Episode #81 - August China sales, US restricts chips to China, Porsche and Apple CarPlay

Tu & Lei start off the podcast with a review of August sales numbers,  the pleasant surprises along with the disappointments. 

Tu and Lei then take a step back and talk about the global EV market, how the Inflation Reduction Act (IRA) should help the US EV sector and how some Volkswagen customers in Europe have gotten so frustrated with their ID Series vehicles they're returning them.

Tu then moves the discussion to the recent restrictions placed on Nvidia and AMD that limits the chips they can export to China and Russia which leads to a broader discussion about the restrictions by both countries that have given them advantages historically that have manifested into companies that are leaders in the space currently.

Tu and Lei then move to unpack Baidu's Robin Li who said that most companies would likely skip L3 and go straight from L2 to L4 autonomy with their vehicles and systems. 

They close the pod with a brief discussion about some of the challenges ahead for the foreign automakers that they'll need to overcome in China vs. their domestic counterparts if they are to ultimately succeed there.  

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Transcript

CEM #81
Recorded 9/1/22

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 of course, tune in next week. 

My name is Tu Le, I'm the managing director at SinoAuto Insights, a management 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, good evening. Can you please introduce yourself?

Lei Xing:
Good evening from my side. I'm your co-host Lei Xing, former chief editor of China Auto Review. This is episode #81. The plot thickens, I guess that's how I would recap the week since our last episode in the realm of China and global EV, AV and mobility space. Heck, we might as well call ourselves World EVs & More, right?

Tu Le:
Geopolitics mix of world, right?

Lei Xing:
So especially with the news coming out the last couple of days, and here's how I’m going to spin the headlines. So NVIDIA and AMD are being restricted from sales of chips to China, and Russia by the way; we had the transfer of power at one of the world's largest automakers with the most powerful supervisory board; we have new investments from Honda and Toyota in battery manufacturing here in the U.S., roughly $7 billion combined; we have Chengdu and Shenzhen in lockdown mode, and the Chengdu Motor Show ending abruptly due to COVID control measures. And we have a shocking shuffle in terms of rankings of China EV Inc. in August deliveries, some continue to grow, some fell off a cliff, and shocking sale of BYD shares from Berkshire Hathaway: the Warren Buffett-backed BYD is now backed less by Warren Buffett.

Tu Le:
A couple of percentage points less, a couple of percentage points less.

Lei Xing:
 0.6% less, to be exact. That's the plot.

Tu Le:
They got people freaking out. Let's start with sales numbers.

Lei Xing:
Sales numbers, you know, it's like a deck of cards, right? You shuffle it, you never know who’s going to be on top. And this month and last month, NETA became the top, aside from GAC AION, which is sometimes are not listed as this smart EV startup, because they had an earlier start. But in terms of new ones that began sales in 2018 and later. So NETA is about to hit 20K, is about to join the 20K club. 

Tu Le:
Yeah I saw that.

Lei Xing:
While the others, let's say, the Big 3, I don't want to use the word struggling, but they are, let's just say they're facing some issues, especially Xpeng and Li Auto. It was not so surprising, given the fact that in their earnings calls, they've already admitted to, they were facing some issues of orders and with certain models. But to see, Xpeng I think was almost from 15,000 units to 9,500 units. And Li Auto there was a huge fall, whereas NIO kind of stayed right where they are actually. So applause. What do you think?

Tu Le:
The one other EV maker that stood out to me in a positive or two, was LeapMotor, they got the record, 12,525 units, and AITO, which got over 10,000 units, right?

Lei Xing:
Welcome to the 10K club, as we say.

Tu Le:
Yes. So what we're seeing is, the domestics that aren't named NIO, Xpeng, Li Auto outperform. And I think that is a reflection of maybe the lower tier cities taking on more EVs, where the NETAs, and AITOs, and the LeapMotors are going to be a little bit stronger than the four tier one cities, right? So. Really quickly, the other thing because I wanted your take on this, was VOYAH at 2,400. That seems and I know that they were last month was not great either, but I don't remember them being that low.

Lei Xing:
No. I think they're fine. They are in the few-thousand-units mode, but they did put out that their average transaction price was over RMB370K, so that's just under what, $55,000 around $55,000.

Tu Le:
That's a good number for them.

Lei Xing:
Yeah, and I want to go back to AITO because AITO, everything is EREV, right? Their M7, and M5. And they're launching the coming week, the M5 EV, which is the BEV version. So AITO, I think is one of the, I guess, dark horses. But considering that they have the Huawei kind of Huawei Inside and utilizing Huawei's channels. So I don't know, that could be a plus. But it was interesting, if you see the press release of both Xpeng and Li Auto, there was nothing on why it felt month on month. Rather, the press release from Li Auto was all about the L8, being that the month it's revealed, it's going to be delivered. We had heard Li Xiang talk about that they're speeding up that model to replace the ONE. And same for Xpeng. A lot of talk about the G9 soon being officially launched. I think they talked enough about it in the earnings calls. So there's, I mean you see the message that they didn't want to go into that fall too much.

Tu Le:
So we kind of talked about it a little bit on Twitter earlier this week how I couldn't believe Li Auto management didn't see any real cannibalization when launching the L9 of the Li ONE, right? So.

Lei Xing:
You know what the problem could be, is they had this long lead time, not the lead time, but they started campaigning for the L9, like several months ago, like tweeting out, teasing out features, pictures, this long lead up, I think, already affected, I think that kind of tactic could be backfiring when it comes to the ONE. And also the ONE did have some quality issues here and there. And then rest of it is just competition. It's old, it feels old. That's the China EV Inc. time, is, it's months, it's not years.

Tu Le:
It has to be less than 18 months, right?

Lei Xing:
And same for Xpeng, we talked about that last episode, especially seeing both the P7 and the P5, not that great, in August.

Tu Le:
Yeah, for Xpeng, it seems to be maybe a loss of focus because of the challenges that they had or they're having in the foreign market.

Lei Xing:
Right. And also seeing this rankings come out. It makes me think to that chart that Bloomberg ETF put out of the boxed in, right? That the small EVs are 100 %, the bigger larger SUVs, they have a very high penetration, whereas in the middle, it's low. But the August EV sales rankings doesn't reflect that, right? The NETAs and the LeapMotors, they are priced in that sweet spot, in the middle spot, and they are leading, at least in August.

Tu Le:
But the crazy thing is also Lei, is that the P5 and P7 are sedans, right? So that market is not as large as the SUV market, right?

Lei Xing:
That's why they can't wait for the G9 to launch, to be delivered.

Tu Le:
But launching after the ES7 and the L9, I think it's going to be really tough for them now to really gain any voice for that product, especially as a five-seater, which is the head scratcher to me. So they're going to have to really focus on, because Li Auto is just reinforcing that whole family thing with the L9 for sure.

Lei Xing:
Right. We had this past week, the ES7 start deliveries, the L9 finally starting deliveries, on like second to last day of the month.

Tu Le:
And hey China Driven and Will got his ET7 delivered, right? Hey Will, I don’t know about that green man, but congrats!

Lei Xing:
That's his car, right?

Tu Le:
I think we're all banking on, and you contradict me if you don't think this. I really feel a flawless launch of the ET5 will get NIO up into that 18,000, 20,000 a month range within a few months. Because it's a good looking car and it should take and win most of those fights against the Model 3, which is really long in the tooth and really old, for China terms, right? China EV time frames.

Lei Xing:
Yet Tesla remains strong based on August…

Tu Le:
77,000 units man.

Lei Xing:
That’s almost their highest in recent memory if I remember correctly.

Tu Le:
And more impressive than that is the fact that it's period two of a quarter, not period three.

Lei Xing:
Yeah as the middle month of the quarter. 

Tu Le:
Exactly. 

Lei Xing:
Though how much of that is export, we don't know. I bet there's a lot. If you've seen the domestic registration numbers, my guess, is probably around, I don't know, 30,000+ domestic, 40,000 export, could be something like that.

Tu Le:
So they're still solidly at around 30,000 units a month.

说话人4 11:43
 Yeah, if we look at this consistency, GAC AION is consistently growing, closing in on 30K, Tesla and BYD, so the suspense is whether they are going to report. So last month it was what? Over 160,000? So they could be very well close to 200K. If we add just these 12 players together. So the ten that was announced today, roughly 100,000; BYD 200,000; Tesla 77,000; so that's 3700,000 NEVs.

Tu Le:
At a half a million monthly take rate.

Lei Xing:
Right, or 600,000 units right now.

Tu Le:
So that’s more than half.

Lei Xing:
But, having said all of this, it’s one month.

Tu Le:
But there's also, the fine print on that Lei, is that as NVIDIA kind of, or not NVIDIA, but NIO, Tesla, Xpeng, Li Auto is exception this month, kind of stays at the same volume, somebody else is taking it, right? And that's the NETAs, that's the LeapMotors, and that's the AITOs, right? So that we're going to get to 600,000 units a month. But most of that's going to the domestic players. We weren't expecting it from, right? And with Shenzhen in lockdown, not, I was told that the Shenzhen lockdown isn't as severe as the Chengdu lockdown.

Lei Xing:
Yeah Chengdu is right now what, almost like a mass lockdown, right?

Tu Le:
It's Shanghai like.

Lei Xing:
It’s déjà vu Shanghai. So.

Tu Le:
Just a reminder, I believe Volkswagen and Toyota have manufacturing operations in Chengdu.

Lei Xing:
I think Toyota stopped. If I, the latest is what I’ve heard.

Tu Le:
Oh really. So, so despite those gray clouds still being there that you and I have said continuously throughout this year, this year's episodes that despite that, we're still going to get to 600,000 units, right? Will that be able to continue with a Chengdu and Shenzhen possibly being locked down for multiple weeks? If BYD is unable to manufacture, it's going to be really hard to get to that 600,000 units. So.

Lei Xing:
It doesn't look like we're going to see a Shanghai again. That's my take, view, because that would be very extreme, which, would be helpful, at least to the sales that we're talking about.

Tu Le:
The other thing, too, is we probably won't see that because of October 16 being right around the corner, right?

Lei Xing:
That's the other plot.

Tu Le:
Yeah, so for those that don't keep track of Chinese politics, October 16 is, I'm not sure what it's formally called.

Lei Xing:
The 20th, whatever Party Congress, the 20th Party Congress, once every 5 years.

Tu Le:
And it's normally when they would reelect or elect a new leader. And this occasion is unprecedented because Xi Jinping will be getting his third term. And most terms are limited. Most presidencies are limited to 10 years.

Lei Xing:
He rewrote the right, the rules, right? So constitution, yeah. But just lastly on again, on the rankings, again, it's one month. Once October 1 comes around, I bet it's going to be another shuffle. You're going to see somebody climb up and somebody go down.

Tu Le:
So we are getting into the really high sales months. So we would likely see…

Lei Xing:
The so called Golden September, Silver October season.

Tu Le:
And so, if Chengdu and Shenzhen lockdowns currently do not affect long-term production, we could see an 800,000-unit month in the next couple. So, and if the current trends continue, then guys like AITO, LeapMotor, NETA are going to gain a ton of share in those months.

Lei Xing:
I think so, and I’m still optimistic, bullish on the numbers, though not as bullish as the secretary general of CPCA. So he's maintaining 6.5 million NEVs, and 6 million NEPVs, and mine is at 6.25. So he's more bullish than I am.

Tu Le:
I think he has a little more inside information than you do, though, man.

Lei Xing:
So that gives you an idea. So 6.5, last year was 3.5. So it's almost doubled, right? Again.

Tu Le:
And it should be noted that global, let's say, NEV, because we will include hybrids, so global NEV sales are forecasted to be around 10 million units this year. So that would mean that China takes on 65% of that. And let me kind of anecdotally give you what happened last night. I went, so for those that don't know, I came back to Detroit for a while to visit family, do some business here, and went to a networking event at a WeWork that was held by a couple of NGOs that for the state of Michigan and an incubator called Plug & Play. And I think people are starting to wake up, the people that I’ve spoken with, because out of the five or seven people I spoke with at length, two or three of them were really interested in what I had to say and what my thoughts were on, how I feel the U.S. markets will play out, especially because of the recent approval of the IRA and how things are getting shuffled. Recent announcements, like you said earlier, Toyota committing $5.8 billion of investment to a battery factory. Is it in South Carolina?

Lei Xing:
North Carolina. 

Tu Le:
You know and I think it's an exciting time for the U.S. It's still pretty messy. I teased you earlier this week Lei with pictures of RIVIAN, the RIVIAN office, and the pictures of the Lordstown Michigan offices. But you know, the other thing I talked about was how many more brands there are, and products there are in China, because if the U.S. hopes to get into the millions of units in sales each month, then we need to see many more products in the U.S. It can't just be Tesla and RIVIAN and Lucid and Kia, right? So I think that's important. And you know that article about Bloomberg or the Bloomberg article, was it today or yesterday about how Volkswagen customers are really wanting to return their ID. series vehicles? Because of the software bugs is really alarming. We've beaten this drum so many times about how software plays such an important role for Volkswagen. And I hadn't heard up until that point about cars being returned or sold within 6 months of purchase. That's pretty extreme. So.

Lei Xing:
Yeah, we've dumped on Volkswagen enough times.

Tu Le:
And that's Europeans, and that's Europeans. 

Lei Xing:
And they love Volkswagens, right?

Tu Le:
And they don't need the same type of functionality as a Chinese consumer, right? So, but let's talk that new restriction that we saw from the U.S. government. I think that is a huge thing. So the Biden administration sent a notice to NVIDIA and AMD restricting a license to sell to China, specifically and Russia, specifically, some of their higher-end chips that run servers in data centers and would run the operating systems for autonomous vehicles. You had gotten some of the Chinese takes. So what have you read and seen on Weibo and Weixin in response, Lei?

Lei Xing:
Well no matter how you look at it, this is definitely going to affect at least in the scope of what we are talking about, AVs in the sense that in China, many of these China EV Inc. they use on the vehicle side, the NVIDIA Orin chips, right, which can be substituted by companies like Horizon Robotics or Black Sesame, that's on the vehicle end of it. But then there's the cloud end, which is what many of these China EV Inc. are using and dependent on NVIDIA as well as for example, Xpeng’s data center, computer center that they just set up. Some of these, the A100 and the H100 chips used on the cloud side of it for their autonomous vehicle development. Now, in that case, there's no Horizon Robotics to substitute. That's the nature of this.

Tu Le:
So they need those chips to run simulations, effectively.

Lei Xing:
Yeah, simulations, training or whatever, which is what He Xiaopeng said today on his WeChat moments, right? And he says something which I didn't quite understand that they pre-purchased a lot of these, pre-ordered or whatever. So I don't know how that solves the problem. But the latest update is that NVIDIA said in, I think they've gotten an extension from the SEC which is to perform exports, needed to provide support for U.S. customers of A100 through March next year and the other two chips, order fulfillment and logistics through the company's Hong Kong facility through September 2023. So I guess there's kind of a grace period. But as you pointed out, this could very well escalate into something deeper, more troubling, which is the vehicle side of it. Then it's for a Mach-E who's trying to get a free, 8155 upgrade. Forget about it, forget about you sharing this, trying to have five friends to download the app. That won't work, right? So I think that’s…

Tu Le:
That last night that answered my question, because why wasn't, my question was, why wasn't QUALCOMM part of that? And they don't make server chips, basically? Or chips that would mainly be used on servers. So to give you all an indication of how this affects NVIDIA, last quarter, they made about $400 million. So let's project that out to $1.6 billion in annual sales. Last year, they had $26 billion in revenue. So these chips, they're growing, first of all, so I think that needs to be said, but they are about 6% of their current revenues, so not insignificant.

Lei Xing:
Yeah and Jensen had sent an internal letter, right? You've seen that, basically saying we're going to try to work with the customers in order to fulfill and also trying to ask the SEC to kind of help them with that this kind of, grace period and they were try to find alternatives, if there is any.

Tu Le:
And if we take two steps back, there's a couple things that we should unpack with this. It keeps that threat of going a bit further restrictions are on the Chinese market for higher-end chips in autonomous vehicles or higher level ADAS, and the larger picture needs to be the, in addition to the restrictions and subsidies that are squeezing out Chinese supply chains for batteries. It's really the U.S. is really focusing on putting the squeeze on China a bit, so.

Lei Xing:
Right, the thing on AVs is in China is if you look at these China EV Inc. launching new models, more often than not the two companies that they will mention in their marketing are NVIDIA and Qualcomm, okay. There is the Horizon Robotics, there is others, but these two in terms of the cockpit, right, the cockpit part of it, the AV computing part of it, there is no substitute, they're very dependent on these two companies.

Tu Le:
We're talking about if they get frozen out of those chips, by NVIDIA and Qualcomm, the autonomous vehicle progress just stops in these tracks.

Lei Xing:
And that's why we had these companies Horizon, we have the Black Sesames, the L8, I think the L8 that's being launched is going to have the Horizon Journey 5, the latest a chip. So that's one way to kind of avoid this issue, but it takes time, right?

Tu Le:
Yeah, but the reality is Lei, is that the Horizon chips and the Black Sesame chips, and there's a couple other Chinese chip designers that get a decent amount of funding, they are years behind NVIDIA and Qualcomm from the standpoint of being able to design chips that run as fast as NVIDIAs and Qualcomms do. And there's another wrinkle, because even if Horizon and Black Sesame or SMIC can design a ship that runs as fast as what's out there by NVIDIA and in Qualcomm and even Mobileye, the Chinese domestic industry needs to be able to fab them. And currently, there are restrictions on Chinese companies buying equipment to fab at the 5nm and below level. So there's, it's like multi prong challenges being thrown at them. So it's complicated. 

Lei Xing:
And if we go and talk about this protectionism and this has been going on on both sides of the ocean, right? Very long time the battery cells. That's right., that's how CATL basically benefited. And now we have this IRA, we have this chip restriction, and who's going to, what's going to happen, how China responds, right? This tit for tat, tit for tat, right?

Tu Le:
And they will respond. And I sent a tweet that said Ford and GM might have got, their jobs might have gotten a lot harder in China, because there's going to be retaliation, there always is and to your point, we should let people know that years ago, was it 7 years ago, 8 years ago Lei, that there was a white list of battery cell manufacturers, about 17 of them that the Chinese government had publish that said if you want subsidies for the vehicles, you need to buy from these 17 suppliers and then excluded to the Koreans. It excluded the Japanese and all of these 17 just happened to be Chinese companies. To your point, it really gave CATL that jump start needed to become who they are now. It wasn't a big deal to the west because nobody cared at that time about electric vehicles.

Lei Xing:
The amazing thing is the China NEV sales are just chugging along. Despite these, we call them the “black swan” events, despite the cloud thickening, right? That's where we're kind of witnessing here. 

Tu Le:
And then, not only that, but then all the while, companies like Lucid and RIVIAN adjusting their forecast down, because they're in complete manufacturing hell and supply chain hell and sourcing hell for chips, right? So we're definitely seeing, generally speaking, the Chinese EV makers able to manage the challenges a little bit better than their U.S. counterparts. And so, but we have to remember RIVIAN and Lucid are $100,000 cars, so they're not mass market cars anyways, so we're not going to see hundreds of thousands of sales out of those two companies, not until they get a sub-$50,000 car, right?

Lei Xing:
We wouldn't have thought of this chip shortage turn into this kind of chip shortage.

Tu Le:
And I’d also alluded to Xpeng kind of knew that this was a possibility. So not only did they hoard chips it seems because of supply chain, but they probably had their risk assessment or risk management internal team look at the possibility of the U.S. government restricting these chips. And so he hoarded them. But again, to your point, I don't know what it means, because is he going to, does Xpeng have a certain number of servers that they're going to put online? And then that's it. Or it's a little cryptic that message, and I didn't understand it. So I’m glad that you fluently being able to read it also kind of didn't get it.

Lei Xing:
It just kind of means that they were prepared somewhat that they have a contingency. So there's a good and the bad. So that's what he was saying.

Tu Le:
But and the crazy thing is, how is Tesla going to react in China to this? How because they have data centers in China, right? And Cadillac right, Ford. 

Lei Xing:
 And then He Xiaopeng, he kind of took a shot at FSD, and saying that we're going to be more superior with the all-scenario, smart assisted driving, which is he's saying that a wider rollout nationally will be next year. Basically, the city NGP, and do you remember we were on a call with Brian Gu, quite a long time ago that was a year ago, he was saying that possibly one of the southern cities Guangzhou, Shenzhen being the first city to allow them to have that. And it hasn't happened. It's taking longer.

Tu Le:
We should note that Robin Li during there's a conference this week, right? 

Lei Xing:
WAIC, following the WNEVC.

Tu Le:
In about two weeks, we're going to have a bunch of acronym conferences, too. So the NAIAS right?

Lei Xing:
Nobody's showing up auto show.

Tu Le:
Yeah, well, not a lot. The highlights probably going to be the Mustang Wednesday, right? So what I wanted to say was Robin had said during the WAIC that he sees AV adoption faster than the current forecast out there.

Lei Xing:
But he has a point. And also I think I agree with him, not 100%, but mostly, because in China, at least, L2 is very right, it's almost every car now, it’s ubiquitous, L4 pretty soon, it's already happening, right, they've already done 1 million rides. 

Tu Le:
And he's playing a major part in that, right? Or at least Apollo is, right?

Lei Xing:
So there's really not much in terms of middle ground with respect to L3. I think that's why he said that. But outside of China, I think L3 in certain markets, at least in limited scenarios like the Mercedes, it's still being considered or tested or being commercialized. Although he did say that L3 is going to take much longer, which he is correct, because of the responsibility issue.

Tu Le:
As he says, that it's almost like simultaneous Cruise sends an update or for their software or something like that. Because so it's like the irony of that statement. But I think we should look at autonomous vehicle adoption needs to be looked at on a regional basis and country specific basis. And what we're going to see, mark my words: I've said this before, is that the U.S. companies and the Chinese companies launching pilots in other regions in 2023 and 2024, and try to divide the rest of the world up into these fiefdoms where Cruise runs the city of Munich and Baidu Apollo might run Stuttgart or something like that, right? Kind of like that.

Lei Xing:
Well there's the Chinafornia companies, but there's no Amerinese companies.

Tu Le:
Yes, you need to work on that. I don't know, Cinafornia work, but Amerinese that sounds, that sounds like a food, actually type of food.

Lei Xing:
Californese companies.

Tu Le:
That chip thing was actually kind of a surprise to me, but it should be noted because I don't think we talked about this last week. It should be noted that the SEC or the PCAOB and the Chinese auditor…

Lei Xing
 That agreement, or the…

Tu Le:
 Yeah signed an agreement. 

Lei Xing:
It's not even called an agreement. It's called something else, right?

Tu Le:
But the threat of being delisted has gone down significantly now. And I believe the accounting board is ready to send a bunch of auditors over to Hong Kong to have these Chinese companies that are listed in the U.S. now completely and fully audited to be in compliance with the rest of the companies on U.S. markets.

Lei Xing:
I thought it was to audit, not the companies themselves, but the accounting companies. I thought that was the thing. If I remember correctly, but anyways, but it's an auditing trip, for sure.

Tu Le:
Some interesting stuff going on this week.

Lei Xing:
I just wanted to go back to this new brands thing a bit, because I wanted to talk a little bit about the Dongfeng M Hero, or Mengshi brand. I don't even know what their English name for the Mengshi, which is warrior, transliterally, brand. I think the significance of this brand launch, a lot of people don't know that the Chairman Zhu Yanfeng, he said something that was well quoted in the industry 20 years ago, when he was the young president of FAW Group. He said in an interview that “we need to kind of be patient for 20 years for kind of Chinese brands to be stronger or to be relevant.” And he was ridiculed for that comment. Now, 20 years later, when he's launched this brand two years after launching the VOYAH brand, it almost feels like he is vindicated. So I think this is one part of the significance of this brand launch. And the other one is basically Dongfeng is the Second Auto Works, was kind of the military-focused a truck maker. And if you look at the military parades more than often than not, you're going to find Dongfeng trucks and their military vehicles. So this is in their DNA and that's why they launched this premium off-road of rand. And it was very extreme, I think, more extreme than anything you ever seen from any other kind of the off-road vehicle or brands?

Tu Le:
I think you're being very kind. So.

Lei Xing:
No, what I’m saying is if anybody is going to launch this type of thing, it's going to be Dongfeng. On the extreme side. And he did mention that they've gotten to a point where they feel confident enough in terms of technology, brand, product value that they can launch this thing. And also, when we talk about this Chinese consumers, we talk about the second half of the smart EV game. EVs are a given, smart part of it is another given, but one more, is this individualized, personalized, kind of nationalistic choice that the Chinese consumers, they're very kind of acceptable to these, the new, very specific segments that nobody would have thought of. So it's the time, it's right, it's the timing, it's the market conditions, environment that these things happen. So I think that's just what this brand is about.

Tu Le:
These extreme niche brands or products work in China, because the market is so large.

Lei Xing:
Yeah and this is 6 years in the making, but the way. So they thought about this for a long time.

Tu Le:
It's, I'm American, so I look at it and I’m like that's it's like the transformer almost looking kind of…

Lei Xing:
 Very cut, very…

Tu Le:
But I'm sure there's a buyer out there for it in China for certain.

Lei Xing:
I think the VOYAH’s success so far has given them confidence. They already have 16,000 customers of the VOYAH cars.

Tu Le:
And this is the crazy thing, generally speaking, man, it's all the Chinese domestic players are super hopeful about the market. And it's the foreign players that need a hug.

Lei Xing:
That are hesitant, that are, don't seem to know where they are, or they're slow to react. They don't have the right products.

Tu Le:
And your point earlier about they're smart. There's this Chinese individualism thing, but you're assuming the smart part for the legacies. And I think that's like, that's a huge bridge for them to cross, or the huge river for them to cross. And I’m talking German, Japanese, Korean, American. Like they are still just learning how to code to be quite frank. And so the smart part is not a given for those guys. And what's likely to happen for Volkswagen to play catch up is that they're going to have to partner, and Blume made a point of saying that we are probably going to use the new CarPlay by Apple. That's like inviting the wolf into the henhouse so if he thinks he can outsmart Apple, because he's Porsche, are you kidding me, dude? You're playing on Apple's turf, you're not playing on Porsche’s turf. Remember that. So I think he needs to be careful about relying on Apple too much, so.

Lei Xing:
It's interesting to see that the three guys Diess, Ralph and Wollenstein, they've all posted their messages on LinkedIn, and there's some interesting comments made. And I think what I see is that they understand the change, they understand what the market want, but at the end of the day, is just delivering and executing that's not there. 

Tu Le:
I'm not sure I agree with that. I think Diess, because he understood what was needed, and he tried his darndest to make those pivots on behalf of Volkswagen Group, and he wasn't supported. And the rest of Volkswagen management were just sheep and didn't back him on these tough decisions that he was making. He became the sacrificial lamb, because Brandstatter, he's a lifer. Blume, he's a lifer. So it's like, there's got to be pain, there's got to be pain in order to really make these changes. It can't be a cumbia moment, the entire time, so.

Lei Xing:
I think Diess was just too much of a maverick probably in the view of the supervisory board. But what he did say was in a LinkedIn message, that “the future of our industry can be brilliant, but we have to change fast,” and what Blume said, what Volkswagen Group, Blume doesn't have a twitter or LinkedIn account, it was Volkswagen Group putting all the messages today for him. He's basically saying, we're going to continue with what, Diess’ legacy, but with the kind of a slight tweak, right? They mentioned about the e-fuels They mentioned about continuing with this path of e-mmobility and at a certain time, go faster. So you see this, ok I agree, but at the same time, I tend to hold back a little bit. And that Bloomberg article basically also said about the change is not going to be that significance in the early part of his tenure.

Tu Le:
Yeah, that e-fuels thing is a boondoggle. He needs to scrap that and focus more. Your tweet was hilarious, first of all, having ten priorities that was just like ok…

Lei Xing:
China was number 3, China is still very important ahead of North America.

Tu Le:
But how they think about that is totally wrong. It needs to just be blocking and tackling. To me, software now is blocking and tackling, its basic stuff you need to be really good at. Because the rest of the stuff doesn't matter if you're not really good at the blocking and tackling or just the basic stuff. So anyways…

Lei Xing:
I want to share an interesting line from Wollenstein’s post on LinkedIn which said, and I quote, “at a time when it is getting increasingly popular to talk about China and its people without even having a profound firsthand experience, it is worth stating, China is a great country with wonderful people. It is far from being perfect, but the same time, far from being evil, let us talk with each other rather than about each other.” I feel like this message is also to Ralph, because he said people without the profound, firsthand experience, so you need to be here.

Tu Le:
I'm sure, and Blume and probably Blume.

Lei Xing:
He graduated from Shanghai from Tongji University, so he can brag, but and I guess maybe that's, they need something new that rather than having people with the on the ground experience, they bring in the outsiders sort of even though they are still the insiders, who knows. And the other, I think interesting numbers for listeners, I think worth mentioning is this China's internet development numbers that was put out by Qin Gang, the Ambassador: 1.05 billion people are internet users in China. That's 3 times the population of the U.S. and 3/4 of China's population. This is something that has everything to do with what's going on in the China EV, AV and mobility space.

Tu Le:
It sets the expectation for the consumer, right? And that that just happens to be the consumer in China. So, yeah man, I think we're good for this evening unless anyone has any last second questions.

Lei Xing:
Same here, and maybe a housekeeping issue. Housekeeping. So China EVs & More is now a media partner for MOVE America, basically claims to be the No. 1 tech and mobility startup show that'll be happening on September 27-28 at the Palmer Event Center in Austin. We're happy to be a media partner. If you're interested to attend, we have some discount codes. So just want to mention that. Yeah looking forward to Detroit, Austin, maybe West Coast later in the year.

Tu Le:
We will be traveling extensively throughout the year in the U.S. because I didn't come back to sit in Detroit for months at a time. So you'll see me and Lei hopefully out and about in LA, in San Francisco, Boston perhaps. So when we make our trips, we'll definitely let folks know so that if there's a convenient time to grab a beer, we could do that.

That brings us to the end of this week 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 this show, please tell your friends about it. Please join this again next week as we track down all the latest news on China EVs & More.