Tu and Lei begin the podcast with their thoughts on the Jidu Auto ROBO-01 production model unveil. They both seemed pretty impressed and detailed that Jidu Auto is going directly after Tesla customers once the ROBO-01 hits the streets in 2023.
They then get into how fast Jidu Auto has been moving in order to get their product into production and think it's even faster than what is commonly known as 'China speed.'
Lei then asks Tu - Lotus Eletre or Polestar 3? A discussion follows on about Geely and the two competing brands within Geely's own stable.
The discussion moves to Argo closing up shop - some Monday AM quarterbacking is done as to why it happened and why now.
The show closes on unpacking how Tesla slashing prices on its MIC Model 3/Y will affect the rest of the market and which companies are likely to follow suit.
Tu and Lei begin the podcast with their thoughts on the Jidu Auto ROBO-01 production model unveil. They both seemed pretty impressed and detailed that Jidu Auto is going directly after Tesla customers once the ROBO-01 hits the streets in 2023.
They then get into how fast Jidu Auto has been moving in order to get their product into production and think it's even faster than what is commonly known as 'China speed.'
Lei then asks Tu - Lotus Eletre or Polestar 3? A discussion follows on about Geely and the two competing brands within Geely's own stable.
The discussion moves to Argo closing up shop - some Monday AM quarterbacking is done as to why it happened and why now.
The show closes on unpacking how Tesla slashing prices on its MIC Model 3/Y will affect the rest of the market and which companies are likely to follow suit.
CEM #89
Recorded 10/27/22
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 we 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. You can sign up for it at sinoautoinsights.com, which I encourage you all to do. Lei, good afternoon. Can you please introduce yourself?
Lei Xing:
Good afternoon from my side. I am your co-host Lei Xing, former chief editor of China Auto Review. This is episode #89. The headlines: Argo going going gone. JIDU does, well JIDU is walking the moonwalk with the limited Lunar Edition. Lotus Eletre finally launched, and Geely's brands are going at it with each other. Xpeng holds Tech Day, I think, under immense pressure and Tesla cuts prices, also under pressure. That's the headlines.
Tu Le:
With a competitor, domestic competitor following suit without hesitation, so.
Lei Xing:
What do you want to talk about first? JIDU? Argo? I think those were the…
Tu Le:
You know, let's start on a high note. We both watched the JIDU Auto unveil. So, what did you think?
Lei Xing:
Like I said in our messages with our good friend Tony. It was good, it was a lot of substance, no “best SUV under RMB5 million or RMB500,000” BS. It's good, I think the, it's really looking back, right, this is day number 605. So that means in about a hundred days, a hundred, let's say, 130 days, it'll be 2 years old. And I don't think you can find any company that launches and probably delivers a vehicle 2 years after the brand was announced. I think that was the, this is the best example of the China EV speed, right?
Tu Le:
Let us unpack that statement you made fully, because it's not only product development speed that needs to be lightning fast, but capital needs to be there, people need to be there. The right circumstances need to be in place. And so I had lunch with Frank last week and he did say there's Silicon Valley speed, there is China speed, and then there is JIDU speed. So maybe we are introducing a new term here because we did both talk about how fast things are moving and how excited he is about everything that's been happening. And just like the Shanghai Gigafactory going up in less than a year, before job number one rolled off. I'm amazed at this unveil and how fast things moved. And I feel privileged because you and I have Frank on DM so we can ask him questions directly and he's pretty open about a lot of things I value that he trusts us like that and we're cheerleaders of his now because not only was he a guest on our China EVs & More MAX series, but he's a straight up good dude. And we want the best for everyone in the EV, AV and mobility space, right? We don't have any grudges for sure. I think the last thing I’ll say is that the car looks mostly like the prototype that was unveiled in March.
Lei Xing:
That's an important point.
Tu Le:
The last thing I'll say is that I am American. So I am not familiar and used to all of the little gadgets and all the little pop ups that happen to be in Chinese design and Chinese vehicles and Chinese websites and Chinese mobile apps, the clean lines, and almost the constraint that Frank had in designing this vehicle, I think, really emphasizes how good looking it is to me, so.
Lei Xing:
Yeah it's well designed. There's a lot of quirky design features. I think, you made an important point that this actually, a lot of the features that were on the concept addition were retained, except we knew that the LiDAR position was not going to be on the hood, right? The doors are even crazy. There's no door handles. Did you see that? I think that was interesting because I've been reading some Chinese chatter, is this how these new door handles are flush with the doors? And the customers that go into the showrooms that check out these cars. The first thing that they get, they don't know what to do is, how to open the door.
Tu Le:
The first thing they get confused about.
Lei Xing:
Now I guess, Joe, he's saying this should be touchless. You can open the door with your phone, things like that. The cockpit was pretty much, right, what was on the concept with the yoke? I heard that Joe drives a Model X himself, and he really liked it. So I think he makes a lot of decisions on these features.
Tu Le:
So just for our audience’s sake, Joe Xia is Xia Yiping, who is the CEO of JIDU Auto and Frank that I refer to earlier is Frank Wu, who's the head of design at JIDU Auto. So the two people that are primarily responsible for the design and likely the UX of the current ROBO-01. So.
Lei Xing:
Yeah, and I hear that the JIDU already has over 2,000 employees. A lot of them are working on software stuff. And this is an important point to make. And you tweeted that there's hardware and software integration, and making it work. It doesn't, I mean no matter what you have, the 8295, you're the first EV that has that Qualcomm chip. But unless you can, right, you make it as smooth as you promised, then doesn't matter what you have, the 8295, the two Orin ships, right? These are all top of the line that you can find. That's why I said it's as smart a smart EV as you can find on the market and all also with the sensors.
Tu Le:
A reminder to everyone that I was clearly told that they're targeting, competing directly against Tesla. So Tesla relative to its Chinese competitors has a really simple UX, almost too simple. In the United States, it's still, I won't say, cutting edge or bleeding edge, but it's still up front, right? Because if you look at the Ford Mach-E, there's still a physical knob. And so I told you I was talking to a bunch of startup founders earlier, and this is why we pushed our call out or Twitter Spaces out 30 minutes. But to your point about the door handles, if you are disrupting a sector, your whole job is to just to change habits and how successful they are at creating a new habit where we don't have door handles. We just use our app or we use the key fob to open the doors. I think that's a simple indication of the types of small features that JIDU wants to influence or change habits of Chinese customers for, right? So I want to remind people, because I just reminded some folks on an earlier call that you can't listen to the naysayers. And Frank and Joe obviously have not, where it's like these guys have been doing this for 30 years the same way. That's the definition of why you need to make that change, right? Not to change for changes sake, but because this is called progress. And so the one thing that I will say is that the flush hand door handles were never a legacy thing. They were, custom cars started that trend. And then the legacies and EV companies really brought that into the mainstream. So.
Lei Xing:
And Joe, he has is specific KPI which is really simple. What is success is 10,000, the 10K Club, we have to be in the 10K Club. So 10,000 deliveries a month, that's success to him. That's like a hard benchmark that internally JIDU is trying to achieve. Obviously, this specific Lunar Edition limited, they're going to only have 2,000 units, right? So the first thousand is already pre-ordered and they…
Tu Le:
to some pretty famous people.
Lei Xing:
Yeah, I heard Robin Li, he's owner 001. The author of the Three Bodies, that famous Chinese novel, he is 004. And if people have read about that novel, there's this Chinese called Qianjin Si, which means the battleship’s 4th accelerator gear, right? That was the meaning behind it, right? And then also this point-to-point autopilot, they call PPA which is similar to Xpeng’s XNGP, right, so all-scenario autonomous driving future. Yeah.
Tu Le:
I expect JIDU Auto to continue to be very fast. And there's going to be unveiling at the Guangzhou Auto Show. They're going to roll right into this aggressive planning and product planning. So god bless it. God bless it.
Lei Xing:
And Frank had told us sort of that this unveil in Guangzhou is not some concept. It's already done. The second model is already done.
Tu Le:
Three-quarters done or something like that.
Lei Xing:
Yeah, so it's the exterior. And then probably around the same time, they'll have the standard version, I guess lower priced. Probably, I'd say it's probably going to be around RMB350,000 or below. So below $50,000 for the standard edition and Frank did stress that this is going to be the JIDU’s, the first models are going to be above RMB200,000, right? So that's their positioning. I'm just saying Geely has a lot going on, right? So there's this, there's the Polestar 3, there's the Eletre, and they just launched that Boyue L which is a RMB100,000 car, that you said kind of looked like the ROBO-01.
Tu Le:
The silhouette looks very similar, so.
Lei Xing:
Geely’s models they span, I mean from the RMB100,000 to the, let's say $15,000 to well over $120,000 with the Eletre and Polestar 3, that’s their lineup.
Tu Le:
So god bless them because they have global ambitions and they're really outside of BYD and NIO, the only ones that have been sort of successful because MG currently sells pretty well in Thailand. LDV sells pretty well as a commercial vehicle in Australia. MG sells pretty well in the UK obviously. And so Polestar’s doing pretty well in Europe. I can't think of any other EV makers that have besides NIO and BYD anyways, that have gotten a pretty positive response from European audience, for the European audience. So we've seen what a bad reception can do. And Xpeng is basically reorganizing based on some challenges that they had. And the international head left. And AIWAYS has not been able to really gain that much traction. I think part of the challenge for AIWAYS was that they only had one product. We'll see how the U6 gain some traction, but again, I see Geely really being aggressive, how aggressive they'll be in the United States remains to be seen.
Lei Xing:
But it makes me think that at least in the China EV space, the expectations is whenever these new models, they're launching these RMB300,000, RMB400,000 models. And it's kind of expected from the consumers in the sense that it's not expensive. It's expected whereas the legacies when they launched an EV, let’s say a RMB500,000, maybe it doesn't feel right. You see what I’m saying? The expectations have totally, I think, changed, at least on the price premium, glass ceiling of it.
Tu Le:
Here's my theory on that Lei. It's because the Chinese consumer feels that the foreign legacy is selling them a Frankenstein, ICE with a battery bolted on the bottom. It's not clean sheet. It is derivative of an ICE vehicle that's not optimized for an electric powertrain, right?
Lei Xing:
Yeah. And that's why, again, you're seeing these Mercedes, Volkswagen. They're really banking on the second half of this decade with all their new, whether it's the MMA, MB.EA, whether it's Volkswagen’s SSP, right, these all new platforms. They're really looking forward to that. And whatever they have launched now is just kind of the…
Tu Le:
It’s the bridge.
Lei Xing:
It's the bridge. It’s the appetizer sort of.
Tu Le:
And I'm completely on board with that strategy for Europe and the United States. In China, within 5 years, they might get shut out. I'm not saying literally never sell a car, but I'm saying the size and the influence and the brand cachet might not be there anymore for them. I think you and I agree with that because that's how fast the market is moving.
Lei Xing:
Let me ask you an interesting question. So the Eletre and the Polestar 3 are priced similarly, they are positioned similarly, that the, in terms of vehicle shape and size, if you had the money, which one would you pick and buy?
Tu Le:
I'd probably buy the lotus.
Lei Xing:
Shaking your hands.
Tu Le:
So I just prefer a bit more substantial interior. And I think the Polestar 3 looks very clean, looks very nice, but I do understand the Lotus heritage. So I'm banking on the maneuverability, the quickness, and some of that heritage being part of the Eletre’s DNA, but you're splitting hairs. I don't think, I do believe that they're going to kind of cannibalize each other a little bit, right?
Lei Xing:
But we both know the volume drivers are none of these two models from those brands. They are the, right, probably Polestar 4 will be a volume driver and then the coming Type, I don't know what the number is, but right, the later models.
Tu Le:
But we have to remember Lei, that Polestar’s a new brand, but the parent and Lotus they've never been volume vehicles. Volvo has sold hundreds of thousands, but never in the millions. And Lotus is sold in the thousands per year, right? And so this is completely brand new territory. I would challenge the notion that maybe these brands can't sell in the hundreds and hundreds of thousands, right? I just don't know.
Lei Xing:
I heard that the Lotus Eletre, the pricing at least for China, some expected to be a lot more, in fact probably around RMB200,000 more. So that's what I heard.
Tu Le:
So, similar to Polestar then. Because Polestar pricing in China is off the charts.
Lei Xing:
Right. It's more than Europe. And it's not the same case with a Lotus. And I think I would pick Lotus simply because of this brand positioning of the UK, Formula 1, aerodynamics heritage. And actually if you really compare the features, I think the Lotus is probably my pick, so if I had those money.
Tu Le:
But remember that you and I have a deep background in the automotive space. We understand Lotus’ heritage and history. So maybe that's coloring our opinion a bit. A lot of consumers, especially because I believe in China, the Lotus will be more geared towards women. They don't know that history. So do they lean into that for the China market? I don't know. My intuition tells me that I should not really push that as much as just being a really cool British heritage brand that is reinventing itself. That would be my positioning. I don't know if women really care about its racing heritage and Formula 1 history, right? At least in China, that's what I'm saying, at least in China. We see that because they have already announced pricing in eight markets in Europe that they are banking on Lotus being or the Eletre being a pretty significant entry for them into Europe. So.
Lei Xing:
I need to correct your pronunciation, its Eletre.
Tu Le:
It’s Eletre, or not Eletre.
Lei Xing:
That's how the British pronounce it. So, Eletre.
Tu Le:
Ok. But move on to Argo. What are your thoughts?
Lei Xing:
Argo? You know, we're talking Argo, not because it's a U.S.-Europe thing because this has implications globally and with China written all over it. Because what I think that the surprise was the Argo was actually believed to be one of the better AV startups.
Tu Le:
Full stop. Most of the people I respect told me that Argo had a pretty good team, had a pretty good product, so.
Lei Xing:
If you read the fine print of all these statements from Volkswagen and Ford, I mean, it's a day of reckoning, it's a day of, kind of, infamy, almost. And reality sets in of what they really want to achieve cost effectively and what the really the customers want.
Tu Le:
It should be for rational people a negative reflection on what Tesla is trying to say, autopilot and FSD does.
Lei Xing:
Yes, so we should look at this Argo thing. So yesterday, four big news happened in the industry: Argo shuts down, the Department of Justice is doing a probe into Tesla FSD.
Tu Le:
Three of them.
Lei Xing:
Yeah, and Mobileye IPOs for the second time. And then ZF spun off the passive safety division, which was basically TRW that they acquired seven years ago. These are all kind of connected, interconnected on why, right? So.
Tu Le:
There's a couple of people that I'll, let me say this real quick, there's a couple of people that I talked to behind the scenes. And they pushed back a little bit that everything has to involve China. And I'm like, you know what, you don't get it then, right? Because these are global automakers. And it does, because they're not saying, what's my strategy for the U.S., what's my strategy for China, what's my strategy for Germany? They are. But when they're making these types of decisions, these are global, strategic decisions, divestments, investments, partnerships. And so if they're not thinking about China, if I'm not saying that China drives every decision that they make, but it has to be a factor, so.
Lei Xing:
And again, in the Volkswagen, right? I mean they clearly stated that CARIAD is going to drive the development of the highly automated and autonomous driving in China with Horizon Robotics, and in the rest of the world with Bosch. And you kind of, yeah right. And then the first functions from the Bosch planned for 2023, and then they are working with a unnamed partner for the Volkswagen Commercial Vehicles. Which is doing this ID.BUZZ with MOIA that used to work with Argo that were absorbed into the Munich operations, right? And here's I have to quote this Oliver Blume statement, again: “focus and speed are what count, especially when it comes to developing technology of the future. Our goal is to offer our customers the most powerful functions at the earliest possible time and to set up our development as cost effectively as possible.” He talks about speed again.
Tu Le:
I just, Ford's decision is a dollar and cents decision. I think I, so, whether or not these decisions that are being made now by Volkswagen and Ford, for example, the investment in Horizon, the divestment or, not continuing funding Argo, whether they are prudent decisions, we’ll find out in 5, 6 or 7 years. But I applaud Blume. I applaud Farley for making these bold decisions, because bold things need to happen in order for bold, for their moves into the EV, AV and mobility space to happen. They can't just incrementally catch up to their competitors in China, in the United States, right? Because Tesla is lapping them in the U.S., full stop.
Lei Xing:
It is also interesting to see both Volkswagen and Ford leaning toward this Level 3, right? Both they believe that this is something that's more, it's going to drive more value for the customers. And L4, and I must say, you had a great comment when we talked to Cepton CEO Dr. Jun Pei, when he asked you when is, right, the robotaxi, you said 15 years and he said 16 years. He was even a little bit more precise. Yeah. And now to think that back to that conversation and see what happened yesterday, this is the realization, I think, Ford specifically, in that 10Q statement, right, saying whatever about the long-term prospects of L4, it's not what they expected. It's taking longer whereas they believe L2+ and L3 is going to drive more value. That's the realization.
Tu Le:
And that's where, to me, that was a dollars & cents, plus minus spreadsheet question and answer, right? And this really leans into, they're going to start selling Level 3 ADAS services in their cars. They're not going to give that away for free because they see that opportunity in the future to build that services revenue via these ADAS levels. And so Argo has 2,000 employees. How many will be absorbed into Volkswagen and Ford? I don't know. And remember that. I think 350 of them or 400 of them came from Volkswagen in Munich. So this could be Volkswagen’s opportunity to bring them back on at least the talented ones, right? And so it is, these are big moves. And we are emphasizing what we feel are the important ones. The Volkswagen Horizon. To me is like, I can't believe more people aren't talking about it, but I think we'll see how significant they become in the coming years with the backdrop of the U.S.-China relationship, with the backdrop of the Germany China relationship, with the backdrop of the U.S.-China relationship, because that's who's going to, companies from those three countries will be driving a lot of the adoption of these new technologies and these new services, I feel, so.
Lei Xing:
You know, we shouldn't write off AVs because it is happening. And a good example is UISEE, my good friend Wu Gansha, his driverless, these little vehicles have been operating in airports and industrial complexes for months and years now. So, we really have to look at this through different lenses and AVs might not be ready in terms of, let's say, a robotaxi that operates anytime of the day everywhere, but it is happening.
Tu Le:
So I feel like on the agri-tech side, on the commercial vehicle side, and I’m talking construction vehicles and talking,
Lei Xing:
Caterpillars, right?
Tu Le:
That that's definitely already commercialized. And to me, that's more of a what happens to that labor question than is the tech ready for commercialization? That tech is ready, because if I am harvesting acres and acres of corn, do I need that one person or two people driving the, I don't even know what it's called Lei, the machine that harvests the corn, I probably don't. And then on top of that, you have these drones that kind of oversee everything, right? And so that can be completely automated. But in China and the United States, now people are losing their jobs, and people are losing their farms. And so that becomes really, to me the catalyst as to how fast, not the catalyst, but the inflection point of when this really becomes a thing, because we need to find new jobs, or we need to figure out what we're going to do with the people that are displaced, right?
Lei Xing:
But it's just so interesting to see this kind of this, winter is coming almost, and looking back in 2016 and 2017 when all the promises were made or these expectations that 2021 will have robotaxis on the roads. We do. I mean Cruise, they're doing it in some way, but these expectations, let's say, from the BMWGroup, right, that was announced in 2016. Ford, they were all looking at 2021, and now we're almost into 2023.
Tu Le:
And the weird thing is, Lei, that China might go full steam ahead and where the United States, I think, might take a more precautionary step, or take precautionary steps towards Level 4 and Level 5.
Lei Xing:
And Maxwell Zhou from Deeproute, he said 2026. So., right?
Tu Le:
Yeah, but the crazy thing is these legacies, these AV companies, these are smart guys. Most of them have Ph.D.s, so they knew this coming in, right? And so to your point, winter is coming, the environment has changed. And specifically for Volkswagen and Ford who have certain challenges in regions and markets that they operate in, where that capital is needed elsewhere. Ford, for instance, and we've talked about this in the past, but let me succinctly detail, Ford, they have the Mach-E as an electric vehicle in China. They have the F-150 and Mach-E here in the U.S. but for the most part, the last couple of vehicles that they launched outside of the Mach-E were petrol engine vehicles. If Ford is going to be competitive that needs to change in the next 18 months, full stop or they'll lose hundreds of thousands of sales. They're bringing the Bronco and the Ranger, but they're likely going to be ICE vehicles over to China. So those are going to be incremental sales. They're not going to drive volume from the standpoint of what's needed for them to thrive, okay? And Volkswagen, we said this ad nauseam, 50% of their profits are coming from China. Their, Volkswagen brand has lost hundreds of thousands of units of volume per year for the last 3 or 4 years in sales. Their ID. series is selling about 12 to 15,000 units a month across five products. So these are the immediate challenges that Ford and Volkswagen have to really, really remedy and fix. So, kudos to them that they looked at their wallet in their bank account and said, I can't fund this for the next 10 years and still be successful with my product plan. So that's what I think.
Tu Le:
Just really, I mean, if for those that have watched closely the industry, especially AV space, especially around 2015, 2016, those were the kind of right, Dr. Jun Pei, he said that the mushrooming of not only the LiDAR companies, but the AV companies, right? And now we're seeing right, earlier, Ibeo, the LiDAR company bankrupt, right? We didn't talk about that, but and now Argo is gone.
Tu Le:
I still think it's, but we're talking about this binary transaction, but I still am doing some research to figure out why weren't assets sold? Why, did Volkswagen and Ford agree to like share the IP of the existing Argo company? I want to understand more details and we'll figure it out, I’m sure, between our connections, but it's an interesting story that hopefully we’ll get a full picture of in the coming weeks. The other thing that I wanted to bring and point out is, maybe this is the canary in the coal mine, because you and I have read and been told that 2023, if the central government doesn’t extend subsidies, we could see a more challenging EV environment sales environment in China. And if that is the case, and we have already seen some pricing competition kind of as key leading indicators, right? So we'll see more and more EV companies go kaput in China as well. Maybe that's necessary because I think there have been some EV CEOs that said there are too many brands, which should help them. But unfortunately, one of the companies that might go kaput is one that four years ago, I think you and I thought had a real good chance. WM. You saw that rumor or you saw that article about them cutting staff salaries.
Lei Xing:
Yes, and Faraday Future.
Tu Le:
So I will never bet against Faraday. I'm sorry, Lei. I just think they're just this cockroach that will be in existence.
Lei Xing:
Surprisingly you're optimistic. You're always the pessimistic guy.
Tu Le:
I'm not optimistic that they'll get the FF 91 to market. I just don't know if they'll ever like close their doors.
Lei Xing:
Yeah, right.
Tu Le:
They're like this cockroach that is just like…
Lei Xing:
Not nine lives, not ninety nine lives.
Tu Le:
Yes. And so it's just a really, really interesting time. And now that I’m a bit more focused on the U.S. market as well, or we're a bit more focused on the U.S. market. I think we're seeing that messiness, right? Because the U.S. government has made this big bold proclamation that the chip with the CHIPS act, then the Inflation Reduction Act that we want to be a player. And they're handing out all this money. A lot of it's going to be wasted unnecessarily, unfortunately. But we will see more innovation. We will see more startups coming out of the United States. And I’m hopeful that there will be 5 or 6 over the next 10 years that can make products that are competitive versus the Model 3, versus the Mach-E, and can rival and compete against CATL and BYD and Gotion. And you and I are friends. I'd like to say we're friends with Mujeeb, and so we're cheerleaders for him too, right?
Lei Xing:
Yeah.
Tu Le:
And you know what, it just makes things interesting because you and I are freaking nerds and we want to know more, we want to see more and comment on, and Monday morning quarterback where we think they're doing well and what we think they're not doing well. I think that's the cool stuff for us, right? And hopefully…
Lei Xing:
It’s easy for us to do.
Tu Le:
Well, but let me also take a step back, and this is probably just something that you and I should say in private, but I’m hoping that I pull you in on some projects, right? You and I can work on some of these projects together.
Lei Xing:
Xpeng and Tesla are worth a mention because G9 just started deliveries. I didn't feel the fanfare was as heightened as some of the other deliveries, because they're under immense pressure, right? They just did this Tech Day. They're reorganizing their company. Tesla just cut prices. The L8 is launching.
Tu Le:
Xpeng’s existing products are long in the tooth, very old.
Lei Xing:
And they are probably a bit more sidetracked on some of the other projects than the other competitors.
Tu Le:
The flying car?
Lei Xing:
The robots, the flying cars, which I really didn't like this, the second edition, the iteration, it felt heavy, I felt.
Tu Le:
They just bolted on some arms and propellers into an existing car.
Lei Xing:
And He Xiaopeng, I mean he quipped, he said this thing only, it goes how many kilometers on the ground, but in the air, it only does like 10 or 20 km tops. So he said that at the event.
Tu Le:
They're quite literally making the flying car, right? It is like in the form factor is a car with propellers on it. Not super imaginative. I'm hoping that they can gain a lot of data points from these pilots and these prototypes, and then form a theory that guides their design process for this flying car. And to your point, Lei, Xpeng's share price is down, I want to say, over 80% since the beginning of the year. So that's where a lot of that pressure is coming from, so.
Lei Xing:
What I’m saying is that they are probably the most, they have probably the most distractions, let's just put it that way, among all their competitors, in terms of a focus, in terms of the things that they need to take care of. The reorganization, the G9 pricing, the product cadence, launch, production cadence, the backlash, right? And their sales are going down.
Tu Le:
And we have to remember Lei, that if you're a talented software developer, the recruiters know who you are, the other EV startups that have promising prospects know who you are, and they're trying to poach you. So.
Lei Xing:
Yeah, and then going back to the comparison of the Argo news, we talked so much about the China speed, but if we look at Xpeng’s City NGP and the XNGP they're trying to launch, right? How long that has taken? It's probably not too much related to technology, but still, right. You have to take into consideration of all these issues that hamper your rollout schedule. And it's going to be 2 years since April 2021, the Shanghai Auto Show when this was a huge thing, right? Now, they're not there. Guangzhou started, they're going to go into Shenzhen and Shanghai probably next year, but it just keeps going, that tells you the difficulties even in these Level 2+ features, and in China.
Tu Le:
On top of new competitors, on top of competitors, launching at a furious rate, new features, new products. And this is where Tesla is not leading the pack, not dictating the speed and the level of competition, right? So let's move on to Tesla. I can buy made in China Model 3 in China right now for $10,000 cheaper than I can buy it in the U.S., $37,000 versus $47,000. Can you believe that? This whole BS that demand isn't softening for Tesla in China, you and I predicted this last summer.
Lei Xing:
But psychologically like there's nobody other than Tesla, other than the Model Y when you can buy one for under RMB300,000, it’s such a psychological attractive driver for consumers.
Tu Le:
Because the supercharging, the supercharging network is still there. So there's value there.
Lei Xing:
What I started seeing happening was they started this referral thing again.
Tu Le:
The insurance thing again.
Lei Xing:
Yeah my WeChat moments I saw at least have a dozen people posting, here's my code. They are owners of Teslas in China, and go and buy it. I also heard that some stores or are selling these like crazy.
Tu Le:
But that's the thing, right? You know, this is why Xpeng is under so much pressure because there will be multiple offers and multiple price discounts or multiple ancillary items that will come along with a vehicle purchase throughout Q4 of 2022 for the Chinese consumer. So if you have an older product and you discount it, is it still going to, is the Chinese consumer convinced? Or would they still just rather by that Tesla? Because it's not going to be much more cheaper, right? Because Tesla is selling at $36,000 and it's unbelievable. So man and it is weird thing to see because they're very strong in most other parts of the world, right? I saw a tweet that said the Model Y is the bestselling SUV in Europe in September. They still dominate the United States markets. So wow, what a difference the China market makes and I described in my newsletter which will be going out later today. They have 1.2 million units of capacity that they need to ship out and they can't ship it to Europe. And remember, their production volume dictates whether or not they get those subsidies for taxes from the Shanghai Government, right? If they're not building, they're paying more taxes in Shanghai. So there's a lot of other things going on as to why they would be incentivized to keep production going at Shanghai Giga at 80%, 90%, 95% capacity.
Lei Xing:
Yeah, that's the pressure.
Tu Le:
And so I don't know if most people realize that those incentives that they signed up for are, have disclaimers and escalators on them, right?
Lei Xing:
And the numbers are that, I think in the first 9 months, the shipment, total shipment out of Shanghai Giga were just under half a million units. And the official capacity is 750,000, so right? And I mean Q4, probably Shanghai is going to again based on this price cut, drive a lot of volume in order for Tesla to meet the 50% growth, which I think in the latest earnings call that they kind of said it's probably going to be tough, but it's going to have a domino effect that's for sure.
Tu Le:
They're going to take, they're going to take companies down with them for sure, right? And one of the other things that I’ve written is that outside of the capacity that they need to sell, that this is just going to really start a price war that will never end, because an SOE will always go lower for certain. It's going to cause a lot of pain for companies in 2023 that can't really afford to slash pricing. Because they're only selling 8,000 units a month, because they're only selling 6,000 units a month. And I see Tesla going even further in 2023, perhaps.
Lei Xing:
Yeah, they are not done in terms of price cuts.
Tu Le:
And there was a rumor that there's going to be a refreshed Model 3 introduced in 2023, that can't happen fast enough for Tesla. So.
Lei Xing:
So really I mean in retrospect, when we got off three episodes ago, right before the October holiday, we talked about that rumored price cut, that didn't happen. That ended up being that RMB7,000, 8000, was it insurance savings? I think they tried that, they probably didn't see too much effect from that. And plus, I think the reason why they waited until October 24 was because the Party Congress was in session and I think they probably thought they don't want to, right, do something during that time to cause kind of revolt from the customers. So they waited.
Tu Le:
I think two other companies to definitely expect and you add to this list to expect some either price cuts or some sort of incentive in increased incentive to purchase: Xpeng and Volkswagen are probably two companies that I would look towards. BYD will also do that. Not as severe.
Lei Xing:
They will do it a different way. BYD is launching a lower priced Han EV I think early next year. This was just listed in the latest catalog.
Tu Le:
So when you say lower price that really reads into de-contented, take out some content. But, hey, I’m all done right now, but let's open it up. If there are any, if anyone with any questions? Is there anything else you wanted to talk about Lei?
Lei Xing:
No, I think we're pretty much. That's all the topics that were listed.
Tu Le:
Actually. I will plant some seeds in your head because I'd like your take in maybe next week's episode or the following episode, how you think Twitter will change with Elon now the owner. And I think, you know what I mean by change. One thing that I did want to note that was kind of a head scratcher for me is that my sister, I told you, just retired from General Motors. Now they have announced that starting in 2023, they will require employees to be back in the office 2 or 3 days a week, and people are starting to complain.
Lei Xing:
Because they've gotten used to life.
Lei Xing:
My sister and I'm not only saying GM but my sister said that some of the GM employees, I'm sure Ford is the same way, I'm sure Stellantis is the same way, physically moved out of Michigan. And so these people, first of all, they seem to be a little bit entitled, because the largest disruption they've ever seen in their lifetime is happening to the automotive sector. And they don't want to go into the office 2 days a week to work, which seems it's not like GM said 5 days a week full stop. And they're going to allow the most talented employees to probably have some flexibility, but you know what? You're doing GM Ford and these guys a favor, if you don't want to go back, they need to lay a lot of people off. And this could be their excuse to do that. So if you really want to keep this job, I really, honestly, it's like 2 days a week guys. It's not the end of the world. So that's really all I had for today, sir. So we will do a better job of maintaining a time. Today was my fault. We were kind of experimenting with the change in time. I think the change in time at 3 o'clock is good. Let's just keep it at 3:00 pm on Thursdays. Because I think it might have confused some of our listeners, but let's just do that. Commit to 3pm every Thursday and then hopefully we'll get a lot of our audience back for next time, but I don't have any anything else. How about you?
Lei Xing:
Just housekeeping, we will be watching BeyonCa launch this Sunday in three days and October sales will be out following that, which we'll talk about in next week's episode. And I'm hearing or seeing that October is actually going to be down month on month, partially due to the holiday. But that will be interesting to see.
Tu Le:
That's going to mean they scramble for November and December.
Lei Xing:
Yeah, I think my expectations for October is that we will not, let's say, from the NIOs, the Xpengs or Li Autos, we're not going to see a step change. Let's say they go from 10,000 units to all of a sudden to 15,000, 20,000. We're not going to see that. And then other than that happy Halloween.
Tu Le:
Yes, happy Halloween.
Lei Xing:
It’s next Monday. I got that, did you see that Baidu did that thing, and I’m a cackling witch. That's generated by AI based on the words. So.
Tu Le:
All right, everyone. Good morning, good afternoon, good evening. Thanks for joining. And we will talk to you all on next week.
Lei Xing:
Same here. Thank you, byebye.
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.