out when the ID.7 actually launches.
Lei Xing:
It's just a huge uphill battle from here on out, every model that's, because you get the sense that, before it was the foreign companies setting the benchmark, now it's the Chinese companies, China EV Inc., right? And you're, right?
Tu Le:
I got to call this out Lei because you and I we're in a lot of WeChat groups together and not together, but some folks are talking about stuff that you and I have talked about 6 months ago, 3-4 months ago. And so it's cool to kind of be validated, but come on, like, the whole thing, there's been a lot of articles about Volkswagen recently. One of the reasons is because this year they're down 29% sales from 2021. I don't think any other automaker in China is down that much. Globally, they're down 26%. If it was appropriate to post a panic button GIF, this is it. And remember, this is not, ok 2021 was full of growth, and then they're down. They were down in 2021 too, so collectively, they're bleeding profusely for a long period of time. And there's infighting and there's reorgs, and they just seem to be flailing a little bit to me.
Lei Xing:
And that makes me think about their target of doubling ID. sales from last year. Is that in jeopardy, I don't know, but based on all the chatter that they've been, I think ID. has been quiet in recent months.
Tu Le:
My thought and my prediction was that they're working in Wolfsburg to pull in likely 2027, 2028 model year features into the 2025 model year in order to try to compete, at least in China. I thought they had an opportunity to sell well in Europe and the U.S. But according to that review from CAR magazine in the UK, I don't think they're going to be able to compete in those markets that well.
Lei Xing:
Yeah, definitely below expectations. We can be sure of that. So the China board announcement, right?
Tu Le:
Should we, let’s move on to another topic.
Lei Xing:
So there's two interesting moves by, one by Volkswagen, the other by Mercedes. All China related: VW with the China board and Mercedes now having the highest profile Chinese in the CSO, the chief strategy officer, position. Paul Gao, he is well known in the industry. From McKinsey, he used to attend our conferences back in the, way back in the days. So now seeing him.
Tu Le:
I've asked a few questions to my network about him, and so he's an ex-auto executive. If it was a career consultant, I would be a bit more skeptical of them hiring a McKinney 25-year consultant, but he does have some automotive chops. He's one of the automotive leaders, was one of the automotive leaders for McKinney here in China.
Lei Xing:
And Volkswagen bringing in a guy who used to be the advisor to Huawei’s automotive business. Though, he's still a foreigner, he's still a German, as the CTO of (VW) Group China.
Tu Le:
This is the crazy thing Lei. They're adding layers. That's the crazy thing. How do you go faster? Few add layers. I don't get that.
Lei Xing:
But I think the difference with the two separate announcements is with the Mercedes. It's more China into the global, because specifically, Paul will be in charge of kind of influencing the global decision making based on what's going on in Asia, right? This is global implication, where Volkswagen’s the other way around, is trying to be more China, be more Chinese, be more China speed with these set of appointments. And they're all long-term inside Volkswagen people, with the exception of the guy from Huawei and BAIC.
Tu Le:
I'm just going to call this out Lei, I don't know why Volkswagen doesn't feel comfortable hiring more Chinese executives to be part of the management team. It boggles my mind.
Lei Xing:
The Mercedes appointment is in sharp contrast, right?
Tu Le:
Yeah, that's what I don't get. I want VW to do well. I want them all to do well. Even I've talked about this, they're not all going to do well.
Lei Xing:
We've talked with Stephan Wollenstein, right? He finally got a shout out from Dr. Diess on LinkedIN. On that presser, there was no mentioning of him, but right? But I guess the scrutiny will be how much autonomy do you really have even with this China board? That's my question. That's my, you know, I put a question mark on that. Even though they talk about China speed being faster and you have now these executives, one or two, they might know China pretty well, but the new CEO is, right, Ralf (Brandstatter), he’s new.
Tu Le:
He's coming from Russia?
Lei Xing:
The CTO, the other guy’s from Russia, but Ralph, he's new to China, right?
Tu Le:
Let me also point this out because I’ve said this in previous podcasts, you know this, I've said this to you in private plenty of times. If we're going to get serious about technology, we need technology executives. Volkswagen hasn't done that. If we want to be serious about China and Asia, we need China executives. That just makes sense. Mercedes acknowledges that. Volkswagen crickets. So saying that you're creating a China board, and this guy's going to be the top of the China board. Now we have two boards. Now we have a German board, a global board, and a China board, that just creates layers.
Lei Xing:
Some of the Volkswagen’s moves. It just doesn't feel right. Something's off.
Tu Le:
It feels right if they want to keep shrinking their market share.
Lei Xing:
Yeah that's our common consensus that some thing’s off, but it's been announced, it's been decided. So we will see.
Tu Le:
I think let me articulate to the audience what I believe we are so concerned about because Volkswagen was the top dog here for a very long time. So they have all kinds of insights and data, and they should have seen this coming. They did it, whether it's because of diesel gate and they took their focus off of really building a long-term strategy for China, or is it because they've focused too much on China and were just printing that money. And I’ll give you the equivalent and I’m sorry to be jumping around, but CATL wasn't resting on its laurels for being the biggest battery supplier, being the cheapest, they're still innovating, right? And so it's very clear with the ID. series, generally speaking, that these guys, the product planners didn't understand the China market, which is their most important market. So that's the head scratcher. And they're continuing to show us, they're telling us one thing, but they're showing us another that they still don't understand the China market. That's, I think you tell me if I’m wrong, but I feel that's our collective concern about what Volkswagen has been doing and is doing.
Lei Xing:
Now we wish them the best of luck, but like I said, I tweeted that Ralph, he has to, the entire Volkswagen board or senior management, they have to forget about the past success, recognize it, but forget about it. You are starting anew, you're starting from the back of the pack. You're catching up now. You no longer have that leadership decision, just have the understanding, and right and then go from there. I wouldn't count them out, but this script is completely flipped. And since two years already,
Tu Le:
In its simplest form, they just need to be faster at doing things, at doing everything.
Lei Xing:
Easier said than done, easier said than done.
Tu Le:
It is, but where I'm frustrated is that the next announcement that they make to me, it's always the next announcement that still doesn't get them closer to where they need to be, so that anyways, we'll move forward on that. But…
Lei Xing:
So CATL? CATL is also one of those things where we knew the specs already, even before the announcement. So the only thing they did was kind of talk about that the some of the details, this three and one design for the different, what the cooling and how they do these cooling within the cells, rather than kind of a cover. And these specs, right? Everybody knows specs, the 1,000 km (range), 10-minute charging to 80%, 255 Wh/kg density.
Tu Le:
Cold weather.
Lei Xing:
Yeah, the hot start, 5-minute hot start. And we also already know that, so the three companies that are appearing to be already customers are Li Auto, NETA, and the latest I'm hearing is AVATR. What did you think?
Tu Le:
So I’ll do a bit of self-promotion. Danny lee from Bloomberg contacted me and he said, are you going to be listening in on the CATL announcement? He pings me yesterday, I’m like, yeah I’ll listen in. And it was 4 minutes long, right? It was a pre-made video. So I was like, okay, we kind of knew all this stuff already, right? And so it's kind of disappointing like because there's still a lot of questions. We're in a group chat with one or two people that we're all kind of puzzled about certain specifics and
Lei Xing:
the volumetric efficiency, debatable.
Tu Le:
It keeps CATL on the innovation side, as opposed to the cost side, which I think is important, because BYD is nipping at their heels. And so they need to keep leverage somehow some way outside of just cost, right? Lowest cost provider.
Lei Xing:
In retrospect, I remember attending the 2019 Frankfurt Motor Show and CATL had a booth. And that was when they had announced CTP 1.0 which had the 55% efficiency. And now they are, the 3.0, the third-gen is 72% and Steve LeVine he reminded me that Our Next Energy (ONE) had 76%
Tu Le:
With their Gemini.
Lei Xing:
Right, that's the Gemini, okay? But anyways, so I think in retrospect though, I didn't expect the CTP to become such a key hot topic three years later, right? When you're looking back, ok CTP a new structural tech, and now it looks like it's becoming mainstream. BYD's blade is already CTP and it's in large quantity. It's in, right?
Tu Le:
Until the blade battery, the BYD blade battery is LFP, it's different chemistry, but it should be noted that they compared the Qilin battery to the 4680. In my opinion. And I know Taylor's listening, there's still theories because they're not mass produced. And do I think CATL will fulfill their commitment of mass producing this Qilin? Yes. Because Tesla announced the 4680 and 2020, Octo er, or September 2020.
Lei Xing:
Battery Day right?
Tu Le:
Be produced in mass quantities. And so I go back to the best ability is availability. But if the 4680 comes out in early 2023, and the Qilin comes out in around the same time, then the other OEMs will have the same type of features and range capabilities that the 4680 is supposed to have. And I would imagine that CATL is going to be able to manufacture those battery cells more affordably than the 4680s. So maybe that advantage that the 4680 was supposed to give Tesla is now off the table by the end of 2023. So.
Lei Xing:
And also the debate on the cylindrical cells versus what's the word that the square not prismatic but that the, that’s CATL route.
Tu Le:
Let me go through the list of interesting things that I thought happened this week, because I’ll definitely want your take on a couple of them. There was a an editorial or opinion piece in Fortune magazine about Tesla because Elon had treated that we're not going to build or we're not going to build in a country that doesn't allow us to sell and service our vehicles. So there's an Indian American who wrote an op-ed in Fortune magazine that said behind the scenes, Tesla actually wanted to import Chinese made Teslas into India and that's what he wanted to sell in service. I know that would be a nonstarter because of the current relationship between China and India. So this PR campaign about oh it wasn’t me, India is not allowing us to manufacture locally, and they're not being flexible, but that kind of gives you a behind the scenes look at these public relations campaigns that Tesla is throwing out to try to pressure, because what they're doing right now is trying to negotiate between India and Indonesia or other Southeast Asian countries.
Because I’m going to be quite frank. I don't think Tesla wants to have 5 million or 6 million units of capacity in China. I think that's going to be a nonstarter, but they want to get the best deals that they can.
Lei Xing:
So well, Tesla is doing that production stop in July, right? The Shanghai Giga to increase capacity reportedly to 2,000 a week. Does that sound right, 2,000 a week?
Tu Le:
2,000 a day.
Lei Xing:
2,000 a week is too small. I think it was 2,000 a week, cause that comes out to be, i'm sorry, 20,000 a week. So that comes to be just over a million units a year. So that sounds about right. So Shanghai Giga is going to have a million units capacity. Right now, it's well over half a million. So right, not to the point of 4 or 5 million, but so the other related, I think news chatter was Tesla being banned in this where the senior leaders are meeting. It’s not news really.
Tu Le:
So for those that are wondering. Beidaihe is like the Jersey shore, right?
Lei Xing:
It's where the senior leaders have their summer get together.
Tu Le:
And it should be noted and I actually didn't know about this till about 2 years ago that Beidaihe is the ocean. I didn't realize you can access the ocean from Beijing, but.
Lei Xing:
It's a 3 hour drive.
Tu Le:
It's a great little area. It's become really westernized over the last 5 or 6 or 7 years. A villa there will now cost between $1.2 to $1.5 million. It's a luxury area, there are luxury hotels and resorts there. Now. I've been there a couple times, you can take a train there or you can drive there.
Lei Xing:
I think Tesla more than anyone else is walking the finest line in China, right?
Tu Le:
Shameless plug number two, CNN contacted me and they quoted me as saying, if this was any other country, Elon would just be having a twitter fit about this. And I don't think anyone can argue that fact. I just if it was the U.S., you just be, the stans would just be freaking anyways. So the other thing I wanted to talk about was Foxconn now officially owns Lordstown. And they've swapped over Lordstown manufacturing employees, are now mostly Foxconnn manufacturing employees. And I watched a video of John McElroy interviewing at Edward Hightower, who's the president of Lordstown Motor, and the paint shop, the stamping and the body shop will all be the same. So it sounds to me like when the PEAR comes online, and if they bring another OEM contract manufacturing customer, everything will be built on one line. So there's not going to be these separate lines and to give you a sense of context, Lei, the Lordstown factory is one of the large, one of the more larger ex-GM factories. It's 6 million square feet to get a sense of context, I googled this: Fremont Giga is 5.3 million, so it's even bigger than Fremont Giga. So they used to make Chevy, what was the small car?
Lei Xing:
Spark? Nova? Aveo?
Tu Le:
Not the smallest car, but like I forget it was so long ago but...
Lei Xing:
Cruze?
Tu Le:
It could have been the Cruze, but they built those cars and they would put 1,200 a day kind of thing. I mean it was a factory that just turned-out cars left and right. So Foxconn has a lot of floor space to fill. And if it's one line, then the likelihood of, so they need more customers using their MIH or Motion in Harmony platform if they're going to use one line because the parts bin is going to have to be shared quite a bit across these multiple, because it doesn't make sense to build on the same line. If every single part for each vehicle brand is different and I didn't get a clear sense of whether or not there's different assembly lines for the brands. But if they are sharing body shop, paint shop and stamping, there's not going to likely be different assembly lines.
Lei Xing:
Could that facility become a Magna Steyr?
Tu Le:
I think it has to be, okay, because think of it…
Lei Xing:
So it’s doable, because Magna Steyr has done it, right?
Tu Le:
Yes. But is Magna leaning into their own hardware/software platform?
Lei Xing:
I don't know.
Tu Le:
But that's the thing. And so this got me thinking, because now we have our first major foreign Asian contract manufacturer entering the U.S., purchasing or acquiring one of the larger factories in the U.S., my next thought was ELMS or Electric Last Mile Solutions who is going to liquidate their assets in a bankruptcy. So ELMS SPACed a couple years ago. They ran out of money. They were building small commercial vehicles. And were going to build the platforms in China, import them to the U.S. for final assembly, that never happened. They never got the platforms because of COVID. And they just started bleeding money. The reason I bring them up is because they own a factory in Mishawaka, Indiana, that used to build the Hummer. So I’m betting, Lei, that the strat planning teams of a NIO, of an Xpeng, of a Li Auto, of a BYD are all kicking the tires on that Mishawaka, Indiana factory. And it's going to go up for auction when they sell those assets. So that could be the next factory that gets sold to a foreign automaker, namely a Chinese foreign automaker. So.
Lei Xing:
Yeah, somebody will see if they can repeat what Tesla did with the Fremont actually, which was a what, GM-Toyota joint venture right, in the early days. Could that happen? We'll see.
Tu Le:
Cause Tesla bought that factory for pennies on the dollar effectively, so.
Lei Xing:
The other thing I wanted to talk a bit about is NIO in the news for the wrong reasons, right? That accident that killed two people.
Tu Le:
Tragic accident.
Lei Xing:
So first of all, condolences to the employees. There was a NIO employee and an employee from a partner. So probably one of their suppliers. But going back to the incident itself, I think you never want, this is how, one week they're so high, and the next week something happens, and they drop from 10,000, 30,000 feet. That's a feeling you get, right? But I think NIO made a PR blunder by saying that in the first statement they put out which they deleted on Weibo. They said at the very end that the vehicle had nothing to do with the incident which came off as cold to many people. They reworded the statement and put it out the second time, deleted the first one. I think in this type of situation, you never right, before that's confirmed, you have to word it differently. You never say that, maybe it's true, but it irked a lot of people, I think. But I think from the other point that the strange accident, supposedly, the guy was, the car, the impact happened when the car backed out. So he hit the wall, broke the wall. And when it fell, the front of the vehicle fell to the ground first, but it was in reverse. I think that the theory is that this guy thought it was in drive and hit the gas pedal or the e-pedal, right?
To me that like this is one of the things that technologically, technically somebody has to solve this type of situation, can, from a technology point of view, can something like this be prevented.
Tu Le:
So Lei, let me say this as someone who's been in dozens of factories, who's worked in corporate headquarters, for a number of large companies, the U.S. has an organization called OSHA. I think it's the Office of Health and Safety or something like that, right? And so they create the guidelines for every factory in the U.S. and stuff like that. So safety standards. And I’m not an expert, but I’ve been in enough of these engineering centers and things like that. First of all, why is a car on the third floor? Why isn't that strapped down? Why does somebody have access? They're probably not wearing their seat belts, right? So there's so many different questions that I have going on. And in, even in even in social media, it says third floor, and then it says 5th floor. I don't know what floor to be quite frank.
Lei Xing:
No, I mean NIO said it was on the third floor. So which floor it is on doesn't really matter because this is their headquartered building. Any floor could have one or more of their vehicles parked as a parking structure.
Tu Le:
Yeah, but I don't know why it would be parked in front of a freaking window.
Lei Xing:
No, based on the pictures that the impact must have been huge that this car went through a wall because on the ground we saw cement, right? Broken cement. So the impact must have been huge to break through, let's say, there's a protective wall structure on or behind the parking space.
Tu Le:
Which should never, there should never be a car up there that's not strapped down properly. That's what I’m saying, right? Like.
Lei Xing:
We can go on and on to debate this. But still I’m just saying one a little bit of PR blunder; two, safety. When we talk about safety, there's so many different ways to talk about safety. And this is an extreme situation that usually doesn't happen. And three, I think I don't think this incident, I mean NIO’s had its share of crisis in the past and in the present, it's unfortunate, but this is happening at the exact time that they're looking forward to ramp up deliveries. But I don't think it's going to affect anything going forward, it is just an unfortunate incident. So.
Tu Le:
Yeah, it just seems aa bit like a head scratcher like they don't have the right safeguards or fail safes in place.
Lei Xing:
Lesson, definitely a lesson for them into this type of situation.
Tu Le:
Let me see the last thing I wanted to mention was that DeepRoute has added their hardware and software stack to a medium sized commercial vehicles and are working with a company Deppon.
Lei Xing:
One of the delivery, shipping or delivery companies in China, commercial shipping.
Tu Le:
So it's but it's short haul because it's smaller medium size. So it's to me, it's like a Gatik in the U.S. So good for them. I think Maxwell emphasized getting DeepRoute’s hardware and software into more vehicles. So I think this is another way that they're trying to do that, right?
Lei Xing:
And Pony.ai started in Shenzhen. So basically now all four tier one cities. They're the only one I believe.
Tu Le:
I'm hearing things about Pony.ai that they're kind of a mess, but I could be wrong. Have you heard anything about?
Lei Xing:
No I haven't heard, but…
Tu Le:
Normally that means that they're trying to figure things out, right? If they're really silent.
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 @leixing77. If you wouldn't mind rating and or reviewing us on Apple Podcast, Spotify or wherever you grab your podcast from, we'd appreciate that as well. Even better if you enjoy 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.