Episode 87 - Volkswagen Invests in Horizon Robotics, US Chip Restrictions tighten, Polestar 3 Unveiled

Tu and Lei immediately get to the biggest news of the week - the Volkswagen Group investment in Chinese chip design startup Horizon Robotics.  They both articulate what they believe the implications are from this transaction, especially at this sensitive time. 

Tu moves the discussion over to the increased restrictions posed on China for chips and chip making equipment by the US govt and what this does to US employees working for companies currently working to support Chinese chip design and fabrication companies.

Lei then shifts the conversation over to September sales which bleeds into the Polestar 3 unveil which they debate the merits on and whether it will be competitive in the two markets where it will be manufactured - the US & China. 

Tu and Lei end the pod with a brief discussion about Li Bin's ambitions to be a top global automaker by 2030. 

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Transcript

CEM #87
Recorded 10/13/22

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 course, 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. You can sign up for it at sinoautoinsights.com, which I encourage you all to do. Good afternoon, Lei. Can you please introduce yourself.

Lei Xing:
Good afternoon from my side and good morning, good evening, wherever you are. I'm your co- host Lei Xing, former chief editor of China Auto Review. And this is episode #87. Let's talk Volkswagen CARIAD Horizon Robotics without further ado. Unpack it for us, Tu. What are your thoughts? What surprised you? What didn't surprise you? What's going to happen?

Tu Le:
This is, and my opinion, because I’m going to CYA right now, I'm going to cover my ass, CYA is cover your ass, by the way, if you're wondering. Because this just came out, we thought, we talked about it last week, but we got the wrong “H”, right? We thought it was Huawei. And so it's actually Horizon, which makes sense, at least from an expertise and portfolio standpoint for Volkswagen, because they do not have any chip design inhouse that will allow them to compete in the future. And the trend is OEMs and legacies moving, battery, material science and battery tech inhouse as well as chip design. So from a technical and functional standpoint, it makes sense, but this is really an unusual move, because it's only for the China market. And it is with one of what I would have called China, the Chinese government’s, like princelings in the chip design space or the AI chip design space. Now, is the Chinese government going to still look at Horizon the same way as they are now owned 60% by a German company? I don't know. You go ahead. Let me know what you think, because my opinion might evolve based on what you say.

Lei Xing:
Yeah well, to be clear, that 60% is what CARAID owns in the joint venture. But there was a fine print that this was also an investment into Horizon Robotics, but that wasn't revealed, whatever, how many percentage. So that's number one. And then I think my opinion is, this is one of those the right time, the right place, sort of things, especially I was talking to a PR person from Horizon. And she was kind of telling me this is a sensitive time of course, because the China-U.S. chip restrictions that are going on.

Tu Le:
Which escalated even further this week.

Lei Xing:
Right. We were looking forward to this being announced previously. And on paper, this seemed to be a strong type of partnership. You have the largest European automaker, the largest foreign automaker in China versus teaming up with one of the, I guess, most promising, most prominent, most important startup companies coming out of China. 

Tu Le:
And let me emphasize the Horizon is neighbors with Zhongnanhai, right? So with where the Chinese government reside, so it's based in Beijing.

Lei Xing:
So in actuality, in reality this is actually a weak versus a strong, weak being Volkswagen’s software side of things. And we've, I think we've talked about Volkswagen, CARIAD and Horizon many times on the show. And we’ve dunked on Volkswagen enough that this just felt like, I think it was revealed by Ralph Brandstatter in his LinkedIn post that this discussion began in January. So this was in motion well before the CEO change. 

Tu Le:
Transition.

Lei Xing:
Right. This is a 10 month, let's say, discussion. And now it’s…

Tu Le:
You could probably give Wöllentstein credit for this.

Lei Xing:
Sure, sure. You know, Horizon Robotics, I would say they are the CATL in the chip, autonomous driving computing chip space, because. 

Tu Le:
They have the potential, because CATL has now become the 800 pound gorilla, Horizon is years behind NVIDIA and Qualcomm, right?

Lei Xing:
I mean now with Volkswagen, it essentially is, it’s like one…

Tu Le:
It needs to fulfill its potential.

Lei Xing:
And it's like one of those things were you head out and you're trying to find a restaurant. You kind of pick and choose. And normally you will probably go into a restaurant where there's a lot of crowd. You see the analogy that I'm trying to use here? And this is the same thing for Volkswagen. They were shopping. I think over that 10-month period, they believe that Horizon presented the best opportunity and the fastest in terms of speed on both the hardware and software side of things. So that's how they ended up choosing them. I think that was the.

Tu Le:
To unpack that even a little bit further Lei, Horizon already counts SAIC, Audi, BYD, so a lot of automotive customers, so they do have history in the automotive space, recent history with the automotive space. Horizon does, just to clarify.

Lei Xing:
So just this past year, I mean how many announcements have they announced, right, various strategic investments.

Tu Le:
Li Auto.

Lei Xing:
From Chery, from FAW, teaming up with BYD, Li Auto, the L8, the Pro version has the Journey 5 chip, whereas the MAX version has the NVIDIA chip, right? NETA, the NETA U-II that just came out.

Tu Le:
Let's be clear because there's, Volkswagen is betting on promise, because the level of technology is not there yet, right? The roadmap will be there, or at least points to that direction where they'll be able to compete with the Qualcomms and NVIDIAs in the next several years. But it's still just a promise right now. And I’m in complete agreement. I actually tweeted about it. It reeks of a desperation a bit from Volkswagen Group to be doing this. The last time they had a transaction this large was the investment in Argo, a U.S. autonomous vehicle start up years ago that they co-own currently with Ford, not co-own, but they've co-invested with Ford. So we had talked about this a couple of weeks ago, right? The make versus buy decision. They've come to the realization, Volkswagen Group has over the last several months, because outside of 12, 14, 18 months ago, you and I had spoken with Volkswagen people, and they still thought they could do this inhouse by themselves. So this realization that they needed to buy, meaning partner or acquire the technology side of things has been a recent turn of events.

Lei Xing:
Yeah, I think regardless China or globally, you always need partnerships on this next, you know the second, what we call the second half of the smart EV competition. And the fine print, I think, worth mentioning in that presser is, and I quote, “integration of numerous functions in one integrated chip intended to increase stability and reduce energy consumption of entire automated systems, allowing for scalable ADAS and AD solutions with differentiating innovation.”

Tu Le:
That tells me that Horizon brings the goods, but CARIAD still might not, because how do they still become the software side of that, right?

Lei Xing:
I think so, that was the surprising thing is actually, I guess not many people know that Horizon Robotics is not just a chip company. There are a intelligent, the so-called intelligent driving solutions company, because they also have these software expertise and localized focus on China, right? And it so happened that today was that Tech Summit. I think Volkswagen Group posted some stuff and Oliver Blume said, and I quote, “also the success will be coming, now we need to deliver. For developing software, everything is about speed.” I think Volkswagen believes this joint venture with Horizon Robotics is going to offer them the best speed, hence the announcement.

Tu Le:
Let me put my legacy auto hat on. I can't hire Usain Bolt to make things faster for me. And the rest of the organization, the policies, the processes, the communication channels, how we think about things, stay the same, right? That means that the company needs to get leaner. It needs to throw out most of the processes and policies that are currently associated with ICE product development that needs to be a wholesale change for all of the brands under the Volkswagen group. It can't just be we acquired 60% of one of the most promising AI chip designers in the world. And we're going to go as fast as they go tomorrow, right? It is just not going to happen that way.

Lei Xing:
The geopolitical factor of it, in China for China, you got to use just like what happened with the battery cells, right?

Tu Le:
Yeah, and it points back to multiple foreign automakers coming to the realization that they will not be playing by anyone else's rules, but the Chinese government's rules, if they want to stay in China. It points back to, despite GM having invested over $1 billion, multi-billion dollars now, in Cruise, they've also invested $400 million in Momenta here in China. So this really points back to in China for China, like you said, right?

Lei Xing:
I think the closest comparison of this deal is the GM's investment in Momenta, similarly. By the way, Volkswagen is still working with DJI on some of the ADAS feature. So it will be interesting to see how this will differ. And speaking of Huawei, that's still not out of play. It's still possible because…

Tu Le:
There is a lot of cooks in the kitchen right now, though, with this third new entrant, right?

Lei Xing:
Yeah. And remember earlier this year, we had talked about this that Volkswagen was going to select, let's say, a dozen or so suppliers, remember that? 

Tu Le:
Chinese?

Lei Xing:
Yeah. Chinese suppliers. So this could be one of those announcements, but this is for China for now, specifically for China.

Tu Le:
And let's not forget if I am an automaker that was closely aligned with Horizon from a product planning standpoint. Now, does that relationship die on the vine? And do I go out to a Black Sesame? Do I go out to a inflame? These are other AI chip designers in China that because the last thing you want to do if you're a promising automaker, is align yourself with the company that's more than half owned by another automaker, your competitor. So these relationships that,  and these customers that we named off earlier about 2 minutes ago, the Li Autos, the BYDs, the SAICs, those relationships and customers might die on the vine now, because number one, Volkswagen is probably going to suck all the air out of the room and utilize Horizon’s resources to its fullest, right? So they're not likely going to have a lot of bandwidth for other customers. And the other customers know that now that there's a new ownership structure, they're probably not going to spend as much time on nurturing these relationships with the current customers, right?

Lei Xing:
Well I mean, for Horizon, the more the merrier, right? From their point of view, I think there are only a 7-year company, started in 2015. So how far they've come, it’s nothing short of amazing, I think just over the last year or so. That how, right? And they are the Chinese CATL, they are the Chinese NVIDIA, however you want it compare it, but right, they are going to be a company that's going to be reckoned with in this smart side of the game.

Tu Le:
You know, I thought so too, but again, now I wonder what the Chinese government stance is going to be. Are they going to support them as much and as vigorously as they did as an independent startup, right? I don't know if they'll move their focus onto other independent AI chip designers. So I think the jury still out for me. I'm not sure that Horizon is going to get that level of attention, positive attention from the Chinese government moving forward.

Lei Xing:
So far. There's, in Horizon’s space, there's probably three or four other competitors, smaller, Black Sesame being one of them. There's a few others that we're going to see more of in the coming months.

Tu Le:
You're definitely going to see and hear more of them, because like we had mentioned earlier, there are more restrictions now on capital equipment providers, foreign capital equipment providers into Chinese chip designers and fabrication shops into China. And we're getting to the level of passport holders, right, where their passports are from.

Lei Xing:
I saw that.

Tu Le:
Even if they live and work in China, so.

Lei Xing:
And also, huge volumes are at stake for this deal, because all of the JVs, FAW, SAIC, Volkswagen Anhui, the Audi FAW NEV Company, all of the future BEV models will be powered by whatever hardware/software that this deal is going to provide.

Tu Le:
It is going to be the brains. And these chips are going to be the brains of every single EV built in China. But I’m still unpacking those new restrictions for some of the capital equipment providers. So when we think of chip design and chip fabrication, there is a lot of IP that is owned by European companies and American companies. So big names like KLA, Lam Research. They sell equipment, testing equipment, capital equipment, and any fab, whether you're in China or Taiwan, you need this equipment to validate the ASICs or the chips, the silicon they are making. And so, if you spend millions and millions of dollars in purchasing capital equipment, there is support individuals that come along with that. And sometimes they actually live and work at your, not literally live, but work at your facility to help manage any quality or any engineering issues. And so there are a number of foreign employees or employees from these capital equipment providers that sit and work at the fab shops for SMIC for all these other Chinese companies. And they've been told basically to not come to work. They can't go to these factories anymore. So there's, it's kind of understated some of the folks that I follow on Twitter. We've kind of alluded to it is that there are a lot of ethnically Chinese employees with U.S. passports. Now, what does that mean for them? I think that's kind of one of those gray areas that nobody knows.

Lei Xing:
And they'll be very torn, right?

Tu Le:
Yes. And China officially does not recognize dual citizenship. So they turn a blind eye for sure, on some of that stuff, but it just seems like these folks are, and let me assure you that renouncing U.S. citizenship is not easy either. Even if they wanted to renounce their U.S. citizenship, it would be a long drawn-out process that involved lawyers. And it wouldn't be cheap. So at least I don't see that part of it easing up anytime soon.

Lei Xing:
There's constantly these clouds shrouding on the horizon or Black Swan events that keep happening. And yeah, right, I think going forward, it's going to continue to be like this for some time.

Tu Le:
And it's so random because you see the trend moving one way. And then there's these random events like the Gotion investment, like the Volkswagen investment. And then you're like that.

Lei Xing:
Hell or highway.

Tu Le:
Yeah that really puts a monkey wrench into things, because I was told by some really reliable sources that the German government, the newly elected German government was going to take a more firm stance towards the Chinese government. How was that transaction coming off in Berlin, right? I don't know. It'll be interesting to hear in the coming months, because this won't get final approval until early 2023. So it's not over yet. But I think we talked about that as much as we can.

Lei Xing:
I think so. And it'll still be some time until we see these solutions actually in Volkswagen’s EVs, and Audis, in China.

Tu Le:
So there's that saying that I tell my boys, you can talk about it, or you can be about it. Blume is talking about speed, but can he be about it, right? Can Volkswagen Group be about it? Because that's ultimately where the rubber beats the road. Can Volkswagen branded vehicles in China catch up to the Xpengs, to the NETAs. to the AIONs, right?

Lei Xing:
Yeah. This is where we probably should go into the sales a little bit, because really, I don't want to go into numbers too much, because you can find those numbers, but I think two numbers stood out for me in September is the CPCA retail sales in China, not including export of new energy passenger vehicles was over 30%, the penetration was over 30% for the first time ever. That's one and two, in September, the entire Chinese brand passenger vehicle market share topped 50%, also for the first time.

Tu Le:
It's just a monster number, right?

Lei Xing:
Right? But the tide is, you know the purchase tax half off, that's pushing everybody up, including Volkswagen.

Tu Le:
It's pulling sales forward.

Lei Xing:
But I think those numbers stood out to me more than anything else. And we're going to end up this year, probably very close to 25% penetration.

Tu Le:
We all agree. I think the general consensus from the Chinese organizations is that Q4 is going to be pretty wild, with big, big numbers.

Lei Xing:
You just multiply 700,000 units by three and add a little bit more and you get over 2 million NEVs in Q4.

Tu Le:
I'd written well over 1.5 million for Q4, but I’m thinking we're going to get over two million.

Lei Xing:
You're, no, that's too way too low.

Tu Le:
Yeah, I figured. But slow, slower for the Chinese automotive market. And so that's one of the reasons I think we're seeing this mad dash of Chinese EV companies opening facilities and launching vehicles abroad, because they want to keep that pump primed in case the China market slows down at all, so they can push out vehicles and ship vehicles to Europe, to Australia, to Singapore, to Japan, to South Korea, for BYD 12 countries, right? With a handful of them being in Southeast Asia. So.

Lei Xing:
Well, slow, relatively, let's say, from 100% growth to 50% growth. Is that slow? Yes, but volume wise, still huge.

Tu Le:
Still huge. But again, we're talking from a larger base of 50% makes a lot of sense, right? Because growing 100%, multiple years in a row, that's that would just be insane.

Lei Xing:
This year likely, it'll be still another year of 100% growth. Next year, probably not. But.

Tu Le:
It's just hard to fathom, especially during what we saw for the first quarter and half of the year, where plants were down for literally three weeks at a time, right? So for them to be able to be so efficient and catch up with production, we can just point back to BYD and Tesla being kind of the lead examples of that, right?

Lei Xing:
The rankings, top two selling SUVs were the Model Y and Song Plus, those are NEVs. I think Haval H6 was No. 3 or something. So that's.

Tu Le:
So I should say really quickly, I posted something on Twitter about the ET7 being the 8th most, 8th ranked sedan.

Lei Xing:
Give us some time, Tu.

Lei Xing:
No. So they were right because we shouldn't be comparing them to the 3 Series and stuff like that. So in the large premium segment, the ET7 is doing okay, but I’m not going to give them because they're competing against ICE vehicles, right? And I’m not going to give them that. I'm just going to say that the ET7 is doing okay, it could do better, but let's wait till the totality of ET5 ramps and see how all these numbers shake out for NIO. Then I’ll evaluate.

Lei Xing:
Looking forward to how ET5 performs if it performs as advertised. So we'll see in the next three months.

Tu Le:
I think it's going to sell like crazy if and I think that the only way that NIO doesn't get to 10,000 units per month, at least on the ET5, is if they still have operational difficulties. I'm not saying they'll get to 10,000 in October, but they'll need to get to 10,000 in the next couple of months. Because I think the demand is there.

Lei Xing:
Because ET5 right now is in a dedicated, stand alone, production facility, right?

Tu Le:
So all they need to do is make the line move faster. That's it. They do that by making sure that the parts are coming in on time. The batteries are, the battery supply is also coming in the production volumes that are necessary to keep the machine moving, right? So.

Lei Xing:
Anyways, for China's NEV this year, just two big numbers to keep in mind is 7 million units, 25% penetration. That's probably a foregone conclusion based on things.

Tu Le:
I have to pat myself and you on the back, we talked late last year, maybe as far back as October of 2021 about how Tesla would likely start to see slowdown in demand because of no new products, right? Now the Western media has picked up on it and all you're seeing are silence from the Tesla stans, and analysts saying man demand is going to fall off a cliff for Tesla, blah, blah, blah. We talked about that a year ago.

Lei Xing:
I think we also look at it this way. Tesla is still doing pretty good, but there's other people that are doing even better. So just all depends on how you look at it.

Tu Le:
I'm still impressed with Tesla, because I thought by middle of summer that they would have slowed down a little bit.

Lei Xing:
But I would just say this that if Elon Musk’s famous quote, that prototypes are easy and production is hard, the only two companies that are passing grade on that front is BYD and Tesla right now, there's nobody else.

Tu Le:
What makes BYD even more impressive than Tesla is that BYD is ramping multiple new products, whereas Tesla is just leaning into two products. So the level of efficiency that Tesla has shown has been amazing. But the level of efficiency on top of the increased complexity at the BYD factories just makes the degree of difficulty for BYD off the charts, right?

Lei Xing:
Yeah, BYD, while expanding overseas, they're not home free, right? We've seen some issues popping up here and there.

Tu Le:
Yeah there could be a stop ship order for BYD at all three vehicles in Australia. So that's a real issue.

Lei Xing:
And it's all because of some tether in the middle back seat, which reportedly if not done, right, would make it a four-seat vehicle rather than a five-seat. That's what I read.

Tu Le:
And Australia is known for having some of the most stringent rules for homologation and safety in the world, because that vehicle has passed safety for the UK, I want to say, and Europe. So you, so really quickly, Europe, the UK, Australia, the United States, they all have different standards. Some are similar, some are unique to these markets. And remember that the ATTO 3 was designed as a left-hand drive vehicle. So there's probably some issues on the right hand side. And there's issues with the local requirements from Australia. And if you think about the vehicles and the size of the streets and the size of the vehicles, then you'll figure out why the United States has different safety, because there's a freaking SUV right next to you, almost. Every car’s an SUV, Tahoe, an Expedition, a Lincoln Navigator and Escalate in the United States. And so the safety standards need to be amped up in the United States versus a Europe, where a lot of these places, they don't have that many highways and these big SUVs driving next to them. So.

Lei Xing:
Well stakes are high and it's not about BYD is about China EV Inc. and their reputation. So they need to be extra careful. The BYDs and these are the ones especially launching in Europe soon.

Tu Le:
And I have to point out that they picked this partner EVDirect and EVDirect is effectively a startup. So I think there's some growing pains with that relationship as well. So let’s talk…

Lei Xing:
Polestar, is that what you had mind?

Tu Le:
 Yes. So you watched the event, I only watched the highlights. So please detail for us your highs, lows and your takeaways.

Lei Xing:
To be honest, this is an awesome car, like technology wise, safety, sustainability, everything about the Polestar brand, the design, features, how it looks, it just like I would want it, until the price comes out. So it was woo, ah, and then, oh. That's basically my reaction, and even higher pricing in China, when the car is made in China.

Tu Le:
That's the head scratcher for me. Because in the United States pricing kind of establishes positioning a little bit or at least it wants to establish positioning in the market. So $84,000 so be it. They said that they're going to compete against the Cayenne. So that was no surprise, but the China price.

Lei Xing:
$125, 000.

Tu Le:
 Tai gui la (Too expensive). I tweeted that. But you know, I'm of a different sound and mind Lei, I like it.

Lei Xing:
Yeah, I like it too.

Tu Le:
But there's a reason why Volvo didn't sell. Well, I think the interior is like nice, but it needs to be, it's super clean. But it's too simple for me, right? I just, cause if I want simple interior, I'll just get a Model Y. Because it looks, if you squint, it kind of looks like a Fisker Ocean a little bit. We saw the front end. 

Lei Xing:
JIDU!

Tu Le:
A friend of this show tweeted yeah, that the front end looks a little bit like JIDU Auto, the JIDU ROBO-01, so.

Lei Xing:
So no, I think the design is pretty original. I liked it, but.

Tu Le:
I's a little bit too Scandinavian contemporary for me at that price point, right? Because the Polestar 2 is a $48,000 car. So can I accept a bit more Scandinavian design into a $50,000 car? Yes. But when we're pushing towards 90 grand, I need to see some, I just need to see more. Because the Volvo XC90 the interior looks great to me, but it's more substantial than the Polestar 3 I think, right?

Lei Xing:
Yeah in terms of cadence, I just thought, from growing from 29,000 units last year to 290,00 in 2025, you need a volume driver, which let's say it could be a 3 or 4, but you need a right sized SUV and right priced SUV to drive that volume. 

Tu Le:
Especially for the U.S. market.

Lei Xing:
Right. So for all of next year, pretty much, it's only the 2 that'll be on sale. This year they get to 50,000, let's say they double next year, get to 100,000 units. And then what's going to drive that volume forward? You kind of question that target now.

Tu Le:
And remember that at least in the United States, their tax incentives, the reason they're building in South Carolina, is probably aligned to productivity and jobs. In order to get those tax breaks, maybe they had to say that volume in order to for that number to make sense, right?

Lei Xing:
And that won't come until what, second half of 2024, because production starts in mid-2024 in South Carolina, so.

Tu Le:
The launch date or the unveil to the launch date being a year out is a complete head scratcher to me. Cause to make people wait that long is really really mind boggling.

Lei Xing:
And also not including the Pilot with LiDAR, that's, you need to pay more for that.

Tu Le:
Well, but that's just everybody's doing that now, right? So.

Lei Xing:
Think about this. Remember when they announced, Luminar announced this Volvo partnership, there was talk of LiDAR being standard as a seatbelt, well it’s not. At least not yet. So, then.

Tu Le:
I just see echoes of Volvo being a super, not Volvo, but Polestar being that super niche brand like because here and I had two Saabs. So let me take a step back and say I supported these Swedish car companies, but they are niche. And at $85,000, you better pull out some heart strings because it's way too competitive at $85,000, right? In that market segment to not bring the kitchen sink. So and, yeah, it's a year out. So what are they thinking about?

Lei Xing:
So they're going basically against the Lucids, the Rivians, which are in that price range, right?

Tu Le:
And they're going after the BMW X5, effectively, right?

Lei Xing:
And in China, this is something that's, their global sales. You have China being the largest market, but pretty much all their sales are outside of China. I heard year to date, they've only sold like maybe a couple of thousand units, all this time in China.

Tu Le:
So the two largest markets in the world are their worst markets, the U.S. and China for this Polestar, worst markets full stop.

Lei Xing:
And by the way, within the last 2 years, they've had five different CEOs for Polestar China.

Tu Le:
So this is a publicly traded company. So if you're a shareholder, I don't know if you're frustrated or excited, but I just wish there's more to it.

Lei Xing:
Both. Because the car is a great car. But again, I think the pricing was the most talked about issue.

Tu Le:
But do you, outside of design Lei, does it bring anything technology or innovation wise? It looks good, but am I bringing anything to the table that, maybe the sustainable thing? But.

Lei Xing:
The use of materials, but yeah they used the five human senses to talk about the launch, right?

Tu Le:
They’ve taken after NIO on that branding stuff, right? On that design and branding stuff for sure they've taken after NIO. But at the end of the day, I just, because you attach Polestar to Volvo, maybe. I don't know, I can't separate those two brands.

Lei Xing:
So we can look forward to the EX90 and see how that will be compared to the 3, from Volvo.

Tu Le:
 So and, how they will differentiate between Volvo EVs and Polestar EVs. I think that'll be an interesting study and marketing and positioning as well, because obviously Polestars are more sportier, but not more premium, more sporty, right? More advanced in technology.

Lei Xing:
Performance, performance. 

Tu Le:
So NIUTRON. You'd tweeted about NIUTRON. So let's talk about that. First of all, Xiao Niu and NIUTRON, I don't know how to say it. They have the same founder, but it is not connected to the electric moped company from China. Two separate entities, they don't share anything, they don't share any capital, is a completely separate entity, separate company. So there's still confusion about that. The founder of Xiao Niu, the electric moped company, is also the founder of NIUTRON, but he has nothing to do with Xiao Niu, as except for the fact that he's still a major shareholder of that company. So what did you think of the NIUTRON?

Lei Xing:
I think the only highlight, all those specs, right, you can find, they are competing against all the recent launches in terms of range, whatever, ADAS. But I think the highlight was the smart stacks HMI which kind of having their own OS, and let's say Apple CarPlay at the same time. That was a bit interesting. And then that center screen has the physical buttons on the bottom. I kind of liked it, and the car felt simple, straightforward, clean design. And they've got over 20,000 reservations. And this is, the car is being produced at Dacheng. Dacheng is some other company that didn't survive. And now they're utilizing this production asset. So.

Tu Le:
Which we're going to see a lot of if 2023 pans out and turns into a global recession and a slowdown in the China market. We're going to see a lot of these Chinese EV companies that you and I have probably talked about in direct messages, in private conversations but not really brought up in China EVs & More podcast. We'll probably hear about them kind of going away and then asset sales in China or factory sales in China, IP sales.

Lei Xing:
And NIUTRON’s tactic is also offering both a BEV and an EREV version priced right below or right around RMB300,000, which is trying to undercut, let's say, the L8, L7, ES7, G9, which are priced much more above the RMB300K price point. So I think their kind of positioning.

Tu Le:
I think their market is going to be the Xiaomi market, the JIDU Auto market. Now those consumers, so maybe this head start that they get will allow them to grab share prior to the launch of the Xiaomi car and the JIDU ROBO-01 car. So hey Lei, it is 3:50. So let's open the room up to any questions, comments, anything you guys want to talk about, we're open. We'll continue to talk about some of the things that I wanted to bring up. We had already talked about BYD struggles, those struggles continue in Australia, although they have their foot on the accelerator still in other parts. Faraday Future, the shares were down 25% this week.

Lei Xing:
Half a dollar or something?

Tu Le:
Yeah, they're at all-time lows, and they're down 93% since the beginning of the year with a current valuation of $166 million and trading at 51 cents. That's because there were some borrowers that converted their promissory notes into shares of the company. And so the saga continues with Faraday Future, a $166 million company that has not generated any revenue, but is supposed to be launching a vehicle by the end of this year or production of the vehicle FF 91 by the end of this year, not likely. And NIO’s Li Bin said that he wanted NIO to be the 5th largest global automaker by 2030, right?

Lei Xing:
And in the U.S., market planned by the end of 2025.

Tu Le:
So just to give everyone a sense, the current Top 5 in the world are Toyota, and we're talking about vehicle sales. If we were talking revenue, I think it'd be a little bit different, but Toyota,  Volkswagen Group, Hyundai, GM and Stellantis. And Stellantis last year sold almost or just over 6 million cars. If NIO wants to become the 5th largest global automaker, it needs to sell over, if it was today, they would need to sell over 6 million cars.

Lei Xing:
So you got to dream big. That's all I can say.

Tu Le:
And they're not going to get there by only selling premium vehicles.

Lei Xing:
No, we know about the ALPS that are coming.

Tu Le:
So just to give everyone an understanding, Porsche sells around 300,000 cars a year, and they're the 4th most valuable car company in the world. 300,000. They're hitting records when they hit 300,000, because before that they were selling under 300,000 cars. So the premium automakers sell a huge number less than the Toyotas and Volkswagen Groups. But if NIO and this is where we need to read the fine print, are we talking revenue, are we talking vehicle sales? Because maybe in 2030, NIO has a ton, 25-30% of their revenues come from services, so car volumes, sales volume or vehicle sales volume is probably not that important by 2030, right?

Lei Xing:
As it's difficult to fathom that they'll be selling 6 million EVs in 2030.

Tu Le:
And it looks like. The last thing I wanted to just bring up is that to repeat what Li Bin said, 2023 is going to be a struggle for Europe for energy, it's likely to affect car production in the country or in the region, because I think it was S&P said that we could be taking out a million units of volume production, volume per quarter due to energy issue issues.

Lei Xing:
So it's a huge wild card. That's, we've said it before.

Tu Le:
Yeah, so that's pretty much all I had.

Lei Xing:
There's the good and the bad, right? I mean the market is looking promising volume wise, but all these things, factors being played out.

Tu Le:
Yeah, and I want to speak to my European friends a bit more closely because I want to understand and know how they feel about this. This huge transaction, this huge move, because effectively, Volkswagen Group has invested $5 billion in an American car company, an American technology company, and a Chinese technology company.

Lei Xing:
They now own parts of Gotion. They invested into Horizon Robotics, right? Two big plays and two big sectors.

Tu Le:
So they are doing, they're writing the checks in order to…

Lei Xing:
Be relevant. 

Tu Le:
 But now their vehicles need to catch up to the rest of China's vehicles.

Lei Xing:
Trinity, baby, or Artemis, or whatever. I think they're probably betting on those.

Tu Le:
Man, the one thing that concerns me for Volkswagen Group is that I don't know how much experience they have working with startups, right? So let's take the, let's take the Chinese adjective out, let's not call it a Chinese AI chip startup. Let's just call it a startup. Working with startups makes you want to pull your hair out because there's a lot of fits and starts. Are they prepared for that? And then add that layer of, is CARIAD China really going to be pushing software updates to the rest of the world? Could we see that being driven by China?

Lei Xing:
I think they'll play a role in some of the development, but not necessarily, as you said, but primarily within China.

Tu Le:
They need to play a leading role though, Lei. They need to play a leading role. That's how I feel. So that's it for me. And unless anyone has any questions or comments, we can pull you up. If not, Lei, you have anything else?

Lei Xing:
Ok housekeeping. Our latest MAX episode dropped, has dropped. It's our conversation with Dr. Jun Pei, founder and CEO of Cepton, the LiDAR, Silicon Valley-based LiDAR company that's supplying LiDARs to GM’s Ultra Cruise program starting next year. So make sure to listen to that.

Tu Le:
It's good to compare and contrast what Omer Keilaf says with what Dr. Jun Pei says.

Lei Xing:
Yeah, totally a different technology route and approach.

Tu Le:
Because Dr. Jun Pei emphasized the bridge, the ADAS bridge, and how they're focused on fulfilling that space and that opportunity with their product. And they're not using a MEMS technology. They're using an MMT which is derived from audio, not visual.

Lei Xing:
And the other housekeeping is, I will be at the Paris Motor Show.

Tu Le:
Bonjour, man, Bonjour.

Lei Xing:
So I will be over there starting later this weekend and early part of next week, I’ll come back on Tuesday. So we'll get to talk about some of the China factor, BYD, ORA, SERES are the three Chinese brands exhibiting in Paris. I had said a while ago that I would be seeing these Chinese EV Inc. brands outside China. Yeah, and it looks like that will happen. I'm kind of excited because it's right, it's anytime that I'm seeing these Chinese brands, the Chinese are coming, it's exciting, for the good and the bad.

Tu Le:
I think it won’t be as fun as the Detroit Auto Show, man.

Lei Xing:
It's going to be a totally different feel. I'm sure of that.

Tu Le:
I'm anxious to hear what your thoughts on size and kind of energy is. So I've never, have you ever been to the Paris Motor Show before?

Lei Xing:
Yes. Paris last time was 2016.

Tu Le:
Is it pretty exciting? Is it pretty laid back?

Lei Xing:
It's both, it's Paris, right? It's French.

Tu Le:
How far from Paris proper? Is it in the burbs or is it in the city?

Lei Xing:
It's not in the burbs, but it's a little bit farther away from the city. What's the place called the Versailles? Did that, my French is really bad? So it's like an exhibition ground for where the auto show is held.

Tu Le:
So like Shunyi.

Lei Xing:
Like that. Kind of like that.

Tu Le:
All right, cool, man. I guess I will be texting you from Paris, direct DMing you from Paris, but we do plan on launching our next MAX episode really quickly. And now please look out for that Monday or Tuesday.

Lei Xing:
Yeah, and also hopefully we'll try to get Dr. Yu Kai. I'm kind of possibly get him on the pod. So.

Tu Le:
Dr. Yu Kai is the founder and CEO of Horizon Robotics, by the way.

Lei Xing:
I think this is good. I guess period in time, now with this huge deal, that kind of talk about their perspective on things. 

Tu Le:
Lei, I think this 3 pm kind of works. I don't know what you think.

Lei Xing:
Ok. I'm fine with it.

Tu Le:
We can move it to this slot for a few weeks and see how it goes. Thanks again, everyone for joining good morning, good afternoon and good evening, and we will speak with you all next week. Have a good weekend everybody. 

Lei Xing:
Ok, alright, thank you again, bye bye.

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.