China EVs & More

Episode #88 - Lei Goes to Paris, Tu Goes to San Francisco, The Lower Segments Drive the Sales Volume in China

October 28, 2022 Tu Le & Lei Xing
China EVs & More
Episode #88 - Lei Goes to Paris, Tu Goes to San Francisco, The Lower Segments Drive the Sales Volume in China
Show Notes Transcript

The pod starts with Tu and Lei talking about Tavares' comments about doing business in China and how Europe should place import tariffs on Chinese imported EVs into Europe. They discuss whether his comments were controversial or not. 

Lei then takes a few minutes to discuss his time at the Paris Motor show and the Chinese brands that both directly and indirectly attended and how it seems that they've infiltrated the. market already.

Tu talks about his trip to San Francisco and the panel that he sat on regarding China US trade and IP rights. 

The pod ends with a discussion on EV sales and the pricepoints that dominate the volume for China's record sales year that still has almost a full quarter left. 


CEM #88
Recorded 10/21/22


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:
Hey, good afternoon from my side. I am your co-host Lei Xing, former chief editor of China Auto Review. This is episode number, lucky, 88.

Tu Le:
Baba (88).

Lei Xing:
Les Chinois sont arrivés, excusez mon français! The Chinese have arrived. Pardon my French. So, basically, you were in San Francisco earlier this week, and I was in Paris for the Paris Motor Show, so lots to talk about. I don't know where to begin. It's, so, this is, this is a trip that I was invited by Mercedes, by the way, for their EQE SUV launch, and this was a 48-hour trip. So I arrived in Paris at about 10:30 am local time on Sunday. And I left, my flight back was at 10:30 am on Tuesday. So it's a 48-hour trip. So I arrived, the afternoon, I had a chance to check out Paris, the Notre Dame Cathedral that was being renovated from that fire. I finally got to see the Louvre Museum and the Mona Lisa, after all these years that I've been to Paris. The first time I went, the Louvre was on strike. So I didn't see it. That was 2001. And the last time I was in Paris was 2016 during the Paris Motor Show. And that evening was the EQE Suv launch, which was kind of the culmination of this 6 years of the EQ kind of offensive. It's almost the end of the line because all of the other segment vehicles have been launched. A, B, C, E, S and the S SUV, also the EQV, there's some other AMG models as well. I also got to talk to Ola Källenius, the CEO whom I last met in, almost 3 years ago at the Guangzhou Auto Show, then he was just on the CEO job for half a year, taken over from Dieter Zetsche. I remember they all, these CEOs, whenever they go to China, they would wear a Chinese flag pin on their suits just to kind of show the importance of the market.

Tu Le:
Support.

Lei Xing:
Yeah. And so I got to talk to him and it was almost an exclusive interview. So I must say, because there was another guy from Global Times who was stationed, based in Germany. But he was there.

Tu Le:
And you are independent.

Lei Xing:
Yeah, I'm more independent. So actually, it was about 25 minutes. I think I asked about 5 or 6 questions. It was mostly on the EQ strategy so far, the electrification, Apple, whether it's a friend or foe, and China. And so this was the morning of the 17th after the previous evening when they were launching the global debut.

Tu Le:
Don't leave out those details. So where were you when the debut, was it at the Louvre? What’s it like?

Lei Xing:
The debut was at the Musee Rodin. It’s where, it's one of those famous…

Tu Le:
Another fancy place?

Lei Xing:
Yeah fancy place. It's where one of those, the famous museums where the Thinker, the sculpture, the Gate to Hell, and also the Kiss. Those are the quite the famous sculptures by this Rodin, the famous sculptist. It was almost like and they showed all the EQ models that are launched so far, and also all the concepts, the EQG, the Vision AMG, the EQXX, and then the Maybach, all of these models. And I think its interesting to point out is we heard about Carlos Tavares’ comments on China. And I would say this is a completely at the extreme ends of what Ola said versus what Carlos said. I think that obviously, everybody has their what, prerogatives or agenda or whatever. But I thought that was an interesting contrast, sharp contrast of the importance of China, as far as on the Mercedes side of it, and then kind of on the Carlos side, just kind of like, you know, yeah, we don't have to be there producing, if so be it. So that was interesting to contrast and compare.

Tu Le:
I'm going to tell you what, though, that's what's being said. Tavares is basically giving himself the ability to say what things are being said behind closed doors likely in Europe, in the United States, right? Because it's a reality that these companies kind of do struggle with their JV partners at times and following the rules of what's going on in China. And generally speaking, they've been living high off the hog, so they've been quick to bite their tongue. And so with Tavares now, not manufacturing there and effectively giving up the market, right? Because you're not going to import your way into any type of leadership role in China. And so I think it's okay for him to make these types of comments, because his opinion is not unique, let’s just say that.

Lei Xing:
Well, from the Chinese media chatter, it's almost 100% dunking on Carlos for saying these type of things, “we're rolling out the red carpet for you, and in Europe and in China, there's I think the gist of it is just this partnership with the GAC is not going that well, I don't think, that's why, hence the Jeep (decision).

Tu Le:
And that's the thing though, right? Because GAC is going to lose out on this, right? Because Tavares has already calculated in his financial statements, the losses that he's going to take. This is where GAC needs to come to the table, if they really want to savage this partnership. Otherwise, they need to find another JV partner, right?

Lei Xing:
Yeah, I don't blame him for these comments, but on the China side, at least on the JV side, this is when he was talking about the PSA, Citroën and Peugeot, they've actually performed really well the last what, actually doing the pandemic, compared to before, because we know the Dongfeng PSA joint venture, which is called Shenlong in Chinese, was really bad, was doing really bad. And actually, they’ve recovered quite nicely. And actually that you've seen some social media posting by these employees of Shenlong saying we're on a good way up. Now you have this CEO of the joint venture partner saying that we're going to close shop, so it's kind of, not pleasing to hear.

Tu Le:
But that's kind of the challenge. You and I know this is the challenge with doing business in China. If you say something that even could be partly true, it if it the Chinese media is just is almost like a monolith, they just are completely offended by it, as opposed to it's just a single voice and it's very difficult to be objective when maybe he is saying it with a bit of sour grapes, but it doesn't make it not true, right? So he inherited a tough situation to begin with, right? So.

Lei Xing:
Yeah, and we've seen this play out throughout this year with them announcing first that they were increasing the joint venture equity share in the GAC-FCA and then GAC came out a statement saying we haven't officially announced it. Now you kind of announced it that we don't agree that so you see that they're not in tune. And then what ended up happening was stopping Jeep production.

Tu Le:
I think GAC out played their hand because, or overplayed their hand, because I don't think they thought that Tavares was going to call their bluff. And he did and good for him.

Lei Xing:
And coming back to Mercedes a bit, I met Paul Gao, who was hired as the Chief Strategy Officer of the Mercedes-Benz Group worldwide. Now this is the highest profile, I think, Asian C-level executive at a major major global automaker.

Tu Le:
Especially now that Hau Thai-Tang is gone, right?

Lei Xing:
Yeah, and that's another extreme difference compared with, let's say, Stellantis, how Mercedes is placing such importance on the Chinese market by hiring someone of his caliber, right? He’s been at McKinsey for over 20 years. We were just chatting off the record, and he's quite intelligent, I think. And Ola is like he's in my ears all the time and I’m like, he needs to be in your ears more times because of what's going in China. And I think he said he, Paul, he said he's probably going to spend 2/3 of time, I don't remember exactly which is which, but 2/3 time in one region and the third in the other region for his job. And quite interesting, I’m still working on to possibly putting this interview, it’s already been recorded, for all pod, if that's the case, that will be, Ola will be our highest profile guest to appear on the pod. So I hope that will happen.

Tu Le:
Henrick might be upset that you said that.

Lei Xing:
Well, I mean, good thing that Henrik is keeping his promise of starting production on November 17, So.

Tu Le:
I’m just joking, I’m just joking.

Lei Xing:
No, I’m saying that it was actually a candid conversation, sort of like when I talked to Wöllenstein, right? I think he did say to the effect a little bit more diplomatic about a level playing field. He basically welcomes the Chinese EV Inc. to Europe because it's a natural thing to do and just like Mercedes is in China. And I think also talking to some of the Mercedes engineers, they did, our conversation naturally went to NIO, and also some of the reporters that were there that are based in either in UK or Germany. I think one thing I heard was that if NIO, the ET7, some of them who's driven it, was benchmark against, let's say, German engineering standards, there's still improvement. These are coming from the engineers as well as the report local reporters. But they said that this is, it's well done, it should sell well. And now we just heard NIO pivoting to that purchase option what, two weeks after a launch. So they're listening to their customers, at least they're making changes quickly. Hopefully, we'll share this contents of this conversation with Ola. 

Tu Le:
Nice. 

Lei Xing:
Because from this Mercedes, I think that the relationship goes really back 10 years. So at the end of 2012, is when they hired a Hubertus Troska as their Daimler China head and also on the board, it's been 10 years and over the years I’ve attended quite a few of their events. Over in 2016 when they announced the EQ brand and C.A.S.E., right? I was at the EQC global debut in 2018. I was that the Frankfurt Motor Show in 2019 and then speaking last to Ola in Guangzhou in 2019. So just kind of see, I think I asked him about kind of the 6-year progression of the EQ and electrification strategy. And he said, “it's a solid first few kilometers of a long marathon, and there's a lot more running to do.” So now, it's going to be, all of these EQ products are on the EVA, what’s called the EVA platform. In 2024, they're coming out with the MMA platform for the compacts. So for the C-Class sort of models. And then if you remember, in less than a year, they updated their strategy from electric, leading electric to going all in, 2030 where markets allow, right? And he talked about Apple, he talked about in China really investing in local kind of R&D to have features that meet the local customer needs. 

Tu Le:
It’s amazing you think about this Lei, it's amazing that these companies, Volkswagen, GM, Mercedes have been doing business for over 30 years in China. They're just now talking about investing in local R&D, that's how, that's how easy it was for them to make money. And now how the pendulum has swung so quickly and so violently, that they're scrambling to try to build a “local product” or a product that has features that would be attractive to the local market, right? And so this is kind of a microcosm of why I feel that it's good for them to be humbled, because they've had it for the last 30 years so easy in China. So.

Lei Xing:
Yeah, and he's like I plan to be, I want to go back to China and spend some time there. But, you know.

Tu Le:
Because it's their most important market, bottom line.

Lei Xing:
And now we just heard that story from Handelsblatt on Olaf Scholz trying to have a delegation visiting China, right?

Tu Le:
He will.

Lei Xing:
That agenda.

Tu Le:
And so I was contacted by a journalist about that. And this coming on the heels of Volkswagen’s largest transaction in recent memory. And these companies retrenching, Germany, the German companies retrenching in China. So Scholz is going to have an interesting conversation, but I do want to emphasize that China EV Inc., the Chinese government is going to have to either play nice or let their Chinese EV companies that are entering foreign markets, risk them being shut out of the market because there could be social media sentiment against them if the Chinese government does this or does that, that's never in the last 30 years, that's never happened, right? Because number one, there haven't been any Chinese companies really exporting anything. And then number two, the relationships with the Chinese government and other countries have normally been pretty pretty good, but it's deteriorating in Germany is one of the countries that I think is going to take a much stronger, they're going to take a much more confrontational view towards China moving forward. I was told so.

Lei Xing:
Yeah, and then the afternoon of the 17th, which was the media day for the Paris Motor Show, I spent quite, just the whole afternoon just walking the show. Macron was there in the morning. I wasn't there and I think he just walked right in. There was no, nothing like what happened with when Biden visited the Detroit Auto Show. So I think people are saying, man, there's no security, you just, right, it was lax. Somebody could have just pulled out a gun or something, who knows? I think there was some chatter about having some kind of a local requirement for these EV incentives, let's say, would something happened like it must be produced in Europe to be able to enjoy certain incentives.

Tu Le:
I don't think there's any doubt that's going to happen.

Lei Xing:
Yeah. That's so…

Tu Le:
And I don't think that any of the Chinese EV companies believe that they can import their way into Europe, they have to build locally, that's the bottom line.

Lei Xing:
Yeah, but for now, so coming into the show, my summary was we knew that BYD, we knew that Great Wall Motor’s WEY and ORA were attending. That was the official. So I think that was kind of. So this is how I summarized coming into the show before I spent that time in the afternoon that this will be dominated by the French homegrown brands, Renault Group and Stellantis, right (half French), have dominated by Chinese brands and the third of it, these local startups or other startups. So let's say Fisker was there, VinFast was there, Hopium, NamX these French hydrogen kind of startups? And this Microlino, I posted some videos on social, Microlino the Swiss startup trying to kind of copy the Isetta, a little car that you open the doors in front of you, you open up. That was my expectation.

Tu Le:
It’s like these micro cars, right? 

Lei Xing:
Yeah but after walking the show, man, my summary was: full of surprises, I said, I tweeted this crouching tiger, hidden dragon, full of confidence, and yet, a lot of work to do. That was my assessment. And a total of, I counted nine. So either nine Chinese brands or automakers that are under disguise were represented either directly or indirectly at the Paris Motor Show. That I thought was quite surprising. I mean BYD, WEY, ORA, we don't, I mean we talk about them all the time, but one interesting company is XEV. This is an Italian based startup that was started by Stanley Lu (Lu Di), who used to be the head of design for JAC’s European design organization based in Turin, in Italy. And he founded this company XEV in 2018. They own a kind of like a contract manufacturer called You Yao, in English it’s YoYo. And the car being exhibited is also called the YoYo, so like a two-seater smart style EV and his business model is manual battery swapping.

Tu Le:
Okay.

Lei Xing:
So what he found out was in the 300 million, let's say, vehicle owners, he said in Europe, he said roughly a third of that don't have really good access to charging, right? And really these small EVs and I’ll talk a little bit more on some of the other ones later, are really becoming attractive for local mobility. So he thought that these type of vehicles he signed a deal with ENI which is the Sinopec of Italy. There are probably the largest a state-owned company, the largest, let's say, oil giant or energy giant in Italy that will work with them on setting up these footprints of these manual battery swapping stations. Basically, what happens is you drive your car and you go up to these stations and there will be people physically taking all the batteries from the station to your car or vice versa, to swap the batteries. There's three sets of batteries. They're really heavy, and the cars themselves are, you may have heard XEV, they have a lot of 3D printed parts, so the door side panels, the front fascia, are 3D printed, these things they sell for about 15,000 Euros, and with incentives, they can go down to 12,000 Euros. And he's saying that they've already like sold 10,000 units. Mostly, I think, in, he says, seven countries, including Italy, and they're offered in, let's say, different models, different purchase models, you can buy them, you can rent them, you can lease them.

Tu Le:
Are they legally considered a passenger vehicle or a motorcycle?

Lei Xing:
Yes. And the car is actually nicely designed. There's a keyless entry and there is these frameless doors. When you close the door, the window goes up automatically, what you call it. These are only found on like premium cars. So he's saying that this is really the model trying to aim at the masses who don't have access to charging. And he's planning to set up a huge footprint of these manual battery swap stations, which is a lot less involvement in upfront investment. So few tens of thousands of Euros, rather than, let's say, a regular gas station would be a million Euros or a swap station, which will be.

Tu Le:
He's still going to need an energy partner to…

Lei Xing:
that's ENI.

Tu Le:
Those batteries need, that's for Italy, though, right? But if he expands out past Italy, then he's going to have to find partnerships with individual.

Lei Xing:
Sure. But ENI so far as is their biggest partner that they've signed up. So I thought that was interesting, but like XEV when you go look at the booth, you wouldn't know that this is a Chinese. It's under disguise. And he's saying that he's trying to launch this model in China starting in the second quarter of next year. Yeah. I think the manufacturing the YoYo, I think it's based in Hefei where JAC is based. Yeah, so that's one of the surprises…

Tu Le:
But this is one of those things Lei that  I guess he gets a 3,000-Euro subsidy, but if they change the requirements on that, he's going to be shut out of it, right? So. 

Lei Xing:
Yeah there are risks.

Tu Le:
So he's got to be careful about that. I'm not saying that someone wouldn't buy it at 15,000 Euros, but they would at 12,000, but this is just an example of importing risk, right?

Lei Xing:
Yeah. So that's XEV and then similarly, is the Dacia Spring, which is a no frills EV selling for just under 20,000 Euros. I talked to this guy called Xavier Martinet, who is the senior VP of marketing sales at Dacia. I chatted with him for a couple of minutes, and he said, retail, the Dacia Spring is the top-selling EV in France, not including the fleet sales, but including fleet sales, he said number one is, guess who? You’ll never guess the model: it is the Peugeot e-2008 for French market as a number one, including everything flea sales and private. He said, interestingly, the Dacia Spring has a conquest rate of 80%. What happens is a lot of these premium buyers who already own premium cars, they buy this Dacia Spring for local driving. And this is a car made by the joint venture eGT which is between Renault-Nissan and Dongfeng. I believe this is made in Shiyan, in Hubei Province. And it's selling very well. It's a China made EV so that's another way that Chinese is coming or has already arrived. And the similar model is the Mobilize Limo, which is produced by the JMEV, so the other Renault joint venture in China with JMC, in Chinese, the model is called the Yi, and seriously, all of these, may be except the Dacia Spring, the BYDs and the Great Walls, and this Limo, if you look at the build quality, if you look inside, whether interior, exterior, you really can't relate them to Chinese cars or Chinese level quality anymore that they're just if you slap a Mercedes, if you slap some other brands on it, you wouldn't tell because it's so well done. I think that was the other thing I found that even compared to 2019, I think it's a huge step up in terms of build quality, perceptive quality, and in some ways even better, I think than…

Tu Le:
I think that's the whole point, right? The proof is in the pudding. These cars are starting to enter Europe and you're not hearing any headlines about build quality. You're not hearing about these Chinese features that are trying to be sold to Europeans, right? So it is not going to be an issue of quality, reliability, design. It's going to be about protections like the IRA from the United States, and highly likely going to have a European equivalent. And at the end of the day, this is where I’m a little bit torn. The United States talks about free trade. And however we are a free trade country. And I’m all for that, because as a consumer who works hard to earn his money, I want the best products that I can buy for my money full stop. And so I get that part of it, but I also feel and this is me wearing my U.S. hat, that it has been unfair that Facebook, Google have not been a part of the China market, right?

And so where do we go from there as China, at least an automotive standpoint really hits its stride, because like you said, it's not going to be a quality issue, it’s not going to be a reliability issue, it’s not going to be a design issue. It's going to be a protection issue of about whether or not Chinese EVs will be accepted in other parts of the world outside of China.

So right now, it's theoretical in the United States, but it's starting to happen in Europe. And the Europeans better move quickly. Otherwise, before they know it, there's going to be two dozen brands, either through a joint venture with a European partner or a Chinese brand, full fledged Chinese brand that's going to be over there. It's going to be taken sales from Dacia, it's going to be taken sales from Peugeot, it's going to be taken sales from Renault. Then there's going to be this backlash, right? So I don't know what the answer is. I don't know what the happy balance is. I do know that the foreign legacies, whether they're American or whether they're in Europe, they need to step up. There needs to be no excuses about whether or not they can compete. They need to have more products in the market. They have better products, cheaper products. And that can compete side by side on a feature and on a price standpoint, because currently in the United States at least they don't, as long as China EV Inc. hasn't come in multiple brands to the United States, there's still an opportunity for the U.S. legacies to kind of flood the market with great product, right? That's affordable.

Lei Xing:
Exactly right. So I think when we talk about quality as a Mercedes, they will have their benchmark on how good the engineering of the vehicle is, but it's really no longer this Chinese brand image of poor quality, cheap. Although that still sells I mean that Dacia Spring is a no frills, definitely a no frills EV but these others that the BYDs that are priced in the high, 50,000, 60,000, 70,000 Euros, it might be high, but at least, at least the build quality is there to feel, to touch and feel?

And then also the MG Marvel R was exhibited at a kind of a joint booth, also at the same booth where the Fisker Ocean was exhibited. This was a booth of the CA Mobility. It's part of the also Italian company, like a dealer financing, no, not Italian. CA is the French bank. The Xingye (Crédit Agricole), forgot the English, that's offering these models and I spoke to a MG Motor France guy. He says this MG has benefited partially of the British heritage. So it's a Chinese brand, but at the same time, it's not a Chinese brand, and it's selling pretty well as well.

And then, lastly, is this French company called Espace Vehicule Electrique or EVE in short, which showed a couple of SERES models, and hiding in the back, the LeapMotor T03 and the C11. And the guy I talked to was, said the LeapMotor, these two cars that they plan to launch either end of this year or early next year. This is not official yet. So I mean LeapMotor officially, they didn't make any news out of this. So I think that's it, all the Chinese brand, I think, right? So BYD, WEY, ORA, Mobilize Limo, Dacia Spring, MG, SERES, and LeapMotor. So these are the nine.

Tu Le:
I'm glad you were able to get a lot out of this man, sounds like you packed a lot of research in 48 hours. And so…

Lei Xing:
You know what, we've been talking on the show for, this is our 88th episode and we’ve been about talking about China EVs. And I’ve not seen or physically touched a China EV until now. So I think it was due.

Tu Le:
We should also have folks, Google Paris Auto Show because a lot of headlines will say Paris Auto Show, China electric vehicles or Chinese EVs, enter or flourish or coming out parties. So we weren't the only ones that noticed the number in quantity of products from China at the Paris Auto Show.

Lei Xing:
Yep, in terms of the size of the show is really two halls. Hall 4 and Hall 6 and each hall had a few Chinese brands。

Tu Le:
Bigger than Detroit?

Lei Xing:
I would say size wise, it's probably two Detroit. So there's two halls. Each hall is probably the size of the Detroit Auto Show. So roughly. There was at the end of the afternoon, there was a third party organization that were organizing test drives. I signed up for a test drive, the BYD ATTO 3. I had to do it because right, if I'm there, then maximize my time, right? So I did and driving on the streets. Awesome car, features are very quirky, as you've seen on my tweet. It's a good, all around car, 38,000 Euros. But we've also heard there's, I said a lot of work to do, right? What's happening in Australia of the same ATTO3 ? I'm not sure if the features are the same, and you had asked me to check the middle seat and I didn't have a chance to do it, but.

Tu Le:
I think BYD is shipping that as a four-seater in Europe, but they don't have that reg, they don't have that middle hook reg in Europe that Australia does so.

Lei Xing:
Right. And it did get a 5-star Euro-NCAP, which I think the WEY Coffee 01 and the ORA Funky Cat, I think they also got five stars. I think I read that some where.

Tu Le:
We just have to remind our listeners that the Australian market is one of the most stringent for homologation and safety standards in the world. And so just because a car passes regs, safety regs in Europe or the UK, it does not mean it's going to pass in Australia.

Lei Xing:
For BYD, I posted some videos, Great Wall, the only regret that I have is I tried to talk to for BYD it was Michael Shu, who is their European head, he’s Chinese and for Great Wall, it was this guy called Mr. Meng (Henry Meng). And I talked to their PR people, and they said they're all packed with interviews and events in the afternoon. But BYD, there were support staff that came from Shenzhen. They have to go back and quarantine.

Tu Le:
And that's the other thing too, because Li Bin and Lihong.

Lei Xing:
They are quarantining right now.

Tu Le:
Because of the Guangzhou Auto Show, right? And the events surrounding December is going to be NIO Day, right? So man, give us 6 months Lei and they'll be inviting us to these events. They won't they won't say that there's too many and too busy. They'll be wanting us to be part of these events.

Lei Xing:
So for so for me, the China factor in Paris was having been able to talk to Ola and Paul off the record. You heard about Carlos’ comments on China. And then speaking to these people at these Chinese brands.

Tu Le:
Let me also really quickly say Lei, I don't think Tavares’ comments were that controversial to be quite frank? 

Lei Xing:
I agree. But the Chinese chatter has really dunked on him.

Tu Le:
Because of the thin skin that they tend to have. So to me, that was a nothing burger, because I really don't think he was trying to create waves, right? Or make waves. But.

Lei Xing:
And now and my other comment is just these Chinese brands they, right, the French is sont arrivés, they’ve arrived, but they need to be humble about the market because right, all the, either politics or something else that need to be careful, but quality wise, they are there man. 

Tu Le:
So as you state that in about Paris and France, there was an SCMP article that just posted on Twitter that says the EU leaders talked to Scholz and said no separate deals with China. 

Let me unpack for a minute or two, my couple days in San Francisco. I was invited by a licensing organization called LES, at their U.S. North America conference in San Francisco. And this particular panel was for automotive licensing. And so I was the only non-lawyer on the panel. It was a room full, of a breakout room, and there's probably 50 people in it, three panelists, Steve Gaysler. I think he's the North American general council for Huawei and Sunny I want to say Huang, who is a partner at a Pittsburgh law firm that does IP law for her clients, her Chinese clients in the U.S. or vice versa. So anyways, we got into a discussion about the escalated restrictions on the chips and on the capital equipment and how U.S. employees in China working for either these equipment companies, these chip companies, or for these Chinese chip design and fabrication companies have been put in a really tough spot. And I think we could be starting to see the bifurcation that people are talking about between the United States and China on the technology side. I sure hope there's a middle ground or an off ramp so that things don't keep on escalating, but for the United States to drop those increased restrictions on China, during the week of the 20th Party Congress, I’m sure that's not lost on the Chinese government.

And I’m sure that there was an article, was a Reuters or Wall Street Journal or Bloomberg. That said that the Chinese government is scrambling to assess what it all means, what these new restrictions mean. And so I’m assuming that within the end of the year, by the end of the year, there's going to be some sort of response or retaliation. There always is. And so it's unfortunate because there are people that are going to get caught in a crossfire. Some of them are probably friends of ours that and tough choices are going to have to be made likely over the next 6, 12 months. But our consensus was that we didn't see the United States government really easing off. And so this could complicate things for ADAS systems in Chinese EVs in the next 12, 18, 24 months. It could complicate things for autonomous vehicle startups in China.

So I think it's an important thing to really, really keep a close eye on. And then really quickly, the Volkswagen Group announcement also happened, right after that, right? So was that a coincidence? Was Volkswagen aware that this was going to happen? Maybe, right? And so they decided that they needed to protect themselves by making this investment in Horizon. So to me it all is related some way somehow. So.

Lei Xing:
It feels like one of those, a step forward here and another step backward there, kind of things, right? Case in point BMW Group’s investment with Envision AESC which is a Chinese company and nowhere in their press release said this was a Chinese company.

Tu Le:
It said it was Japanese. The press releases said it was Japanese, which was a head scratcher to me.

Lei Xing:
I saw some people posting in WeChat moments saying this is BMW with this Chinese company.

Tu Le:
I couldn't believe it. There was two articles that I read, they both said that AESC was Japanese.

Lei Xing:
There's Japanese involvement. 

Tu Le:
Yes. Wasn’t it acquired by Nissan? From Nissan?

Lei Xing:
Yeah, that was a few years ago, I think, before the pandemic.

Tu Le:
But I don't think Nissan has anything to do with them anymore.

Lei Xing:
No, I don't think so not anymore.

Tu Le:
I'll be quite honest with you Lei, about 4 years ago, 4 or 5 years ago, my buddy who works in private equity in China was looking at that transaction, a Chinese private equity firm was looking to buy that, because Nissan was off loading it, right? It's kind of funny that they still, the media just can't get it, right?

Lei Xing:
And at the same time, the $2.8 billion grant on those 20 companies in the U.S. right? Cathodes, anodes, recycling, then plus, again, Our Next Energy they had the official opening was it, of their HQ?

Tu Le:
And BMW also announced an investment in Spartanburg, South Carolina to prep their factory for four EVs that are going to be built there.

Lei Xing:
Six, yeah six X EVs. 

Tu Le:
And then $1 billion or actually they didn’t disclose the amount. But was it the AESC, it's not an AESC factory in Spartanburg, but it's a different battery cell manufacturer that's also going to be investing. And in a short period of time, we've seen billions of dollars worth of announcements and investments in the U.S. for battery cell capacity. And then friend of Sino Auto Insights and China EVs & More Paul Lienert.

Lei Xing:
Yeah I saw that.

Tu Le:
Just posted an article, a Reuters article, Paul Lienert works for Reuters as a journalist, automotive journalist here in Ann Arbor. He said that they did a recalc, and there is a total of $1.2 trillion that has been announced that's going to be invested in electric vehicle manufacturing and battery cell manufacturing globally by 2030. So there's going to be a lot. I feel that we don't need to say this, because we've been evangelists for so long Lei, but we've been preaching about this me for the better part of 4 years. And then me with you for the last 2 years, right? So it's good that people are actually being able to see and feel how tangible this is. But it's also going to have these other things that go along with it, right? These challenges between the U.S. and China. And there's going to be a lot of politics, like literal politics, not red tape politics, literal politics, and diplomacy that is going to need to be worked out. If China EV Inc. is going to reach its full potential globally, right? So that's really all I had. I think you did a great summary of the Paris Auto Show. Anything else? Because I'd like to open up the room up.

Lei Xing:
No. I’m sure there were a bunch of news out of China that we probably missed or at least I missed.

Tu Le:
But it was the tail end of October holiday, too. So I don't think there was a ton.

Lei Xing:
Our friend, looks like you met up with the Frank. And he posted some update on the JIDU, the first what, the prototype?

Tu Le:
So they're going to show it on October 27. And I got invited. And then there's three or four companies that asked if I was going to be in Guangzhou, unfortunately, I will not be. We'll have to watch them, so we're going to stream them basically.

Lei Xing:
But on Monday is also the Xpeng’s 1024 Tech Day. And then next week supposedly that brand launches, right? You remember, right? If they still stick to that date that they said.

Tu Le:
Which is 50:50 because you know them and I know them. And just because they say something, it'll change five times before.

Lei Xing:
The other thing I thought of, was what you shared, Lei Jun’s posting on Twitter, of Xiaomi’s ambitions of being selling what 10 million EVs.

Tu Le:
That's right. And we didn't even talk about Foxconn, how Foxconn wants to be 50% of the market of contract manufacturing.

Lei Xing:
These huge, lofty goals.

Tu Le:
There's no lack of ambition between NIO, Foxconn, Xiaomi. But I will have to say, and I don't think it was a translation thing. I think that he's over simplifying. And if he thinks it is just a connected consumer product, he's going to be sadly mistaken, because it's much more complicated than that. I hope that was just an over simplification of how he was describing it and not the company's approach to developing and building this Xiaomi car. Because I just don't agree with because the car is never going to be a consumer product, just because of the fact that it's a dangerous thing, projectile that can go 100 miles an hour and hurt somebody, right? So you can't treat it the same way. Man, I just think that's an over simplification and kind of lazy. But anyways.

Lei Xing:
He'll probably be in for a rude awakening. And a device is certainly not a mobile phone device.

Tu Le:
Exactly. 

Lei Xing:
And if we're talking about cars becoming a device.

Tu Le:
And that's the other thing too, because from a manufacturing standpoint it’s completely different. And then number two, my point earlier that it is not something that you can just call somebody with. It is something that if pointed in the wrong direction could really be dangerous. But let's open the room up. If anyone has any questions. The other thing I wanted to talk about, let me see here.

Lei Xing:
Congrats to our good friends at RoboSense on opening their Plymouth office.

Tu Le:
Yes.

Lei Xing:
So after Cepton, we have another LiDAR company establishing presence in the Greater Detroit area.

Tu Le:
And unfortunately I was not able to attend, but I will try to stop by in the near future. The other thing that I think, so you had talked about Frank, so Frank Wu, JIDU Head of Design originally spent 8 years at Cadillac here in Detroit. He's back, picked up an award in Singapore for the Red Dot. He's on his way to Japan in a week to pick up another design award for the vehicle and the charging station that they designed. So congratulations to Frank, super great guy, very Midwest like me. They have a few surprises, JIDU does at the Guangzhou Auto Show that I will not mention.

Lei Xing:
He already shared that in our pod. So maybe there will be more.

Tu Le:
And most of what we talked about was off the record, but I'll be able to talk to you about it Anyway. It's like, but he's been super excited. He did clarify that the JIDU Auto is aiming for Tesla that's from a feature standpoint and from a market standpoint. So I don't think that is any secret. So but because and I were speculating at that price point and those features whose competitors were or who JIDU’s competitors were. But he did articulate that they're going around after Tesla’s customers. So good luck to him on that.

Lei Xing:
Not surprising. I mean the RMB200,000 price range.

Tu Le:
I did want to talk about one post I had in my newsletter and that CNEVpost did a price breakdown of market share for, at certain price points. It was triggered by your talking about the cheaper cars, right?

Lei Xing:
The below RMB300,000, right? I saw that.

Tu Le:
And so we talk about NIO. We talk about BYD and BYD kind of fits into what I’m about to talk about, but an Xpeng kind of fits, but NIO doesn't fit. Li Auto doesn't fit. HiPhi doesn't fit. What other brands that we talk about. When we talk about 7 million cars.

Lei Xing:
VOYAH, VOYAH is priced pretty high.

Tu Le:
When we talk about 6.5 ~ 7 million vehicles. NIO's never going to push that number up. Tesla will dictate some of that number. BYD will dictate some of that number, but they're not going to be the volume drivers, obviously. And what's important to note is that 67% all BEVs, CNEVpost specified BEVs are under RMB300,000 in China when they're sold, which means that they're under $45,000. And if we look at the under RMB200,000 price point, it's 41%, okay? So almost half of the cars that are sold in China that are battery electric vehicles are less than $30,000. So we talk about probably 10, 20, 30 brands on a rotation basis right Lei? But there are dozens of other brands in China that we never talk about, that are that are contributing to this 6.5, 7 million units, right?

Lei Xing:
Sure. Look who just made a comeback: Zoyte. Zotye is back producing EVs.

Tu Le:
Is it Zotye? Or is it zoia? I don’t know how to say it.

Lei Xing:
Zotye.

Tu Le:
They are zombies. And they are zombies. Because I posted a couple of newsletters back that I congratulated Leap for IPOing, but I was like 12 months into.

Lei Xing:
The stocks are just dismal right now, including Tesla, right? It's just bloodbath, I think.

Tu Le:
Yes. And this is the crazy thing, right? So somebody had asked me this, and I forget for 2022 because of COVID, because of the supply chain, the Chinese government created an additional subsidy where any vehicle that's traded in could receive a discount, right? Was it? That's, in addition to all the other subsidies that are already in place, correct? They only added one subsidy, right? And then by at the end of 2022, that's going to go away, correct? And so 2023, I’m predicting that we're going to see a lot of consolidation, a lot of closures. I think Faraday might actually close up shop in 2023. Because if the Chinese government is not going to maintain, increase or find different ways to keep the market stimulated. If we're going into a global recession, then the less well capitalized Chinese EV companies, they're just going to have nowhere to hide, right? So I think it's going to be, 2023 is going to be a really interesting year, not only because China EV Inc. will have mostly entered China already. We'll start sending more volume that way, but then we'll also see in the United States where the charging infrastructure’s start showing up and some of these cars getting closer and closer, the end of ‘23, we'll see probably 6, 7, or 8 cars, including the Silverado EV which is going to be huge for the us market. But we'll also see Xiaomi's car, will see JIDU Auto’s ROBO-01 in production form. So there are still some exciting cars that are coming out, but those less well capitalized EVs are going to have a very, very difficult time in 2023. Winter is coming.

Lei Xing:
So the suspense is Q4 this year for China, at least it's going to be is it going to be the last hurrah? And then for 2023 is going to be a thud? 

Tu Le:
What do you think?

Lei Xing:
That's the suspense. I think it's going to continue to grow, no matter what.

Tu Le:
But not at 50%, not at 100%, right?

Lei Xing:
Ola, he said, I asked him whether he was surprised to see China’s NEV market, and he said, no, he said when that technology reaches a certain threshold, it's going to be faster than people think. So it's not going to have the growth of the past 2 years, certainly. But if you look at the penetration, you look at the percentages that their EVs are becoming your everyday vehicles to buy.

Tu Le:
Man. Brilliant minds think alike because right before I got on, I forwarded, I quote tweeted the Paul Lienert article and I said that it's going to be a trickle trickle trickle because $1.2 trillion of investment that's going to hit and be effective in the next 24, 36 months in the United States, right?

Lei Xing:
I think Q4, really, you know, NIOs and all these companies they need to prove themselves. Really, that's what we're looking to. Are they going to get to that?

Tu Le:
NIO has primed the pump, right? You and I believe they primed the pump. The ET5 is set to be a really, really high runner for them. The ES7, I think it'll be ok. But this is and I just saw another article and I’d heard rumors about this, but it looks like Xpeng is reorging some of its.

Lei Xing:
It’s reorganizing. 

Tu Le:
You'd heard the same rumor? I'd heard that rumor. 

Lei Xing:
It's forthcoming. This announcement is probably coming next week. Some of the reorganization into BUs, business units.

Tu Le:
Because you do know what last month I was on that call with Brian. And I said that the challenges in Europe and he didn't like me saying that.

Lei Xing:
I actually bumped into Brian (Gu) in Paris on the show floor. He was walking with one of his probably European guys and two other Chinese, maybe high ups. And I told him where to look for Chinese cars. He was cool. And also I spotted Hui Zhang at the BYD booth. But I was walking by I was in a hurry, so I didn't get a chance to, but you see these people are out there, scouting.

Tu Le:
Not only that, but the thing is the reason Brian Gu is probably there is because they fired his international head, right? So, or he left the company, they didn't say.

Lei Xing:
So that's why I say, you know, it's full of surprises. You never know who you see.

Tu Le:
If no one has any questions. Maybe we close it out here?

Lei Xing:
Sure. I think I was this is another, after Detroit, Paris, next will be LA.

Tu Le:
Yes, so Albert or Alfred, I’m totally sorry that we weren't able to get together. I'm going to DM you the dates that I’m back in SF next month. And we will break bread or have a drink with you probably Lei, right? So, I know that Alfred also wants us to go check out one of his portfolio companies. So maybe we could go do that too. So.

Lei Xing:
Yeah, and I feel really, really lucky and fortunate to be able to do this traveling internationally, especially seeing these few Chinese media. How when they go back that the ordeals that they have to go through. So I treasure every moment that I get these opportunities to be out there. I'll show you some screen shots of what they have to go through. 

Tu Le:
You know Paul Yang, he's posting on LinkedIn.

Lei Xing:
Yeah, he's right from Hong Kong, he’s over there in Beijing quarantining.

Tu Le:
I feel very lucky as well because I told you on WeChat that I just booked my ticket, to do that without hesitation is actually pretty pretty significant because 8 weeks ago, 9 weeks ago, I was like, man, I don't want to leave Beijing, right? I don't want to go to Shanghai, I don't want to go to Guangzhou. I don't want to go to Shenzhen. Because there's risk.

Lei Xing:
You know the CIIE is coming up in 2 weeks. They require whoever attends this to stay within the city the 10 days before the event to not go anywhere else. So that's the fine print.

Tu Le:
And this is me being a cynic. Remember that there are people and companies that are making tons of money in China that administer the tests, that sell the masks, that do all these things that have the quarantine hotels. So there's so many different reasons why certain groups in China do not want zero COVID policy to change, right? And That's why well into ‘23, we're going to have to quarantine if we want to go to China. Full stop. I truly believe that.

Lei Xing:
But now they have this 2 + 5 or something or 5 + 2, rumored, but digress. We digress.

Tu Le:
So thanks for joining everyone. I hope you all have a good weekend, good morning, good afternoon, and good evening. Lei, have a good weekend, and I’ll talk to you on WeChat.

Lei Xing:
Same to you and same to all of you. Alright talk to you next week.

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.