Tu chews on the latest EV startup to throw its hat in the ring - BeyonCa. Lei and Tu take the first several minutes of the show discussing in detail how the company came about and how Weiming Soh, the current Renault China CEO & BeyonCa founder, was able to pull everyone together.
The conversation then moves onto two China-fornia companies having problems in the US, TuSimple and Faraday Future. Tu and Lei discuss what they'd heard which has now mostly been substantiated by the recent articles about the two company's challenges.
Tu and Lei end this week's podcast with a discussion on what it takes to be successful in the global EV space, something they feel that only two companies can really claim for now - BYD & Tesla.
Tu chews on the latest EV startup to throw its hat in the ring - BeyonCa. Lei and Tu take the first several minutes of the show discussing in detail how the company came about and how Weiming Soh, the current Renault China CEO & BeyonCa founder, was able to pull everyone together.
The conversation then moves onto two China-fornia companies having problems in the US, TuSimple and Faraday Future. Tu and Lei discuss what they'd heard which has now mostly been substantiated by the recent articles about the two company's challenges.
Tu and Lei end this week's podcast with a discussion on what it takes to be successful in the global EV space, something they feel that only two companies can really claim for now - BYD & Tesla.
CEM #90 Transcript
Recorded 11/3/22
Tu Le:
Hi everyone and welcome to China EVs & More where my co-host Lei Xing and I will go over the week's most important and interesting news coming out of the China EV, AV and mobility sectors. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. If you enjoy this room, please help us get the word out to other enthusiasts and tune in again next week.
My name is Tu Le. I am the managing director at Sino Auto Insights, a global 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. 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 #90, we are closing in on triple digits.
Tu Le:
Well, technically, we're at triple digits if we include the MAX episodes, I think, right?
Lei Xing:
Well, that's correct, but we digress. The headlines the week starting off ghoulishly, because of Halloween. And we heard about BeyonCa on Sunday. And then Monday, Halloween, a series of news that I tweeted with Ford cutting prices of the made-in-China Mustang Mach-E, the GAC-FCA JV files for bankruptcy, Guangzhou Auto Show pretty much postponed, I'm hearing to the end of December if it's ever going to be held this year.
Tu Le:
That's the placeholder date to me. I don't think they're going to actually have it, so.
Lei Xing:
And big news from TuSimple, firing the CEO after probe. Some positive news: Geely was floating the idea of spinning of ZEEKR, and speaking of ZEEKR, there was that 009 MPV launch, which had actually brought in a lot of noise from competitors. Let's just say that. And we just saw the Buick Century MPV launching at the RMB600,000 or close to $100,000.
Tu Le:
Interior looks pretty damn good.
Lei Xing:
For a non-EV MPV, by the way. And October EV sales, obviously, we've already seen some of the numbers. And I think that's also the latest you had just tweeted out the Canadian government requiring divestitures from Chinese companies in the Canadian, what, mining companies or lithium companies? So those are the big headlines. Where do you want to start?
Tu Le:
Let's start at the top with BeyonCa. Let me know your thoughts.
Lei Xing:
First of all, the auto correct says it should be Beyonce when you type in the name, so I hope Beyonce is not too…
Tu Le:
The internet just needs to give BeyonCa a few million more times before it can separate the two with the algorithm, so.
Lei Xing:
Yeah, and does this world need another new automotive brand? Weiming Soh says so, right?
Tu Le:
If one thing is for certain Weiming Soh is a salesman, because he convinced some pretty significant folks to leave their pretty stable careers and jobs, to join a startup, a pretty well capitalized startup, but a startup nonetheless. And we saw the first product, which is a coupe sedan that is aimed directly at Porsche Taycan customers, so.
Lei Xing:
I just call it the “VW gang,” trying to compete with VW.
Tu Le:
That works.
Lei Xing:
Right? So I, from the top, I summarized that there's seven things about BeyonCa. So number one is who Weiming Soh, who he is, he is the highest level Asian, or let's say Chinese even, I mean he's Singaporean, right? But he speaks Chinese.
Tu Le:
Malaysian.
Lei Xing:
He speaks Chinese and he is the highest Asian, what, he was the global executive vice president of Volkswagen Group. So he's the highest.
Tu Le:
He was on the management board.
Lei Xing:
He's the highest Asian executive in Volkswagen. So that's number one. Number two, was the “VW gang,” right? So Christian Klingler was the former board for sales & marketing. Hans-Joachim Rothenpieler was the Audi R&D guy. The chief designer Dirk van Braeckel was the former Bentley design & concept director. I heard there's obviously many other people from tech, both within the auto industry and outside the auto industry. Number three, is the strategic, the investors from Dongfeng and Reanult.
Tu Le:
Who he happens to be the China gm as well.
Lei Xing:
He still is, he still is, right? He is the CEO of what, Renault China. And BeyonCa is, so the company behind it is called the Beijing Binli (which is, sounds same as Bentley) Information Technology Company, with the parent company BeyonCa HK, and the largest shareholder is none other than Dongfeng (Dongfeng Hong Kong). So that's 45%. Renault is 15% of this parent company in HK so this is based on…
Tu Le:
Can you do us a quick favor? Since you said “Volkswagen gang,” can you let our audience know where BeyonCa’s headquarters is located at?
Lei Xing:
They are in the Jiang Tai. If I I’m correct.
Tu Le:
Remember that old Volkswagen largest dealership in the world location in. It is right there.
Lei Xing:
Near one of the shopping malls.
Tu Le:
Near the east hotel, right?
Lei Xing:
I forgot the name of the shopping mall, but yes I know exactly where you're talking about. So number three, that's the shareholders behind, this is based on Qichacha, by the way, the platform, Chinese platform for…and then obviously with this Dongfeng and Renault, most likely production is going to be in Wuhan, right? And then number four is basically it's starting as a global company. So they have three or three countries. So China, Germany, Singapore, they have different what, design centers in Munich, R&D in China. Then there's an AI Center I heard in Singapore.
Tu Le:
That’s right.
Lei Xing:
And then number five is the bench marking against the Taycan, So upwards of RMB1 million. So it's not going to be cheap, right? And then the number six is the car itself, the GT Opus 1 with the dynamic logo and the surrounding interactive system, whatever that is.
Tu Le:
One thing that is unique to BeyonCa is that they're really leaning into sensors for health monitoring inside the vehicle.
Lei Xing:
Yes. Which is the number seven point, this health as a service ecosystem that they're trying to as a selling point. And this is, I think the only company that has hired a team of doctors. So this kind of a smart cockpit that can monitor your health. And that which is also the biggest question mark. Is that going to work?
Tu Le:
So it'll work, but in the time frame that's needed, right? Because it needs to be kind of seamless and it needs to be low latency, zero latency, kind of real time. I had the pleasure of meeting with BeyonCa in the very early stages. And I got to talk to Weiming a couple times, worked with his team on a few things. And so it's good to see the progress that they've made in a short period of time. When I spoke with them, they were working out of a wework just down the road from their current headquarters. Unfortunately, I'm sure both of us would be invited in to visit them if we were in China, but I plan on trying to speak with a few those folks again to see how they're doing. We're going to see a production version of that GT Opus 1 at the Shanghai Auto Show which you and I both plan on being at, we're not going to see a high volume from this GT Opus 1 at almost a million RMB. I'll give you, for instance, the Taycan in 2021 sold about 7,500 in China. So we're just going to be looking at hundreds for the first several months that it's launched. And then if lucky, we get into the high hundreds and maybe 1,000 a month towards the end of 2023. And so they're going to go slow. I know they're also looking at, and trying to work on a second product. So the whole JIDU thing where it's JIDU speed, we're looking at BeyonCa speed, which is highly unsual if only because it's still driven by mostly car guys, ok? So Weiming to his credit, he does understand the urgency of going fast. I think that's one of the things that he wanted to leave behind with him or leave behind him when he left Volkswagen is that bureaucracy and what's the right way to say this, the process driven decision making, cause make no bones about it. Most of these decisions are coming from Weiming, the final decisions. So he has a balancing act because I know that they also want to maintain these decent relationships with the Volkswagen Group and the families that run Volkswagen Group, right? The Porsche family. And I forget who, the Piech family, right? So it'll be interesting to see because we'll probably see marketing material early next year. That'll put it against Taycan and likely the HiPhi X right?
Lei Xing:
So this, we are seeing, by the way, BeyonCa is not the first smart EV startup, and it's not going to be the last, that's number one. And number two, we're seeing this kind of new, because if we put these startups into buckets, right? We have the NIOs and the Xpengs which are started out by people that used to work in, let's say that the tech or the internet industry. That's one bucket. We have the VOYAHs, the ARCFOX, all of these that are born out from the state owned companies. That's another bucket. And then we have the Xiaomis, the JIDUs, that's the third bucket. Then we have these private, let's say BYD has still yet to launch the high-end brand. That's the 4th bucket. And now BeyonCa…
Tu Le:
And NIO their low-end brand.
Lei Xing:
And BeyonCa now belongs to this 5th bucket where it's a group of executives that worked at one of the largest foreign automakers in the world. The other thing is…
Tu Le:
Let me also add that, and they have some Xiaomi employees and Alibaba employees peppered in there. So there's, it's almost like…
Lei Xing:
Melting pot.
Tu Le:
Yes. A jambalaya of these different factions that have come together specifically for BeyonCa. But we'll start to see more of them because Xiaomi also has a ton of ex-auto legacy folks that are working for them.
Lei Xing:
And this is also probably result of a kind of career ladder issue. How high can you go as someone being in Weiming’s position?
Tu Le:
I think one of the reasons he left was because he didn't get the top Volkswagen Group China job.
Lei Xing:
Yeah, right. That's all of these issues playing out and plus the dynamism and the market, the kind of the startup. Everybody's starting out with these new companies.
Tu Le:
So to give a bit more background on Weiming, he was one of the more outspoken Volkswagen Group management team. And I think that's how he stood out a little bit, but he came from humble beginnings, really. He was a sales manager, I think, in Malaysia for Mercedes, and they sent him over to…
Lei Xing:
The DaimlerChrysler days.
Tu Le:
Start operations, yeah. So credit to him for how he climbed and he is known in China for starting what is now CARIAD for Volkswagen Group.
Lei Xing:
Mobility Asia. Yeah.
Tu Le:
Yeah, so he, in that period of time that he worked there, I think 20 years or something like that, he was able to accomplish quite a bit. Now. He was also very polarizing as you know, right? You and I know a handful of the people that work for him, they are loyal, they're very loyal to him, although he's very tough on them. And what sometimes might be described as a little bit indecisive. But he, god bless them because they've been able to do a lot in a short bit of time. Now we couldn't see, touch and feel that vehicle, but it's going to be promised by April next year, which is when the Shanghai Auto Show will be. So they still got a lot of work to do. And I’d mentioned to you that I DMed him or WeChated Weiming, congratulations, and then he wrote me back and so we might actually, we might actually jump on the phone and chat some more, So.
Lei Xing:
Put him on the pod.
Tu Le:
If there's anything, I’m going to ask him. If there's anything that I can share. I will with the audience because I think they have the secrets, right? They kind of know all the things that the Volkswagen Group team knows. And all they need to do is peel off a few hundred a month for the first few months to build that momentum, right?
Lei Xing:
I just put this big question mark on this health selling point. I mean they're not the first one to actually talk about this, I don't think, because we tweeted a lot about Yueting, YT on what he was doing before at LeEco, LeSEE. They talked about health as well back in the day. So I just question is that going to sell? I don't know.
Tu Le:
So to kind of not speak for Weiming, but how it was explained to me is that there are many old people in China. And the needs of those older folks aren't being met by any car makers in the market currently. And so if to me, I don't care what the feature is. I care mostly about how well it's designed, because if it needs to be this separate thing where you're focusing on it, right? Remember, you're driving too. So it's not like you can do these things and then ignore driving. There will be some ADAS features, Level two, likely Level 3 by 2024. But you still need to pay attention. So the integration needs to be such that, you don't know it's there until you need it, right? How will it be different than an Apple Watch? How will it be different than a Garmin sports watch? Because you're in a car, you're not being an athlete, you're not running, you're not walking trying to monitor this. So and they have to be working with local hospitals too, right? So how that will play out will be important and interesting to find out, so.
Lei Xing:
I guess one of the things is that live monitoring of your health conditions. If they sense anything that's is going to be wrong with you, they're going to notify you or something. That's what I’m hearing, it is because otherwise, just being what Apple is doing with this collision feature on the Apple Watch, right, on the phone, where they can automatically dial 911. Then right? So that's my big question mark.
Tu Le:
Let's go ahead and move on to…
Lei Xing:
TuSimple?
Tu Le:
The must, or you want to, we can do TuSimple. So let me press 10 seconds of rewind. There were two things that came out this week, one article and one investigation acknowledgment.
Lei Xing:
I know exactly where you are going.
Tu Le:
About the Faraday Future. There's a Bloomberg article yesterday, and you and I scrubbed it. And from what I know, and what we both know seems to have a lot of overlap, right? From what you've heard. I think that article was pretty accurate. The only thing that it didn't call out was that YT had his nephew on the management, so.
Lei Xing:
You know, this is about Chinafornia companies, and right now, after TuSimple, after this article on Faraday Future, we have a completely new perspective on what Chinafornia means. It's becoming more negative rather than positive. And TuSimple, FF, Pony, all of these companies, they are really in the same boat. TuSimple was, what do you call it, a ticking bomb or something, time ticking bomb or…
Tu Le:
Ticking time bomb.
Lei Xing:
Ticking time bomb. It's going to be the same thing for FF and probably some of the others, if they don't get, if they don't learn what played out in these two companies.
Tu Le:
I do have to say that U.S. investors, they sometimes plead ignorance, but you can't, if you have a few hundred million dollars to invest, and then you plead ignorance. It's a little bit disingenuous. Right now, I didn't know about threats to this board chairwoman for Faraday Future, but I did know that, I was told anyways that YT had basically put his shares under his nephew. And the article actually says that it's under his nephew's wife's name or something like that. We knew that YT was still pulling the strings. And I think there is a lot of distrust and the largest bank he doesn't have access to because he's persona non grata China. So with TuSimple, if there wasn't a border involved with a country that is in kind of a diplomatic funk or difficult time with the United States. I don't know if this is a big story, right? Because if those two Americans, is it worthy of securities fraud? I don't know, but again, you and I had heard stories about this as well, right? I received the Hydron pitch deck and looked at that. And I was like, and we both know Cheng, Cheng Lu, he was brought in, basically, to get the institutionals lined up. And one notable thing about TuSimple is that they're basically the last Chinafornia company, right before DiDi, to be able to IPO, right? Cleanly, is what I mean, whereas DiDi IPOed and got crushed, right? So we know that there was a huge accident in April, but we also know, and this is kind of the contradictory stuff. We also know that or we've been told, or I've been told that you tell me if you've heard differently, the TuSimple hardware software stack was actually one of the better ones out there.
Lei Xing:
They were probably the most promising at putting these L4 trucks on the road with Navistar and DHL. But based on that LinkedIn post from Xiaodi, I feel like he might have been scapegoated based on what he said in that post. And the other thing is, I do not think he wanted to be CEO at all, or his position. He, him being a tech guy. I doubt he wanted to be in the CEO position in the first place. And now he's sacked for whatever reasons that he said he wasn't aware of the wrong doings. Then with Faraday, with Carsten being at the CEO position, now for the second straight company is going to have trouble just putting the car into production, Byton is gone, and now he's facing the same predicament.
Tu Le:
Yeah, these guys almost are. So at least in the Faraday case, it seems that these guys are chasing fame a little bit.
Lei Xing:
Yeah, one telltale sign in the WeChat group that we were trading messages. I was looking at the press release in March when they had the Cheng Lu and Xiaodi had the transition, in that press release. Chen Mo was still the chairman, I believe, at the time. And he said, I’m going to give up my chairmanship to Xiaodi. And less than what, a matter of weeks later, he started this Hydron company, right? So all of these things happening are intertwined.
Tu Le:
And there are 10 more back stories that you and I heard, for the sake of just kind of keeping it to what we know. I just don't know how TuSimple gets out from under this, because it's not just SEC now, it's an FBI investigation. There's going to be a lot of emails. There's going to be a lot of communications that are going to point fingers and imply things. And so there's a high likelihood that Xiaodi Hou will have written things, or maybe not, that incriminate him or prove his innocence, but I also think the board shouldn't be walking away very clean on this. In this specific TuSimple case, because I just find it hard to believe that they were, they didn't know or suspect something was going on.
Lei Xing:
And we had talked about Argo for Ford it was a dollars and cents issue, but it's definitely not a dollars and cents issue for TuSimple, right? So consecutive weeks of bad news for the AV sector for the wrong reasons.
Tu Le:
Which, when we're talking billions of dollars, it actually shouldn't surprise us, right? And an aside to that Lei is that Trevor Milton was found guilty of securities fraud, two of three counts, I believe, he's likely now to face some jail time. I think sentencing is in a few months or something like that. But it goes to show when there's a lot of money involved, people are willing to do some some nasty, underhanded stuff, illegal stuff. Yeah. We knocked out two birds with one stone. We talked about Faraday and we talked about TuSimple. What about Mustang Mach-E and its struggling in sales already, right?
Lei Xing:
Yeah, definitely not a supply chain issue for Mach-E, that I’ll say.
Tu Le:
And so 71,000 for Tesla, 217,000 for BYD, but BYD numbers are a combination of PHEVs and BEVs. That's chalk, meaning like clockwork, we know that Tesla is going to come up with a massive number and BYD is going to come up with a massive number. NIO at 10K and change. That wasn't surprising. But Li Bin’s proclamation that Q4 is going to be a massive quarter for them could be in jeopardy if they can't sort out their COVID challenges.
Lei Xing:
They just restart it. I believe.
Tu Le:
They just restarted, yes.
Lei Xing:
After a few days of shutdown.
Tu Le:
So the COVID challenges, I was told, started in in the middle of October, so likely a week, 10 days after October holiday ended, So.
Lei Xing:
Yeah, so in contrast, I think NIO was actually pretty good if you compare it to Xpeng.
Tu Le:
Xpeng, dude, man, Xpeng is…
Lei Xing:
Fourth month of, consecutive month of drop to one-third of what they delivered in June.
Tu Le:
And they have no real rescue plan in front of them. There's no, if the G9 doesn't do well, then they're going to be struggling for likely the entire 2023, unless they can pull in a major refresh on the P5 or the P7. Because we know the G3 is way uncompetitive relative to what's out there, even at that price point.
Lei Xing:
Yeah. And the surprising was the ZEEKR and AITO went up in the rankings.
Tu Le:
For one product, too.
Lei Xing:
And this domino effect from the Tesla price cut, they're still playing out. So kind of, there's more to think, but I think generally, we need to point out October, the so called Golden September Silver October. There's a bit of seasonality played into it, I think. So that's why you see month on month, it was either flat or minimal growth or fall, and also with all the COVID situation is another way that's start starting to happen in China, right? Guangzhou, Hefei, even in Beijing, in Henan with the Foxconn. That was the big news all this past week.
Tu Le:
It's only going to get worse, right? Especially for the manufacturers in Dongbei because it's already started getting cold, and COVID is going to rear its ugly head in these regions where it's cold like Heilongjiang and Jilin. And so Volkswagen could be struggling, man, it because it is groundhog’s day, right? With the shutdown of the Disney, you and I are seeing our friends in Shanghai. They have lockdowns for 2 days in their apartment building. And then it's opened again, so it's whack a mole still Lei. And these OEMs are not immune yet, right? And what I want to emphasize really quickly is how amazing Tesla and BYD is operationally, right? Because NIO is struggling to build 10,000 units a month. I don't care what the reason is, whether it's COVID, whether it's supply chain issues, whether it's chips, they can barely get to 10,000 a month. Tesla is at 70, BYD is at 215. So their operations teams are ninjas compared to some of these other startups, right? Again, this is veterans versus newbies, relatively newbie, right? 7-year old company that is struggling to deal with supply chain, sourcing and operations issues, right? I really think Tesla and BYD should be commended because they are not only maintaining their operations, but it’s orders of magnitude more complex and large, larger than their competitors, right?
Lei Xing:
I think one word comes to mind is momentum. So some companies are definitely having a different momentum than others. If we benchmark against the “prototypes are easy, production is hard,” the famous phrase from Elon, then Tesla and BYD right now are the only two that are passing the grade. Maybe GAC AION, and maybe Wuling. But in terms of getting on a consistent basis, we said these different tiers that we talk about this all the time. First, you get to the 10K; second, you get consistently 10K on a monthly basis, consistently; Third, you get to 20K, 30K, 100K, 200K, most of the companies are still at that first tier, right? Xpeng being the best example. Not all supply chain disruptions are what, created equal or how do I put this? So there's for some companies is definitely supply chain issues for others, definitely not.
Tu Le:
Yeah, and it's really difficult to pinpoint because it's just a blanket excuse now that they're using right supply chain challenges, chip shortages, whatever. And having worked in operations in the past life that stuff and it's very near and dear to my heart, works a lot of hours keeping factories open. So I understand intimately what it takes and how hard people need to work in order to chase parts to make sure production is ongoing.
Lei Xing:
The other thing I wanted to talk about was I listened to a better of the Luminar earnings call yesterday. And some interesting comments, one word that was mentioned “execution” and I’m like, they might have listened to our episode with Dr. Jun Pei, because right now it is execution phase for all these companies, Innoviz, Cepton, Luminar. Luminar just started production for the Rising Auto R7.
Tu Le:
I had to chuckle Lei, on LinkedIn Luminar had posted Ni Hao.
Lei Xing:
I saw that, Ni Hao, China or something. Yeah, the way their business model, right? If you compare it to Innoviz and Cepton, it is completely different, the contract manufacturing in Mexico through the Celestica partner, manufacturing partner, and they are bringing equipment from Rochester, New York to Mexico to make this plant more, automatic assembly line, that's coming online next year, and then ship it to China for the R7, and that R7, the LiDAR is an optional feature, it’s not standard. The other key word they mentioned was they were really conservative about the volumes.
Tu Le:
The take rate.
Lei Xing:
Right, the take rate. So, right? And then just again, industrialization, manufacturing now is the hard part, and the leader of the pack is definitely Hesai. They've delivered another 10,000 LiDARs in October.
Tu Le:
And they just launched the solid-state blind spot LiDAR, right?
Lei Xing:
And I think with Ibeo filing for bankruptcy, I think we're really seeing the LiDAR space really moving from that kind of I’m going to win this project or that project to really delivering on manufacturing at capacity.
Tu Le:
The other important aspect Lei, is that we've already seen companies like Deeproute and Hesai really push the pricing down. So now, it becomes a volume and a contract thing. And so we're going to see quickly, LiDAR becomes standard, and it's going to push the U.S. feature set into pulling in LiDAR as well. I think, within the next 3 years on U.S.-made and sold EVs, too.
Lei Xing:
Yeah, and the other interesting thing about Luminar is, so far their wins are either with Chinese brands or with brands that are owned by Chinese companies. That's interesting.
Tu Le:
And one of the things that needs to be pointed out is that when, again, I'd mentioned this pretty numerous previous China EVs & More, is that when OEMs declare their supplier for X, their supplier for Y, the other competitor OEMs normally do not want to use similar technology, because it's harder to differentiate. And so perhaps that's one of the reasons Luminar is able to do this because Hesai and who's the other Chinese company, RoboSense. They are already in several Chinese brands. And so in order to zag instead of zig, Luminar is getting this opportunity. So it's a huge opportunity for them. So god bless them and good luck to them on that.
Lei Xing:
But unlike Cepton, Luminar is really out in the front, out in front for these LiDAR things. Whereas Cepton I think is a bit more low key.
Tu Le:
Yes.
Lei Xing:
Right? I think that's the sense that we got.
Tu Le:
And it's a completely different type of LiDAR, too, right? I think Luminar, I just had a couple of small, quick notes. Tesla is shipping about 200 employees from Shanghai Giga to get Fremont Giga increased capacity in a short period of time. So that's pretty cool. They have a team of ninjas that they send around the world.
Lei Xing:
Speaking of shipping, BYD is building ships, so they will be shipping ships pretty soon.
Tu Le:
And speaking of shipping, Hengchi has shipped the first 100 Hengchi 5s.
Lei Xing:
They're kind of like, speaking of Hengchi, Evergrande was part of that, one of the…
Tu Le:
Faraday.
Lei Xing:
Yeah one of the names mentioned in a Faraday saga, so.
Tu Le:
We should explain this Hengchi 5 thing. So Evergrande is a real estate company for those that aren't too knowledgeable about Chinese conglomerates. Evergrande was the largest real estate development company in China, and they had the notorious reputation of having the most debt of any company in the world. And so they were building mixed use buildings all over China. We're asking for money up front from buyers in order to fund other operations. And initially, when Evergrande entered the EV space, we thought or I thought, I don't want to speak for you Lei, but I thought it was a land play in order to get manufacturing land and then get land next to the manufacturing so they could build more buildings. And then they wrote several checks that totaled almost $6 or $7 billion to buy assets and IP in order to build these electric vehicles and design these electric vehicles and god bless them with the struggles that Evergrande real estate had, they were still able to get to job one, which we talk about Faraday who's been literally one of the OGs. They were around, I believe, they were around before NIO, right? Farady?
Lei Xing:
Well 2014. So I think NIO is exactly 8 years. They were founded in November 2014.
Tu Le:
So all the same same. And we are joking around there basically it was you and I having a conversation on Twitter about the LeEco, right? Anyways, those were the two things that…Is there anything else? Let me see here.
Lei Xing:
And then we wanted to talk about the Canadian government thing, right?
Tu Le:
So Cory had written that he's in some chat groups that says that Ford is struggling with software for the Mach-E and their cameras. And there's power loss, dealerships not knowing how to actually repair the car. That's a global thing, I think. But so it looks and sounds like the Mach-E is not out of the woods yet from a quality and reliability standpoint. So maybe that's also a reason for the sales hitting a ceiling of a few thousand a month, because Ford is not ready to put too many of them out in the wild. So, Cory, thank you for listening. First of all, while you're at work and for that update.
Lei Xing:
So this is Mach-E, this thing you just described. This is a global thing, not China, specifically?
Tu Le:
Yeah, I don't know, I’m not sure, cause Ford press release said their SUV, what, was number two, the Mach-E was number two, so it's all relative, right? But I mean in China it’s definitely a demand issue. So that's why the price cut, right? And really in response to Tesla.
Tu Le:
Here's another question. What do you think of softened Euro 7, which will start in 2025, bad, good for BYD, Great Wall, etc. I'm not sure what Euro 7 means.
Lei Xing:
Euro 7?
Tu Le:
Yeah Cedric had written, what do you think of softened Euro 7, which will start in 2025? Cedric, if you want to explain that in more detail happy to…
Lei Xing:
Is that the emissions, EU6, EU7? Because I’m not sure I understand the question. That's the only thing I can think of.
Tu Le:
So let's try to answer that question. I think Cedric that Tavares has lit a flame under the EU regulators. And what we're going to see is likely some sort of IRAesque protectionism, protections for the European market, where they're going to require local content in order to receive the subsidies. Because what's important to remember and keep in the back of your mind is that there is a firm end date for Europe to stop selling petrol and diesel fuel engines. So 2035 is going to come quick upon the European legacy automakers. And they need to change their spreadsheet to figure out how they can be profitable selling just battery electric vehicles and hybrids. That's going to be challenging. But it's going to be impossible. If there are dozens of Chinese EV brands or a dozen or two dozen EV, Chinese EV brands that are in the market as well. What do you think Lei?
Lei Xing:
I think that was, the other part of this was, but the 2035 ban, was Oliver Zipse putting his ACEA president hat on. He had a statement basically said that we’re ready as an automaker, but we kind of need the details of the framework, the infrastructure, batteries before we can, I feel, he's saying that before we can really dive into this commitment to that 2035. So it's kind of left and right. We're ready, but there could be issues at play that there will be some lobbying. That's the sense I get.
Tu Le:
So for sure, I don't think that 2035 date is going to change, how the grandfather that in might, it might be slow slow, and then a steep implementation as opposed to this linear, 20, 50, 70 kind of thing. But I’m hoping that the United States government also implements it, but effectively because of California, New York, a good part of the U.S. is also going to be banning ICEs and or petrol and diesel fueled vehicles as well. And so one thing that I did see on Twitter that I thought was kind of funny was an article in Fast Company about how these electric golf carts could threaten the legacies, right? And I just think and one of the comms directors for Ford kept on, bringing it back to the Maverick and how the Maverick, super affordable, blah, blah, blah, blah, blah, blah. And I was like, dude, this is Apples and Oranges, right? Like we're talking about city cars versus these small trucks, right? Anyways, I digress.
Lei Xing:
So the Canadian thing let me ask you, do you think the domino has fallen on this part of the battery equation that you're going to see more of this divestitures required or from government?
Tu Le:
Yes. I do, I think the pendulum is going to swing, and they're going to say no investment or we can do this ourselves. And then they're going to find out by from the OEMs, what they can actually accomplish. And then they'll slowly open it back up either to allow a certain amount of content from because the thing is with the Canada divestitures is they specifically called out China, right? It's not like, if there was another free trade partner that it was happening, they might have some consternation, but no other country was called out. It was like, you don't share the same values as we do. So you can't invest in our companies.
Lei Xing:
Lithium mining, right.
Tu Le:
But Mexico didn't say that, they just nationalized their lithium mines, right? And so Ganfeng is in litigation, I think, or in a what's that called, negotiation to figure out what the right balances. And I know Indonesia is also nationalizing. They all just want a piece of the pie, right? They all want investment, foreign direct investment, so that they don't give the farm by selling their rare earth metals and raw materials, and then get left behind with nothing, right?
Lei Xing:
Seeing this Canadian thing, we've been talking about CATL, BYD, Gotion, whoever, EVE, and the companies that were listed in this divestiture, we've never heard them, right? And that was, I think it's only the small tip of the iceberg of how much these Chinese companies dominate the entire, let's say, the upstream raw materials, supply chain for batteries. And this makes me think back to our conversation with Henry Sanderson, which we should be posting that pretty soon. It's been a while, but about Canada with their mining pros, right? They are a mining country and then how these Chinese companies are everywhere along the kind of the supply chain. And now we're seeing these companies being called out. There's many more of these “Zanges.” One company is called Zangge. I've never heard of them. So.
Tu Le:
Fahim has written and asked, what's your take on reduced delivery time for most of NIO’s models, improved production or soft demand? So what's your take on that? What do you think?
Lei Xing:
It's not demand? That's all I'm going to say.
Tu Le:
I think that NIO has a pretty decent sized order book, and they are just operationally deficient right now and they need to clean it up quickly.
Lei Xing:
I just hope that statement made by Lihong about catching up with the 3 Series don't bite them. Because right now that's looking a bit farther out and we were all expecting, oh, maybe they're going to do 10,000 ET5s alone, in December. I don't think it's going to happen. Not that fast based on the current situation that they're confronting.
Tu Le:
We have to face the reality that when 2023 comes along, that momentum could stall considerably if the Chinese government doesn't maintain some of those COVID related incentives that they put in place that are due to expire. Because what we're hearing is most analysts are saying that there's going to be a slowdown. And I can buy that the market has been hot for two consecutive years. And so how severe it is remains to be seen. But if it is severe, it’s going to force some of the weaker players into either wanting to get acquired, wanting to partner or closing up shop. And so one of the players that is now on its second product after about 3.5 years is AIWAYS, because they are…
Lei Xing:
I was just going to say about AIWAYS.
Tu Le:
Yeah, they have limited capital and you and I were trading tweets with Greg Cable. He seems to be pretty excited about it. I think it's a better product for sure than the U5. But is it going to be enough to really drive sales to where they have enough working capital that they don't need some sort of injection, because the IPO market is not going to be there for them, right?
Lei Xing:
The U6, I think retails for 39,000 euros, which is pretty competitive, because the ATTO3 is what? 38,000 Euros.
Tu Le:
And the Han is more than twice or no, almost twice as much
Lei Xing:
72.
Tu Le:
And I don't see a 30,000-Euro difference. I've sat in both cars. I've only driven the Han. I haven't driven the U6. I don't see a 30,000-Euro difference.
Lei Xing:
But again, going back to that production issue, AIWAYS just produced their 10,000th vehicle and most of those 10,000 probably are in somewhere in Europe, right? They haven't sold that much within China, that’s the…
Tu Le:
A good portion of those 10,000 are probably fleet vehicles in southern Europe.
Lei Xing:
Yeah, right. So that shows you how difficult it is to scale up.
Tu Le:
Yeah, it is where we think we got it figured out Lei, even you and I who I'd like to think are two of the most knowledgeable, man, it is not easy to predict what's going to happen next, right?
Lei Xing:
And we're hearing that AIWAYS is being acquired.
Tu Le:
I don't see it being acquired for $5 billion, but that seems like a lot for 10,000 vehicles sold, right? With Geely also thrown out that trial balloon for ZEEKR, IPO. How much is that going to be worse, right?
Lei Xing:
Yeah, I think in Li Shufu’s mind, he has several of his entities that he might want to IPO: Volvo, Polestar, right? ZEEKR probably will be next.
Lei Xing:
So some housekeeping, I think we're posting #89 soon, and also our conversation with Henry Sanderson soon also, then we're pretty much caught up. And so looking forward to next week, Olaf Schultz and his entourage or delegation are right now probably somewhere over Eastern Europe on their way to China. They will land probably in the morning, have some meetings, talk and they'll leave right afterwards.
Tu Le:
Quick hit. It doesn't take long to kiss the ring, it doesn't take very long.
Lei Xing:
Then on Friday is the CIIE which will see, let's say, the first China debuts of models like the Model S Plaid, the Celestiq, the Cadillac Celestiq is making the China debut, the Hyundai IONIQ 6. This is actually a very important event because the other auto shows have not gone as intended. And then next week is also the launch of the Volvo EX90 which we can kind of compare with Polestar 3 and see which is you're going to buy, right? So.
Tu Le:
The other thing too, is that CIIE, if you're in Shanghai or you're traveling to Shanghai, I would like that would be so “mafan” I think.
Lei Xing:
I was there in 2019, the second edition. Yeah, let's just say you needed some connections to just get in.
Tu Le:
I forget which one I think I was at the 2020, no no no.
Lei Xing:
Yeah, they've had it every year since 2018.
Tu Le:
It's just weird. A little bit, because it's basically, I don't know how to explain it.
Lei Xing:
Diplomatic, more than anything else.
Tu Le:
Yeah, countries are basically have booths. And so anyways, good morning, good afternoon, good evening. Thank you for joining us. And we'll get 89 out. Will also get the Henry Sanderson one, very important I think. He says some really, really interesting things. Thanks again everyone for listening, and we'll catch you next week.
Lei Xing:
We'll talk to you next week. Thank you again.
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.