Episode #86 - NIO Berlin Launch, BYD European Pricing, Gotion, ONE: Michigan Battery Bets

The podcast starts with Lei asking Tu about his thoughts on the NIO event in Berlin launching its products into 4 European countries. Lei and Tu discuss their thoughts on the subscription pricing that NIO announced during the event.

The discussion shifts to BYD and their pricing announcements for the three products being introduced to the European market as well as the partnership announcement between Sixt and BYD. 

Tu and Lei end the podcast unpacking the news of Gotion and Our Next Energy (ONE) investing to build factories in Michigan to manufacture battery components/cells for electric vehicles.

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Transcript

CEM #86
Recorded 10/7/22

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 tune in again next week. 

My name is Tu Le. I am the managing director at Sino Auto 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, and you can sign up for it at sinoautoinsights.com, which I encourage you all to do. A tired Lei, can you please introduce yourself?

Lei Xing:
Not tired of, but tired watching the NIO event. Good afternoon from my side and good evening from any of you that are joining maybe from Europe and a very good morning, early morning, for any of you that's joining in Asia. I am your co-host Lei Xing, former chief editor of China Auto Review, and this is episode #86. So, the, really, since we last talked, four headlines: NIO Day in Berlin today, the big win from Michigan attracting Gotion and Our Next Energy, BYD's big, ten, no, not ten, 100,000 order from Sixt and September EV sales. And many of us probably just watched the NIO Berlin event. So what's your takeaway, Tu?

Tu Le:
Bin Li's English is pretty damn good.

Lei Xing:
I think we all agree to that.

Tu Le:
And I do think the audience was very excited and well attended. So I don't know if there's any other brand outside of Tesla, not a GM, not a Porsche, that could bring this type of excitement in this environment. Because as NIO launches into Europe, we're seeing a bloodbath in the markets, right? And if we look year to date, Tesla is down 44%, NIO is down almost 60% year to date. So obviously, today, at least, William is not worried about the share price. He's excited about the future, and the name change to one of his SUVs. But what do you think?

Lei Xing:
When you said a labored Lei, I got my booster shot yesterday. So thankfully, this NIO event is keeping me sane, but I think I probably going to drop after we finish this pod. So my takeaways are a few. So again, I tweeted that the best thing was William speaking awesome English, the whole time, albeit he must have practiced numerous times. It's a pleasant surprise. NIO, as you said, felt just a bit more international or global because of that, because of William speaking in English, because we've never seen that before.

Tu Le:
And if we're being frank, a lot of white faces in the crowd, right?

Lei Xing:
Yeah, I think it's, the event is obviously nicely choreographed, and it's what we expect from a NIO event, because we've seen how many, six NIO Days now, five or six already, right? The other take away is, I felt, personally that NIO, maybe many people as well, NIO is the best smart EV brand from China that doesn't feel like a Chinese brand. Do you agree?

Tu Le:
I do, I think that near bankruptcy that they used all that capital to bring in and focus on branding, customer experience and design is really paying off right now. And it doesn't feel, and you and I spent years in China, right? It doesn't feel at all. Like I can't think of one thing as I was watching that says oh man, that seems very Chinese because you and I always kind of think, okday, there's always something Chinese about X, Y and Z, right? So.

Lei Xing:
I think the NIO branding is the best thing after NextEV, how it's short, how if you say it in English, it's right, it's easy to pronounce and means new. So I mean, itself right there was a good start? And the other takeaway, I guess, in the first hour or so for those of us that have followed NIO for a significant number of time…

Tu Le:
Since day one, basically.

Lei Xing:
Right. There wasn't much new, right? It was all about the branding, whatever, the design…

Tu Le:
Educating on subscription a little bit.

Lei Xing:
So I think everybody was looking forward to the pricing and how they would market it. And I guess the subscription model and exclusive at that, was a kind of a surprise, choosing to go through that venue. I think maybe they did their homework on the way to enter Europe or wider swath of Europe. What do you think?

Tu Le:
I think that they, I thought it seemed a bit rushed, but as we look back over the last several weeks, they were very premeditated. They were on social media, they were very friendly. They just seem like, a well, like you said, choreographed launch for Europe and culminating in this successful event, because we're talking about it. I think a lot of our followers on Twitter are also still talking about it, too. So we knew, like you said, also that there weren't going to be any new products, but how to position NIO and Europe differently than in China? That was what I was kind of looking forward to seeing.

Lei Xing:
And the subscription being one of the ways to do it, right? And I think the other huge significance is you feel this, I think this kind of a dagger into the heart of Germany and the birthplace of the automobile, but no blood yet, not yet.

Tu Le:
Let's say German legacy auto, right?

Lei Xing:
Yeah. I think if you think back of any Chinese brand that has had this type of fervor, the only one I can think of was LYNK & CO back in 2016. They also announced their brand in Berlin, but this one is much bigger, although the similarity is, maybe LYNK & CO subscription model is something that NIO probably has studied, right? And then I think the other fine print was they're still doing that Euro-NCAP of the ET7, to be, results to be published in mid-November. They have this kind of staggered approach in launching these models so first, the ET7, and then the EL7 and ET5 early next year. So I would summarize it to be a cautious approach to enter the European market, with kind of a step back with the subscription model. I have no idea the way they have, the pricing of it, how that compares with others. But right, I think it's still kind of feeling these stones by crossing the river.

Tu Le:
And I think the European consumers will also need help in trying to compare and map out the ET7 and ET5. It's easy to say ET7 maps out to the 5, 7 Series, but there's a little bit of overlap because the German legacies, at least in the sedan category, they have so many different products that you can get, a 3 Series, a 4 Series, a 5 Series, a 6 Series, a 7 Series. So the ET7 could also attract a 5 Series buyer, an E-Class buyer, a 7 Series buyer. So it kind of goes against multiple segments versus the Germans. And that's where it's interesting to see who they'll take from, right?

Lei Xing:
The Germans did win by getting that EL7 name change. So chalk it up, a win for Audi.

Tu Le:
That's a bit of, that's that's freaking Audi being poor sport, I think.

Lei Xing:
So I think the other thing I was looking at was the fine print in these subscription models is restrictions on the mileage, right? The 1,250 km, and then you have to pay extra for every km thereafter, right? So I think this is quite different from in the U.S. where, for me, for example, I just bought this hybrid, and I put just a little bit over 4 months, almost 6,000 miles living in a small town, needing for the vehicle to go everywhere. Now is that different in Europe? I don't know, but it probably is, the way how these owners use their vehicle. Maybe that's what they've done their homework that this would be, okay, just something that I thought of.

Tu Le:
I also think that these limits also, because they probably have a certain calculation on the battery degradation. And so if it goes more than X number of km or X number of miles, then it will reduce the value of the battery quicker, right? 

Lei Xing:
And logistically, operationally, this is probably, I don't know, creating also a challenge where a subscription model that an owner would expect this kind of flexibility is the new premium. But when you can kind of swap your car for another model, and how many months, right? And then what do you do with the car that was being used? I guess, do you give it to a different subscriber, right? All these issues that they have to confront.

Tu Le:
The one thing that we should key in on is this is where BMW and Mercedes and an Audi could not go without more controversy, because their customers, their business model has been X and for them to introduce this, it would be a shock to the system for the traditionalists. But a NIO who's coming in and really pushing the envelope of being innovative, technology forward, bringing this subscription model is more of a pleasant surprise than it would be a burden, something that need to be explained if you were a BMW or an Audi or Mercedes, right? So I think really focusing and because there's no baggage of history in Europe for NIO, they're allowed to do these new things and try these new things, right? 

Lei Xing:
And Volvo I guess, is probably the only European brand that has had any significant presence in the subscription business with the Care by Volvo, right? I think it's also available here in the U.S.

Tu Le:
I think the other company that does okay is Porsche in the U.S. with a subscription model.

Lei Xing:
Right, and this Ralf Kranz, he worked at Volvo for many years, the general manager of NIO Germany. So there is some experience. And LYNK & CO, they've has some success doing the subscription model.

Tu Le:
This is blue ocean, and let's be clear, this is blue ocean. It could be a great idea and it could be not so good of an idea, but they're out there, they are trying something. And I think you should applaud them for that.

Lei Xing:
That's the spirit. I think. Yeah. I also saw that Sixt does have a car subscription here in the U.S. I looked up the prices, they are mostly $800, $900 a month. 

Tu Le:
Which to cheap guys like me sounds like a lot of money for a lease payment.

Lei Xing:
But let's say you if you were living in Europe right now, you're looking for a car. And NIO just come out with this subscription model. Do you feel it's expensive?

Tu Le:
So this is the thing that I'm not that clear about, because I believe if you are a salesperson or independent business owner, there are different ways to categorize that expense. So it's better and easier for you. But so in the U.S., that would be pretty burdensome. That's not to say that people that are driving Tahoes, people that are driving Model Ss, don't have $800, $900, people that are driving Porsches don't have $800, $900 lease payments. But at a certain point, in time, it just becomes if you have that disposable income, right? You want that flexibility because ultimately buying and owning or leasing versus owning are two different things. This is not for the entry level buyer. For sure. So.

Lei Xing:
No, and I think the clientele, European clientele is probably a little bit older than some of the owners of NIO in China.

Tu Le:
I would think they'd be at least 20 years older, at least 20 years.

Lei Xing:
I'm not sure that much, but it's somewhat older. Their habits in using and owning car is different whether they would want these very avant-garde features. It could be a little bit toned down, perhaps.

Tu Le:
The one thing that is important to note Lei, is these early doctors, these German early doctors, these Dutch early adopters, they're all going to flock to this. They'll sell in the teens and the hundreds to these early adopters. That'll be the marketing and a brand awareness that they need to move into the mainstream.

Lei Xing:
I think it's really the question mark is the user operation ecosystem, and the energy operation ecosystems, these two things NIO is bringing into Europe. The question mark is, are they going to work as expected? So we'll see that play out.

Tu Le:
And, will it work Europe wide or in only certain countries? I think that's another distinction that needs to be made.

Lei Xing:
With this NIO Berlin. I'm looking forward to NIO San Francisco in 2023. Mark my word.

Tu Le:
We will be there.

Lei Xing:
So.

Tu Le:
A piece of my heart is in the Bay Area, so I’m always down to go to the Bay Areas.

Lei Xing:
It's much closer too, but who knows, we will be back to China maybe by then. But I think that's pretty much. I think we will, still a bit early, I guess, but they're trying something new.

Tu Le:
And again, I just don't think, I’m going through in my mind, the rolodex of brands. I just don't think there's any other brand outside of Tesla that could push this kind of excitement over social in about a launch and not even a vehicle launch, a brand launch effectively, right? So kudos to them, the team that put it together. The 700 strong that's already in Europe for NIO did a fantastic job. And I know that you and I know a handful of people from the China team that are over there helping out. And a couple of them are Li Bin and Qin Lihong’s handlers. So kudos to them. Congratulations on this successful launch. I think it sets a great precedent moving forward. So.

Lei Xing:
But I think Lihong and William, I mean they're intelligent enough, whether it's language wise or business wise that it's not strange to them, right?

Tu Le:
But you and I were talking about Li Xiang and the challenges with the L9, L8 and L7, how they just. Because Li Xiang is a very successful entrepreneur, right? So.

Lei Xing:
But Li Xiang is bit of a more kiddo type of personality rather than, right?

Tu Le:
Because when you see William Li in interviews, he seems a bit humble, but this guy has the boldest ideas, right? And we're seeing it. And we saw it today. So I would expect more bold ideas, more innovations, more risk taking, calculated risk taking, because do you see a Wang Chuanfu or even just a BYD doing an event like this, right?

Lei Xing:
BYD maybe we can move on to BYD a little bit, okay? It's a different animal because they are positioning wise, they are more of a mass brand type of, although…

Tu Le:
But they're not!

Lei Xing:
The Tang and the, 72,000 euros doesn't put them at that mass brand level.

Tu Le:
To me that deserved a formal launch. You just don't throw that out into the atmosphere and say, throw a-70,000 euro price tag on it and say, come get it.

Lei Xing:
Yeah, and they are using the traditional approach of doing it at the Paris Motor Whow. Where's NIO is doing a standalone event, right? So that's a difference there. And then the other one is similar to NIO, this trial, kind of a trial balloon as you would always say, with its Sixt deal is another way to kind of get the brand and the cars out there without you owning them.

Tu Le:
I love that Sixt is being so aggressive and embracing China EV Inc. Because a year ago, when I had asked a few friends about Sixt, I got the impression that they are this stodgy Hertz for Germany. But man, they're going after it. They have NIO, they have BYD, so kudos to them, and they're launching autonomous robotaxi pilots with NIO.

Lei Xing:
I was just about to mention that, yep, Mobileye, right, in Munich. Yeah, so BYD, it's right, you have Hertz, you have Sixt, you have Tesla, you have BYDs. It's right, just another way to get your brand out there for people to experience. It's also 100,000 units that takes some of the capacity burden off, sort of, I guess.

Tu Le:
That's 100,000 with a big asterisk, right? So.

Lei Xing:
 A big asterisk, right. Thousands supposedly to be delivered in Q4, but that's over a number of years. So it's not going to happen in one year.

Tu Le:
And this is my question to you Lei, because with BYD and the ATTO going mass market at 36,000 euro, and then the Han and the Tang going up market, premium, I can't say luxury, I'll say premium at 72,000 euros. Branding needs to be really tight, and the partnership between BYD and Sixt needs to be really, really skin tight, or else because BYD is a new brand in Europe, it's going to confuse the hell out of the European consumer.

Lei Xing:
You haven't heard anything whether it BYD is going to go through subscription as well. I don't think we’ve heard that.

Tu Le:
I've not heard that.

Lei Xing:
Right. It seems that it's just the Sixt rental play and also the that you buy it individually play.

Tu Le:
But we have our moles. So maybe that's our homework this weekend. Find out.

Lei Xing:
That's BYD's homework as well. I guess after this event.

Tu Le:
Because remember, they're going to bring, I’m referring to China EV Inc. They're going to bring their quick reaction and quick updates to the European market as well. So you're going to see European carmakers get whiplashed and whether it's overkill, because the European consumer might not be as receptive to quick changes in pricing, in features. We'll see.

Lei Xing:
And the wild card is the energy prices. What's that going to do to the EV sector?

Tu Le:
But I think it's going to be interesting to see because the hard restrictions that the EU has committed to, is really going to force more EV adoption across the region. The pricing is going to be a pretty large hiccup for 2023. But the long-term outlook is we have a cliff for EV adopt or a cliff for petrol use. And we need to quickly bring that around. And the carmakers are going to be responsible for that, right? So.

Lei Xing:
Yeah, and I think for the legacies, I mean, yeah, they must be, to lose to BYD on the Sixt is kind of a…

Tu Le:
Well, that's the thing, because to me. And you and I, I'll admit to you, I haven't done a ton of research or asked anybody about why Volkswagen or the legacies didn't partner with Sixt, but my intuition tells me that the Volkswagens, the Beemers and all these German legacies were like, it's this, this brand that's not doing anything and it'll tarnish what we've accomplished, right? Whereas the Chinese EV companies are like, let's bring this on, let's do this. We need a name partner and will bring them with us, will pull them ahead with us and the reputation. Whereas legacy, the German legacies were probably like, yeah, we don't want to be associated with Sixt.

Lei Xing:
Yeah, they are, but just not at the scale and kind of the exposure as…

Tu Le:
Not as a co-branded opportunity or business. So.

Lei Xing:
There's only three, right? Tesla, Polestar, and now GM with Hertz and BYD that are…

Tu Le: 
2023 in Europe is going to be extremely interesting. Because I think we'll see bit of leveling off at the beginning of the year for the China market so that China EV Inc. can focus a bit more on exports to Europe as the brands become more established, create more awareness and really mate with the competitors in the market there.

Lei Xing:
Yeah, and the success of NIO and BYD as much the success of China EV Inc, right?

Tu Le:
And the G9 is coming there, and it couldn't come at a better time for Xpeng, because I believe they're the worst off since the beginning of the year, their share price is down 80%. So.

Lei Xing:
Right. And then if we move on to the September EV sales charts, the two most, the wildest players are, in fact, Xpeng and Li Auto, in terms of consistency, they're the most wild, Xpeng falling for the third straight month, and Li Auto just thankfully with the L9 somehow.

Tu Le:
You and I made this commitment to the audience, right? We're going to praise when it's appropriate, but also criticize when necessary. And we've congratulated NIO on the successful Berlin launch, but their numbers need to show up in the next couple of months.

Lei Xing:
As we always say, the ones that are at the top are the most dangerous. 

Tu Le:
This is where you could set your watch to it. BYD is just crushing it, my god. And, congratulate, So let me graduate them. They got over 201,000 combined sales for PHEVs and EVs first time ever, for 6 months straight, they've been growing their sales. And I don't see any, at least in China. I think they still have some challenges in Australia, and I think they're going to sort out their supply strategy into Europe over the next couple of months. So.

Lei Xing:
They did put out a number. I think it was over 7,700 units exported in September with the ATTO 3 accounting for the majority, right? So Australia and then pretty soon these into the European markets, so not sales, but only export.

Tu Le:
I'm hoping that they can sort out with their partner or find a new partner in Australia. Because I don't know if the current partner is able to handle BYD so.

Lei Xing:
So basically outlook for September is you got BYD with 200,000, you got maybe Tesla is closing on 100,000. We don't know the numbers probably going to come out this weekend. And then the rest of these that have published numbers, they are over 100,000. So this is well over 400,000 just by these players. And then you put the rest, make it to close to 700,000 in September. 

Tu Le:
Absolutely insane, during a COVID lockdown, supply chain challenged quarter.

Lei Xing:
And full year as I tweeted, 28 million total autos, 7 million, roughly 7 million NEVs including exports. That's the picture. 

Tu Le:
Seven million, man, 7 million, and thank BYD and thank Tesla for a big percentage of that 7 million. Because the NIOs, Li Autos, we talk about them a lot, but the numbers don't. Their volumes are fairly insignificant in that 7 million denominator.

Lei Xing:
Not consistently growing enough to be like a BYD or Tesla.

Tu Le:
This shows that we're seeing operational issues from the startups. We're still calling them startups, but they're all at least 6, 7 years old, operational issues, we're seeing positioning issues,  we're seeing product planning issues, supply chain issues. This is all a part of being a startup. You have these growing pains, whereas BYD and for Tesla, at least on the production side, right, they are able to just churn out cars ho hum, without any real issues. With Tesla, it's going to be a demand issue. We're already seeing that. So.

Lei Xing:
By the way, they didn't have any price cuts, but they did offer this RMB7,000 which is $1,000 insurance savings for the National Day holiday week, and also like zero down financing. These type of things, kind of to push.

Tu Le:
And you and I know that in the terms of traditional auto, even if you don't reduce the price, but you, we’ll put in quotes “money on the hood” some other way. Basically, incentive arising without reducing the MSRP or the price, you're still reducing the overall total cost of ownership for the consumer. So you're incentivising them even further, right?

Lei Xing:
If anybody, it's going to be a Tesla that's going to pull out this price slash play into play. 

Tu Le:
I think they have to.

Lei Xing:
Yeah, I think it won't be surprising to see that in the coming weeks and months.

Tu Le:
I think they are going to wait a couple of weeks because get people out of the Cctober holiday and into the third week of October, if they see light foot traffic in the retail stores, they're going to go to that well again. And for the EV companies that are on the margins that can't really reduce price or offer other incentives, alternative incentives. It's going to put a lot of pressure on them. It's not going to really affect the BYDs and the NIOs. It might affect an Xpeng and it might affect a Li Auto who are having challenges with old product in the market. It's the same challenge that Tesla has. So in China.

Lei Xing:
So, last topic, I know we're at the 40-minute mark, but back home I mean this, I think to Michigan, I think you're a Michigander almost. You are. So it's special for you, I think to see, and for the Chinese, as you say, hell or highway. The Chinese are coming and they are coming with the Gotion and also really having talked to Mujeeb with Our Next Energy, I think up until that visit that we had. I didn't really think of them as being the next significant player until this huge announcement, right?

Tu Le:
Boom. And he was quoted in the Wall Street Journal article that I linked to in this week's newsletter. What effectively he said to us in the meeting, there were a lot of OEMs prior to the Inflation Reduction Act or the IRA that were kicking the tires. And in automotive sales terms, that means people that come in, look at cars, but don't buy. That means they're just going and kicking the tires. But then after the IRA, and he told us this in the meeting, now they're calling back saying, let's work together, let's find a way to work together. I'm excited for him because, so you know this, you spend a week with me basically in Detroit, I'm a homer man. I want us to win. And you also know that it's going to be difficult to compete, but these two big wins on the board and you'll smile at this. I sent the newsletter out this morning, and let me see here. Let me show you our good friend John McElroy, not two hours or an hour after I sent it or four hours after I sent it. He sends, don't forget LG's battery plant in Holland, Michigan, which is undergoing a $1.7 billion expansion, and GM's $4 billion battery plant going up in Lansing. So John, if you're listening to the podcast, thank you. Keeps me honest because we didn't acknowledge those or I didn't acknowledge those in the newsletter. Michigan is a major player in battery cell manufacturing in the United States, in the world now.

Lei Xing:
And do you remember that day when we were listening to Governor Whitmer speaking at the reception at the Detroit Auto Show and she basically said, bring those supply chains to Michigan, bring those investment to Michigan. We're ready for you and boom, what happened, right?

Tu Le:
She's got a tough job because she does know that the manufacturing jobs are going away just because the transition to electric vehicles will dictate that.

Lei Xing:
And the telltale sign for the Gotion project, how many States fought over it, right? Texas, Georgia, Kentucky, South Carolina, Illinois, Ohio. As our good friend, Steve (LeVine) says, local politics trumps geopolitics, right?

Tu Le:
And I’m super impressed with what the State of Michigan was able to do, because they announced both of those on the same day this week. So.

Lei Xing:
Yeah, and also the fine print just to stress, this is actually not a cell plant. 

Tu Le:
No it’s not.

Lei Xing:
This is a battery components plant, producing cathode and anode materials. I thought that was interesting, which is meeting the components share requirements in the IRA obviously, right?

Tu Le:
Yes, that is the key distinction that we need to make, because there's components that need to be made locally, raw materials and rare earth materials that also need either to be mined or refined by free trade partners, or in the North America region.

Lei Xing:
And the ONE, the fine print for the ONE investment is, it is a cell production, but there's more, they're also doing material refinement, pack recycling, second life. That's why they call it ONE Circle, which is also different than some of the other, let's say, LGs or SKs.

Tu Le:
If you're wondering whether Mujeeb is legit and his tech is real, he convinced a couple of his ex- Apple executives that he worked with to come over and either be advisors or part of the management team. So I’m not saying that if you're an Apple employer instantly validated, but he's got believers, he's got a lot of believers that his technology is going to be a major part of the future for electric vehicles, at least in the United States. I think he has grand ambitions beyond the U.S. market. So I’m excited to see what he's going to pop out next.

Lei Xing:
It's hard to believe that they are only two years old, and now how much they have elevated just over the last few weeks.

Tu Le:
And it's the only one that's really gotten any traction or any voice.

Lei Xing:
Now it could be potentially become how they're working with BMW on an iX trial vehicle, right?

Tu Le:
BMW i-Ventures is an investor in Our Next Energy, hence the partnership.

Lei Xing:
Yeah what I was going to say is BMW really made who CATL is today. Now, potentially, BMW is going to make ONE into the American, let's say, CATL, perhaps.

Tu Le:
But the irony of it is that BMW EVs are in no leadership role.

Lei Xing:
I think that their sales jumped and their orders for the i7 was pretty good. I think I saw one of the articles in the U.S.

Tu Le:
I have to see that to believe it. The reason I’m a little bit bearish on BMW is because they had it, they had the i3, they had the i8.

Lei Xing:
They're going with the hydrogen.

Tu Le:
Oh my god, I just wish BMW to just stayed the course. They would be a leader right now in EVs, a leader. Let's open the room up. It is 3:48 pm where I’m sitting, where Lei is sitting. So what we'll do is we'll keep talking because there's a few other things that I wanted to bring up and chat with you on Lei. But if anyone has any questions, I know Eric had a question. So if you're still around Eric, you have that question. I think it was about Tesla, probably his Model 3, but happy to chew the fat with any of the listeners that have any questions. So just raise your hand anyways.

Lei Xing:
Anyways, this was a special week because China is on holiday. So not much, I guess happening, let's say in China per se, but still NIO kind of they like to choose interesting dates because people in China there, right at the end, the tail end of their holiday and have to stay up and watch this and then go to work in the morning.

Tu Le:
And October is going to be the really important month in China's history. Full stop. I'm saying from the beginning of China's history, because it will be the culmination of a third term for Xi Jinping and anecdotal Lei, my friend, he is, his parents live in Dongbei and he traveled to Dongbei to get his to update his family visa. And he said when he got on the train to go back to Beijing, there is a separate security line for the train going to Beijing. He had to go through three x-ray scanners, show his papers multiple times. So getting into Beijing right now, if you're an out of towner, I’m just saying out of town in China within China is going to be really difficult, not impossible, but there's going to be a lot of scrutiny until at least a week or two after the 16th. 

Lei Xing:
And again, we're seeing some lockdowns in Shanghai and other places. 

Tu Le:
Yeah. It is, this is one of the reasons I'm in the U.S. because I needed some predictability. I needed to be able to see people and talk to people. But I’m hopeful, realistically, I’m trying to be pragmatic. By summer, things will change permanently in China by next summer. I'm not optimistic.

Lei Xing:
Hopefully after the Two Sessions.

Tu Le:
Let me also ask you Lei, CALB went public in Hong Kong earlier last week.

Lei Xing:
Yeah, following LeapMotor, right?

Tu Le:
So they have a pretty ambitious target of becoming the third largest battery cell manufacturer in the world within the next 5 years. So how, do you see a pathway for them to be able to do that?

Lei Xing:
Well, what’s CATL and BYD are doing, they have to follow what Gotion is doing. The if they don't do it and then they can't be that in that number three position.

Tu Le:
And they need foreign automakers on board, many foreign automakers on board.

Lei Xing:
And was it CALB that had a series of lawsuits with CATL like back and forth. If I remember correctly, some were dropped, some were, I don't know, might still be in play like the infringement, whatever these. But now you have probably what, the Big 4 now if you count this, just listed.

Tu Le:
The one thing because we do have pretty varied audience today. Porsche is now worth more than Volkswagen. If we're keeping score, everyone, Tesla still is number one. Toyota still is number two. BYD is number three. Porsche is number four at around 80 billion euros. I want to say Volkswagen is a little bit less than that worth.

Lei Xing:
I'm sure Volkswagen’s happy, too.

Tu Le:
I'm not so sure about that.

Lei Xing:
With an apostrophe, or quotes. 

Tu Le:
Actually I lied. The last thing I wanted to bring to you was what we talked about this morning was this Billion dollar investment by Volkswagen Group into this software development partnership in China.

Lei Xing:
We all know who it is. Don't we? 

Tu Le:
I think so.

Lei Xing:
And right, it's popped up before. Now we're probably going to hear the juicy details of it.

Tu Le:
So for our audience, the Reuters had released an article this morning stating that they were going to make an announcement about a partnership. And our good friend who I won't mention had confirmed to us that it's likely going to be with Huawei. And it to me, reefs of desperation that they're just not able to get, move fast enough to keep up with what's going on in China, hence buying as opposed to making the connected vehicle in China.

Lei Xing: 
Your tweet was funny, the H-Amazon, H-Google, H-Apple. So I was thinking now there's other companies that they have named after H, for example, Haomo.ai, there's a Horizon Robotics.

Tu Le:
Yes. And it actually complicates their global hardware software stack quite a bit.So, again, this emphasizes how important the China market is to the Volkswagen Group bottom line. So.

Lei Xing:
Interestingly that they're moving Skoda production to Vietnam. Did you see that? 

Tu Le:
I saw that. We need another, I need another reason to go to Vietnam, dude, another reason to go to Vietnam. I'm saying in 2023, we're taking a trip to Vietnam, buddy, and I'll teach you a couple of as bad as my Chinese is, it’s better than my Vietnamese currently, give me a week back in Vietnam, it'll be okay. But anyways, that's all I had today. Actually, let me take that back. The couple of things that I think, cobalt mining is back in the U.S., I’ve written this in the newsletter starting today. There's a mining company that's going to be mining for cobalt in Idaho.

Lei Xing:
I think you are going to see these announcements, including the one with ONE, doing some of the supply, bringing some of the supply chain back domestically. That's what they want. But again, that ONE factory, the 20 GWh, won't be online until full capacity, at least, I think, until at least 2026. Is that correct? As you said, 36 months to kind of ramp it up.

Tu Le:
And I believe that they are looking at a second location, maybe not in Michigan, so.

Lei Xing:
I think he did mention that in our visit.

Tu Le:
I don't know if we were supposed to say anything, but the cats out the bag. And it's probably an obvious thing anyways, the final thing that I wanted to mention is that the state of New York has announced that they will be banning the sale of petrol vehicles by 2035, following in the footsteps of California. So we are starting to see now in the U.S., two of the largest states for vehicle sales, putting bookends on petrol vehicle sales. Yeah. So it's happening, it’s happening.

Lei Xing:
And Toyota is not happy, right? 

Tu Le:
And normally when California and New York make a change in automotive policy, there is at least another 10 or 12 states that will follow their lead.

Lei Xing:
Massachusetts will likely follow.

Tu Le:
So, for American listeners, ready or not, here they come. And what we're hoping for is that the 
American legacy automakers really hit, doubles and triples with their vehicle launches. And we're going to need to see Chinese EVs come to the United States in order to fill out all of the different market segments in order to really satisfy these restrictions that are coming up very, very quickly.

Lei Xing:
I mean after NIO Berlin today, I don't see why we can't see a NIO San Francisco 2023.

Tu Le:
Do you think it'll be SF or New York or LA?

Lei Xing:
I think it'll be SF in the west coast, California.

Tu Le:
Union Square?

Lei Xing:
 Somewhere in California, because right, whether reportedly they are looking at a NIO House location in San Francisco, so, and San Francisco. I guess a lot of, wasn't the Audi e-tron, the global debut was in San Francisco?

Tu Le:
I think so.

Lei Xing:
Right? So think about that. I think it's coming.

Tu Le:
So when we're in Northern California in November for our visits, we will have to scout out the Union Square area. There's a couple other areas in San Francisco that they could be. But let's see if there are any corner vacant buildings, and that would be perfect for a NIO. So actually, the last thing and you might remember this. My friend in California, my old coworker, he had that e-tron. He sold his e-tron back to the dealer for $60,000. So he basically leased it for free. Now he is driving a blue Rivian R1T, so he loves. He said the interiors are almost as good as Audi, which he was really impressed by. And remember, this guy knows his car stuff. And next time I'm in California, likely at the end of this month, I'm going to be getting a ride in that, or I'm going to drive that R1T.

Lei Xing:
It is cool, man. I saw it last year and.

Tu Le:
I'm also going to get a chance to drive a 356 b-convertible that he has parked in his garage. So I'm looking forward to it. So anyways, that's all I have unless anyone has any final questions. Maybe we can close the room.

Lei Xing:
Just the housekeeping. So still another busy week. So actually tomorrow, the NIUTRON NV, finally, I think launches, right? It's been some time since we last talked about NIUTRON, and then next week is the big Polestar 3 reveal. And they just announced that they're meeting their, they're going to meet their 50,000 global sales target this year.

Tu Le:
And one thing that you folks should google is Foxtron also launched and unveiled a vehicle. Foxtron is Foxconn’s EV brand. It looks like it may be being built in Ohio.

Lei Xing:
Lordstown.

Tu Le:
Yep. Because Lordstown is huge and demand for Lordstown Motors and the Fisker PEAR is probably not going to fill that factory, at least not in the very beginning. So I think Foxconn is looking at either recruiting another brand along with the two they already have and the Foxtron vehicle. So in the next 18 months, it'll be interesting to see what is coming out of Lordstown, Ohio factory that is now owned by Foxconn. So.

Lei Xing:
Yeah just lots of happening in the U.S., it's exciting more so than China, maybe.

Tu Le:
Well it is freaking October 1st week in China, so is a little quiet, but I'm expecting the end of the year to be quite interesting with a lot of fireworks. And we'll start seeing whether the L7, L8, L9 is going to be able to make up for the Li ONE that stopped selling effectively last month.

Lei Xing:
Well, whether they are as advertised anyways.

Tu Le:
So everyone, thanks again for joining us. Great crowd today. Maybe it's something we can do moving forward, man, because everybody's here.

Lei Xing:
I'm flexible as you know, as long as it's not 3:00 am in the morning.

Tu Le:
All right, good morning, good afternoon, good evening, and Lei, have a good weekend, man. We'll talk to you on WeChat.

Lei Xing:
Yeah, you too, and have a good weekend to everyone.

Tu Le:
Later.

Tu Le:
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.