Tu and Lei begin the podcast with a discussion on the complete turnaround by the Chinese govt. on COVID policy, how it's completely changed everything on the ground, how long it might take for COVID to spread throughout the country and if it'll have any damaging effects on business.
Lei reflects briefly on Jiang Zemin's death and the impact he had on China's modern automotive sector.
Tu and Lei quickly move over to a broad discussion on November sales and what caught their attention including a deeper analysis on China's Big 4: Li Auto, XPeng, NIO, and BYD.
The podcast ends with Tu and Lei talking about the latest developments in the global autonomous vehicle space starting with Cruise Automation's 100 robotaxis recently being deployed in San Francisco and contrasting that with the strategies for Baidu and other China AV Inc.
Tu and Lei begin the podcast with a discussion on the complete turnaround by the Chinese govt. on COVID policy, how it's completely changed everything on the ground, how long it might take for COVID to spread throughout the country and if it'll have any damaging effects on business.
Lei reflects briefly on Jiang Zemin's death and the impact he had on China's modern automotive sector.
Tu and Lei quickly move over to a broad discussion on November sales and what caught their attention including a deeper analysis on China's Big 4: Li Auto, XPeng, NIO, and BYD.
The podcast ends with Tu and Lei talking about the latest developments in the global autonomous vehicle space starting with Cruise Automation's 100 robotaxis recently being deployed in San Francisco and contrasting that with the strategies for Baidu and other China AV Inc.
CEM #94 Transcript
Recorded 12/2/22
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. Can you please introduce yourself?
Lei Xing:
Good afternoon. This is your co-host Lei Xing, former chief editor of China Auto Review. This is episode #94. I'm going into this episode with mixed emotions. Part of it is due to, I'm sure you are as well, due to a watching this World Cup, which is turning out to be a, I think the best World Cup ever. I started watching since 1994 when I was in high school. So in the U.S. Wow, the Asians, especially the Japanese and Koreans, right? And then really on the COVID side, the turn of events, I think we have a completely new narrative this week than last week.
Tu Le:
It's a bit of whiplash!
Lei Xing:
Yes! It's, everything seems to be opening up! And I know I'm getting ahead of myself, but that's what it feels like, doesn’t it?
Tu Le:
At least domestically. And I think opening up is kind of a, kind of a broad word. I think it is easing up.
Lei Xing:
Easing up. That's the perfect word. You know the President of European Council, he just met with Xi yesterday. I guess the tone we were hearing from Xi is also one of easing up, at least from the socials, right? And then seeing pictures of these booths. These esting. What do you call them, being taken away, right? And in Beijing without requiring the testing, the 48 hour testing to go on to buses and public transport. I mean that’s…
Tu Le:
So. I actually had three people I spoke with this morning, right before they went to bed and they were also really happy about that. And, one of the people was in Shanghai, he was hoping that Shanghai also follows suit very quickly on that stuff.
Lei Xing:
Yep, I've seen that. People posting about that. And so really, I think this is the first time, in a long time that I’m really excited about the prospects of maybe going back without too much hassle, right?
Tu Le:
I am hopeful Lei, and I don't want to put a rain on your parade. But my understanding and my experience was that, first of all, these testing centers were almost around, at least in the tier-one cities, were almost around any and every corner. And they started going away. They stopped being used so much a few months ago, because people were kind of all over the city. And it was too convenient to get tested. So they really wanted to funnel them back into their “xiao qu” or their own neighborhood. And so they started closing them up. So maybe some of these were already not in use. The second part is, this is the more of the mechanical stuff going on, right? Because yes, it's great that at least for this last 36, 48 hours, things seem to be lightening up, but we also have to remember we're going into the winter time in the northern part of China, where people tend to get more sick in the winter time. And so they're going to have to battle this opening up with likely more cases of COVID for at least the next 2 or 3 months.
Lei Xing:
Which, you know, the more of these cases, actually, people’s sentiment are, maybe like in the U.S. that nobody cares about it anymore, I mean they still do, right? It's no longer as what it felt like during Shanghai, rght? That's the sentiment. So at least a that's a positive.
Tu Le:
But the thing that makes that effective is getting the older population vaccinated again or vaccinated, period.
Lei Xing:
That’s a priority. Yeah.
Tu Le:
Because like here in the U.S., people are treating it like the flu, and we don't hear about deaths and we don't hear about cases anymore. So they, what really points to the Chinese government changing the narrative is what we see on Weibo, right? What we see on Weixin. It's kind of sort of a comm strategy that they're blaming the testing agencies and they're blaming the mask companies. You see that, right? Not the government, but, but we're seeing that messaging kind of get through now. And the weird thing is that maybe those protests did do something. And it should concern the Chinese government, because if something really bad happens in the future, will more people and more protests happen, right? So it is a weird thing, but this is 3 years in the making. This is not something that happened overnight, ok?
Lei Xing:
Yeah I'm just generally seeing this narrative taking a turn. And hopefully for the better. And we also heard the Formula 1 Shanghai GP officially, they didn't say it was cancelled, they said it was not going to be held, but it's the same thing, right? So you kind of, right?
Tu Le:
It's guarded optimism, right? It's like it's still kind of a wait and see approach because the other part that you're excited about is being able to go back and visit and hang out. That is going to be very dependent on the number of flights available, and…
Lei Xing:
Yeah, we beat this horse to death.
Tu Le:
Yeah, so, I’m hopeful that by the time we want to go back early next year, that will also kind of remedy itself, because I’m certain the European Council, one of their requests was to open up more flights. I'm sure.
Lei Xing:
They just had a new Hefei to Frankfurt direct flight, so that's interesting because Volkswagen is big in Hefei, right? So speaking of World Cup, I finally found the analogy that I was looking for of how far the legacies are kind of behind or trying to catch up to the NIOs and the Teslas and the BYDs.
Tu Le:
BY watching Japan and Korea?
Lei Xing:
Yes! That's, the analogy is, how the Chinese national men's, how much they're behind their neighbors. That's how much the legacies are behind.
Tu Le:
You're talking about on the soccer pitch or the football pitch, right?
Lei Xing:
Yeah, you couldn't help but think about it. And as I was joking that at least there's China EV Inc., if there's not China Soccer Inc..
Tu Le:
Yeah. But this is we can point back to Xi Jinping also really, really what 5, 6, 7 years ago really leaning into that. And then the China Super League kind of just blowing up in a bad way, because there was so much money and so much corruption going into the China Super League that it is not even a shell of itself anymore, right? The bottom line is in Asia, our parents, our relatives, we don't value sports as much as the western audiences, right? That's just the bottom line. But what we're starting to see is that World Cup marketing, the La Liga marketing, the Premier League marketing, starting to bleed in. We're starting to see these grassroots efforts by countries outside of China in Asia, really, really try to build up foundational efforts to build these sports out. I think it's great.
Lei Xing:
Yeah, and speaking of Xi, we have to mention Jiang (Zemin), which was the big news this past week. And I think it's important to mention Jiang, not because of his political legacy, which is important because people are reminiscing those good times, right? But also for what we are talking about, is his auto legacy.
Tu Le:
Or his economic legacy.
Lei Xing:
Yes. So I remember. So when he was succeeded by Hu in 2002, the previous…
Tu Le:
Hu Jintao, not who as in you don't know who. Hu Jintao.
Lei Xing:
Yeah.
Tu Le:
We're like Abbot & Costello now, right?
Lei Xing:
Yeah. So the year before 2002 as you know is when China joined the WTO, obviously, Jiang played, I'm sure he played a big role in that, but if we go further back, Deng is the one who had that opening up and reform. And then Jiang, he was a, he worked at FAW for several years in the mid-50s to the late 50s. FAW was founded in 1956, is when they started production, I think. 53 is when they started So Jiang, in his early days was sent to Russia before he was working at FAW, so he was an important part of the early beginnings of the industry. And when he was appointed the general secretary right after 1989, the first company that he met, the delegation happened to be Volkswagen Group. And Volkswagen already had the Shanghai-VW joint venture, and then couple of years later in 91, they formed the FAW-Volkswagen joint venture. So.
Tu Le:
And fast forward the better part of 40 years later, 35 years later, they become the largest global market for automobiles.
Lei Xing:
I think the auto industry, the foreign automakers, and including the NIOs of present day, they probably owe it in some way to Jiang because of the historical, and just simply for being who he is, right? This is what people remembered the last few days.
Tu Le:
Yeah. I am not very good at history. Those, one of those classes I’ve slept through in high school, especially world history. So I'm learning a lot over the last week about Jiang and his legacy. So, yeah, it is interesting, especially when you contrast it with what's going on now.
Lei Xing:
And just some numbers for comparison, if I went back to China after college graduation in, end of 2000 early 2001. So I was there when they joined WTO, I was there when the first round of gushing growth was happening. It was 2002. I think sales grew close to 40% to over 3 million units, autos, the best selling cars, the mid-sized cars were the Passat and the Accord.
Tu Le:
The Accord, that was a long time ago.
Lei Xing:
SUVs just started gaining traction that year 2002, 20 years ago, right? Now, we're seeing EV sales, last year was more than entire auto sales in 2002. So, it's interesting to see.
Tu Le:
It's been an amazing journey over the last 35 years in the automotive sector in China specifically. It is going to be an interesting next 50-75 years.
Lei Xing:
Yeah, so coming back to the present day and months, we just saw November sales.
Tu Le:
Let's get into it.
Lei Xing:
So the big news, I guess, was it the Reuters article with BYD supposedly being the number one brand in sales for the first time in however many years.
Tu Le:
Dethroning…
Lei Xing:
Volkswagen?
Tu Le:
Yes. And again the sales themselves, I really didn't see any surprises to be honest, right? Because we've been following this so closely, except I think I differ in my opinion, to some of the reports that are out there, which rather has a negative or kind of a downbeat tone on November sales. I'm not as pessimistic. I think it's just a blip. You're going to see a record breaking December, no matter what. And the good thing is, things are easing, right? So that's my thought.
Tu Le:
I want to debate that easing does not mean that cases will go down.
Lei Xing:
No, that I agree.
Tu Le:
That that is the dichotomy. And so there's still that grey cloud hanging over production that it hit in Cctober, and it hit in November, Volkswagen, Honda, Toyota lost production. So the challenges are still ahead for many of the automakers, if not the regulations right, and the policies. And so I agree with you to an extent, but I feel that those challenges I do agree that it will be a record breaking year in December. It was a bit concerning to see that November sales weren't bigger than October sales, especially because there's a week that we lost in October. The thing that surprised me a little bit was that the mass market EV brands were weaker. Because we had talked about this the last couple of episodes where 80% of NEV sales or 90% or something like that, some ridiculous number, is below RMB300,000, and so my thought was that an AITO or NETA would maintain a lot of strength. And so that is telling me that some of the tier-2, tier-3 city brands that we might not know a lot about are beating NETA and AION in sales a little bit because I don't really see, because no one else at the mass market level is gaining significantly to point to why NETA is down 16% month over month, right? Or, I’m just, the features and the lineup aren't as competitive as we originally thought. Maybe?
Lei Xing:
We haven't seen the numbers yet from many of these mass brands yet, the Cherys, the Geelys, they're coming, Wulings, they're coming, but I don't know. You can't really, the NETAs, and the Leaps...
Tu Le:
It's a one-month blip too, like you said. So let's see how the trending goes.
Lei Xing:
But I think in general, if you look back over this entire year, it's been a year of headwinds. And what happened? The sales just, right? We haven't really seen any significant hit since April?
Tu Le:
I think the consistency of BYD to me is one of the big, pleasant surprises of the year.
Lei Xing:
Yeah, and also really we have to talk about this company by company.
Tu Le:
Exactly, I think it's important to do that.
Lei Xing:
Tesla. We probably, you, I know you like to dunk on Tesla, here’s a perfect chance for you do so. They're facing all sorts of…
Tu Le:
I'm an equal opportunity dunker.
Lei Xing:
I'm going to help you dunk. They're facing all sorts of, I think, demand issues. Probably right now. And then some other companies, let's say, Xpeng, I think Xpeng, we talked about the Q3 earnings, but it looks like, I think they're okay, but they have a big hill to climb back up to where they were, whereas the Li Autos and the NIOs, they're on that way up. So really, we have to look at this case by case, and it's not the same for everybody.
Tu Le:
Was the L8 and L9 numbers separated? I didn't see that, I only saw the top line number.
Lei Xing:
No I didn't see the separated numbers. L8 just started deliveries recently, right? So.
Tu Le:
Right, so you would hope moving forward, starting December, January, February, or whatever, that you would get closer to a 2 to 1 ratio on L8 to L9 sales. Let's assume that the L7 that's coming out, it's going to be their high runner and along with the L8. I actually think because they're so close together those Russian doll kind of things. There's going to be a decent amount of cannibalization between the three products.
Lei Xing:
Yeah. And then on the one hand, you have Denza worth a mention because they sold 3,500 units roughly averaging prices of over RMB400,000 in the first full month of that MPV. So there is demand. And on the other side, we got to talk about Hengchi, which we had this huge rumor that this chairman, we shouldn't talk about it, but there was this rumor right, yesterday, but it turned out he was just fine. There was rumors about this auto business shutting down or something.
Tu Le:
They did shut down their factory.
Lei Xing:
So that's one of the brands which I think we can agree on. That's not so promising to say the least.
Tu Le:
They should be on bankruptcy and failure alert. I’ll come up with the right words, in 2023.
Lei Xing:
Ditto WM Motor.
Tu Le:
Yeah, when they're furloughing employees, when they're not paying staff, then you get into really, really deep, difficult, financial trouble that is going to be very, very hard to get out of, especially because I think both of those companies own their own factories, they're paying, those fixed and overhead costs keep going if you don't, even if you don't make a car.
Lei Xing:
And ZEEKR is one of the more consistent ones as it appears. So.
Tu Le:
But they're capped at like 12,000 units, basically, 11,000 units a month.
Lei Xing:
So I think really just everybody is just, I think, trying to get through the year on a high note, I think which will happen in December, especially considering this mystery surrounding all these types of subsidies, whether they will be extended. There's a lot of rumor going around.
Tu Le:
I had said in this week's newsletter, I didn't think they were going to be extended. But I didn't realize that November, I thought November is going to show up a little bit better on overall sales.
Lei Xing:
It wasn't bad.
Tu Le:
Yeah, it wasn't. They didn't fall significantly for sure. But I think 2 or 3 months ago, if you were to ask me, I thought November would have crushed October sales. When that didn't happen, that put up some alarm bells in my head about those subsidies continuing on. And I think I've read that they're looking at, keeping them going, but reducing them substantially, so.
Lei Xing:
I think the issue is, NEVs are going to be probably a quarter of the market, right? And then again, the 75% are in some way, still, dependent on that 5% purchase tax savings that’s in place. And that's the one that seems to have the biggest chatter on being extended into next year. So remember.
Tu Le:
I think the other thing that's really important to remember Lei, is that we talk in the headlines go for Tesla, BYD and NIO. But I don't believe the Chinese government is really looking at those companies’ sales figures. I think they're really looking at these SOE sales figures and the EV brands that they have launched, because they're the ones that are really employing the bulk of the Chinese people. And so if they see that there's weakness across the board, not just in the premium segment, but in this mass market, then they'll really consider extending those subsidies.
Lei Xing:
Yeah, we look at the so far 14 brands or companies have reported sales. My math says close to 350,000 already for November, and we still have tons that have yet to report sales. If you add those up. It's, right now the trajectory is, I said, 700,000 units, at least for the remaining two months, I think they're still looking good. The volume is still there, but it's just a different trajectories of these different companies. Some are on the way down, some are on the way up.
Tu Le:
I'm going to pat BYD on the back because they are almost single handedly, because they keep on growing, right? So they're almost single handedly keeping the sector afloat, right?
Lei Xing:
They're what, going into LiDARs. They went to Thailand. Where did they go the last couple of days? They were in Thailand. They were in Mexico, right?
Tu Le:
They exported, I wrote this down because I thought this was pretty interesting.
Lei Xing:
12,000 exported in November. That's not equaling to sales, but.
Tu Le:
And they're just getting started on that, so. I think, that Hengchi thing is really crazy. This is about a $27,000 electric vehicle, so it's not super expensive. And for them not to be able to sell enough units to keep the factory moving and going sould be super concerning. And they have two more products that they'll start producing in 2023, middle of 23 and late 23, larger sized SUVs. But if you're not building the 5, will you make it to start of production on the 6 and the 7? That seems pretty tough.
Lei Xing:
I'm surprised you don't dunk on them more.
Tu Le:
I wasn't expecting them to sell 10,000 units, so. But it is really, so they're the one on ongoing concern alert, right? And if we peel the layers of the onion back for those that don't know who Hengchi is, they are Evergrande, a real estate company. They spun out an EV company, bought and spent billions of dollars to Frankenstein an EV company together. They bought a electric motor company. They bought a design company and a bunch of other things and spent $2 or $3 billion to do that. And their original ambition was to launch 9 vehicles in like a 3-year period. So their footprint is based on that original strategic plan. And they've only gotten one vehicle launched so far, and so their overhead costs must be humongous. Maybe they thought that these vehicles were going to sell a lot better than they do. And they obviously, that's kind of a dumb statement. They obviously thought these vehicles were going to sell. But you and I have been harping on this for better part of two years, the competition and the number of brands and the number of product launches is mind boggling, and it's hard to keep up. And so if you're not up front and have good features, competitive pricing, the right marketing strategy. And I think that's really important as well. Then you're going to get lost in the shuffle because nobody's going to hear about and know about what your product is.
Lei Xing:
Yeah, other is just that Hengchi and Evergrande in the perception of I guess the Chinese public is one of bogusness. There's no, right, there's lack of trust because of all that went on at the company. So that's not helping.
Tu Le:
So Evergrande, to give a little more color on that comet Lei. Evergrande the real estate development company was the largest debt company in the world. I think it owed like $350 billion worth of or borrowed $350 billion worth of money and or something like that. And so when they announced this Hengchi, Evergrande EV company, nobody thought it was real. Everybody thought it was a land play. And so they've never gotten respect for their EV division ever, really. So.
Lei Xing:
Anyways, we move on to Xpeng a little bit.
Tu Le:
Ok, go ahead. They got to 4,500?
Lei Xing:
5,800.
Tu Le:
5,800 sorry.
Lei Xing:
800 more than October.
Tu Le:
Yes.
Lei Xing:
Without getting into the details, I think the first telltale sign on the earnings call was immediately He Xiaopeng at the very beginning, said it was a challenging time, he used the word challenging. That's kind of admitting to kind of what they're going through. And I get the sense that they're trying to tell the investment community that how were we organizing, how we are, plan to stop the bleeding, right? But we know Q4 is not going to be good in terms of sales and revenues, but they have three new models, refreshed, coming next year.
Tu Le:
Not soon enough.
Lei Xing:
Not soon enough, yeah. And just I guess the tone is just that they are kind of taking a look in the mirror, sort of at themselves and trying to find a new positioning of their models. You know, so that's what I felt.
Tu Le:
They have a lot of data to grind out. And they also have to anticipate at least a handful of new brands coming out in 2023 that will try to stake their positioning in the market, right? Because what they marketed and positioned themselves as in early 20, late 21 and early 22 is the most affordable, technologically advanced EVs in China. That promise was not filled. So.
Lei Xing:
And they are still banking on G9 being one of the top three, if not top two, BEV models over RMB300,000. So that's very confident.
Tu Le:
I think that they talk confident. They're just hoping and crossing their fingers. My feeling is that in the first 6 months of sales, G9 is going to have to get a price slash or price cut.
Lei Xing:
Well they already have, kind of, with the less than 48 hours launching.
Tu Le:
Sure.
Lei Xing:
And then that P7 is going to get that new, what, the platform the high speed charging and all that, right? So P7 already feels old two years on the market.
Tu Le:
Well in China time, it is old, so.
Lei Xing:
So, yeah, and I think Xpeng and NIO are the two companies that are in terms of if you are trying to focus, they are the least focused companies, I think. What, eVTOLs, smart phones, new brands, robots. Lots going on.
Tu Le:
Now, and I think what's important is that NIO started with three products in 2022 started. Now they're ending with six. They're at 14,000 units in November. And again, it's hard to really be objective, give an objective viewpoint, because COVID is happening, production stoppages are happening, and it's affecting almost everyone in some way, shape or form. But with six vehicles now, in the market, you're hoping that they get to 20,000 or 25,000 units by April, May time frame if the market kind of levels out and settles with regards to the COVID stuff and the supply chain stuff.
Lei Xing:
We're looking for the boom moment, if it means getting to that 20K club.
Tu Le:
And these guys will learn their lesson about making products and features on these products so close together. Because although the vehicle is new, what's the difference between an ES7 and an ES8 or an ES6? Are they different enough where somebody 10 years younger or 15 years younger than me is definitely going for an ES6 versus an ES7? It is really an art, part science, but a lot of art to position vehicles when they're so close together, it's just, I don't know if you can get any light between the two. And that's just an example, because Xpeng had kind of the same challenges, right?
Lei Xing:
Yeah. And the other thing is about, again, their mentioning of the XNGP that's due next year. I think we talk about this a lot that the city-NGP just being in a pilot mode in Guangzhou. This was announced in April 2021 the function, so that's taking much longer to materialize to commercialize.
Tu Le:
That's a perfect segue Lei, because I looked at my LinkedIn feed. I saw one of the VPs at Cruise say that they now have over 100 Cruise automation, none or driverless robotaxis operating in San Francisco, so we can segway that to the Baidu stuff.
Lei Xing:
We are in two of them.
Tu Le:
Yes. So 2%.
Lei Xing:
Two out of 100 ain't bad, huh?
Tu Le:
Yeah, man, pretty good.
Lei Xing:
So Baidu, where do we start? I think they claim, the biggest thing out of that Apollo Day was they want to establish the world's biggest fully driverless ride-hailing service next year. So I have no doubt that they can do it. And you probably have more credibility than me because you you've been there and done that.
Tu Le:
The other thing that is adding to the probability of that happening is the Shanghai government recently, I'm saying this week, approved driverless robotaxis in areas of Pudong. So we're going to see at least a handful of pilots in Pudong in 2023, more than likely from Baidu, I would think maybe DeepRoute. I don't know, I haven't heard that much about AutoX lately, but I would think Pony, there's going to be a lot of robotaxis riding around Pudong likely not very far from PVG Pudong Airport. If and when you and I can get back to China Lei, I guess we have an appointment with a few more robotaxis.
Lei Xing:
It's opening up. Let's do it.
Tu Le:
And so a little bit of self promotion, I was interviewed by CNN, and I'll be on CNN Marketplace Middle East, because WeRide is entering Dubai, no Abu Dhabi. They have formed a partnership with a company called Bayonet. And they will be looking at launching some robotaxi service in Abu Dhabi. So the premise of the discussion was with the Argo shadow looming large over the autonomous vehicle industry. What's my outlook? And so spent a few minutes talking about that. And one of the insights that I gave because the person that interviewed me was like, well, what do you think about this Bayonet that you think it's going to be? It's going to work? And I said it's more of a marketing exercise for the city of Abu Dhabi, number one, and then number two, the Bayonet thing, I think they're going to be well capitalized. And I would more link the success of that partnership in the pilot program on WeRide and whether they can continue to raise capital, progress on their autonomous vehicle technology, etc. So if you see it, let me know. But…
Lei Xing:
If we talk about the truly fully driverless ride-hailing services, so Baidu right now is in Chongqing and Wuhan, right, in the two cities. So simultaneously in the U.S., Cruise in San Francisco Waymo in San Francisco, Motional in LA, so I think there's a simultaneous race going on here in China, in the U.S. to see these kind of expand out to more cities. And it's interesting to watch.
Tu Le:
And we cannot, the wrong KPI is definitely number of robotaxis, because China will beat the United States every single time on a volume thing. So I thought about this because Cruise, you can go anywhere, pretty much, not anywhere, but you can go to a lot of different places. And so I think we have to try out the Waymo to see the little differences. The other part of the Middle East, Cruise has worked a deal out with Dubai to launch a robotaxi pilot program there in 2023 or 2024. And so if you saw this week's newsletter Lei, there was an article that kind of compare and contrast why there are robotaxis in the United States, but not in Europe. I thought that was a really, really interesting article. And to summarize it in the United States, those regulations are at the state level. So as the state of California can allow those pilots, whereas the European Union needs to get countries in agreement for that to happen.
Lei Xing:
Germany’s KBA just approved the Level 4 AVP, right, with Mercedes and also Level 3 earlier. That's the same thing for the Level 3 is being what, approved in California for the Mercedes, so and Nevada.
Tu Le:
So it's important to draw a distinction between the robotaxi stuff and the ADAS stuff. Because we also heard about Sixt NIO and the city of Munich, right? They have not. So it's three, sorry, Sixt, NIO and Mobileye in Munich. We heard about that, but nothing else has been announced, right? So I think that's going through a lot of regulatory hurdles. So if that gets approved and launched, we should see other robotaxi programs across the European Union probably start to emerge in 23 or early 24. So.
Lei Xing:
And then 24 is when that ZEEKR M-Vision is supposed to be put into operation on Waymo. And then back to Baidu a bit, I think the other interesting, it was a very technical event. So we're not going to go into details on that, but I thought it was interesting was one of the things they pointed out was the lead time to deploy AV technology in a new city is down to 20 days. There's something they mentioned and then that AI model using Baidu Wenxin big model to help them kind of scale.
Tu Le:
It's a big data initiative.
Lei Xing:
And then the high-def autonomous driving map was kind of interesting And then I think Baidu is unique in that it was talking about this balancing or complementing their L4 with their L2+. That was kind of the last thing they talked about other than AI chip. So remember, the ANP3.0 will be first featured on the JIDU ROBO-01. That's their next level ADAS tech.
Tu Le:
Just so everybody understands what you're referring to is that Baidu has the Apollo Division, and they're working on robotaxis. But in order to commercialize and generate revenue earlier, they are also working with OEMs as other AV companies are to deploy ADAS solutions. And so it is a two pronged attack, one more long term for L4 robotaxis and one that has more immediate benefit. And so Qcraft is doing it. There are a lot of different, there's a lot of different companies doing it. And so this is not unique to Baidu, but I will mention also and please correct me if I'm wrong. There are only seven companies in China that have the license to HD map the country. And if you're an autonomous vehicle company, you need Gaode or any one of these other companies like Baidu to utilize their HD mapping system. So this is where Baidu really has the advantage, because it's a native system that they've built themselves, whereas everyone else is buying it, quote unquote, buying it from a partner. Okay? And so Baidu seems to have endless amounts of capital as well, because you don't hear that much about how much they're going to need to invest. You don't hear that much about them trying to attract external investors. But I think that's where Baidu has clear advantages, the clear advantages are multiple. And they've been developing and designing that AI chip for quite some time, too. The most seamless solution, I think would be Baidu L4 robotaxi solution in China. Specifically long term.
Lei Xing:
Baidu is definitely different than Waymo in that respect, but I guess the closest thing similar or a company that's similar to what Baidu is doing is probably Cruise, because Cruise is in some way helping GM with the Ultra Cruise that are coming out next year, I guess.
Tu Le:
Right. But I guess the only thing about that is there's a clear division between Cruise and GM, right?
Lei Xing:
That's the China EV, AV space. I think we covered everything.
Tu Le:
I want to, I think, a few housekeeping things. Congratulations to Qcraft. They've raised a few hundred million RMB for a Series B1.
Lei Xing:
Led by guess who, a company that's a leader in the chip space in China. They didn't specify.
Tu Le:
Yes, I know, I have no idea what that means.
Lei Xing:
The company who’s named H.
Tu Le:
Well, we got the, the last time we got the H wrong, remember?
Lei Xing:
The company who is also invested by Volkswagen.
Tu Le:
If you guys are wondering, you can Google Qcraft, but they are a team that came from Waymo. I think there's three guys that came from Waymo.
Lei Xing:
Three or four guys.
Tu Le:
They came from Waymo. And so they are that second wave of AV startups, the other notably being DeepRoute, because Qcraft was established in 2019. So not like a Pony, not like a Momenta or a WeRide. They've only been in town for about 3 or 3.5 years, but formidable nonetheless.
Lei Xing:
They established the China HQ just 3 years ago. They started in March 2019. So it's not that long ago.
Tu Le:
We will, that we have an appointment with them as well, to check out their robobus in Beijing. So we're going to be super busy when we're in China next time.
Lei Xing:
Yeah, I guess the other big news was, speaking of Volkswagen, what they did in Canada, and CARIAD, I think you used the word Frankenstein again. That acquisition of this company. I forgot the name, but they're on the move. Especially again, we go back to the IRA right? What they're doing in Canada.
Tu Le:
Love it. I love that they're getting much more aggressive, because I guess with Diess, the challenge was that you heard a lot, but you didn't see a lot. With Blume, you're starting to see a lot, because these transactions weren't occurring with Diess.
Lei Xing:
They were definitely being discussed.
Tu Le:
Yes. So I give him credit for that. So it looks like Corvette will have its own brand in 2025 for the purists that must be anti dema for you guys. But they're going to have a Corvette SUV EV so you know, kind of chew on that for a little bit? It's just going to be pretty funny. And one interesting thing, the other interesting thing that I thought was kind of an eye opener, I guess. You don't think about it from a number standpoint, but the Shanghai government has forecasted that 70% of the vehicles that they produce will be L2, L3-capable by 2025. So virtually all vehicles produced in China before 2026 are going to have at least L2, L3 capabilities, which is pretty impressive, pretty impressive. So that's not going to happen in the United States and Europe, by the way, that was coming from the Shanghai government. So that's pretty much all I had and apologies. We talked till 3:56. I have to apologize because we were supposed to do this yesterday. And I had a meeting that got moved on me. So my apologies and thank you for those that were able to join us today. But let's open the room up unless you have anything else lay.
Lei Xing:
No, I think just too much happening. And the good thing is we're, again going back to the earlier in the show that we're seeing this easing, not opening, but easing for good or for bad, which really I think everybody likes to see.
Tu Le:
The best part is that the stores are opening back up. So because you and I love the part, some of the parts that we love was going to those small stores, eating a Jianbing for 10 kuai or whatever. And those operators are not able to work. Now, they're opening back up. Unfortunately, most of them have gone out of business already, because it's been going on for so long. And I just remember 2 o'clock in the morning, going out and seeing the Jianbing guy, extra spicy, please. And man, anyways, I digress.
Lei Xing:
Yeah, good times.
Tu Le:
So if no one has any questions or comments, maybe we close it out here.
Lei Xing:
Sure. We talked for almost an hour.
Tu Le:
So, thanks again for joining us. Good morning, so hey, at 10 am, so my friend who is
Lei Xing:
Last, but not the least.
Tu Le:
My friend is a diplomat who I met in Beijing, is a diplomat. For the Netherlands, he got transferred to DC, he said he's going to go to a beer garden in DC with his orange jersey on and a bunch of Yanks to cheer on the Netherlands. And so this is the stuff that I love, right?
Lei Xing:
Yes and also I have, my daughter has, one of her classmates is from Morocco. I was trading messages with her dad and we were like who's rooting for what. So that was interesting, I was saying congrats on Morocco. One of the surprises, the other being the Asian.
Tu Le:
Yes, so cool, man, hey good morning, good afternoon, good evening. And we will talk with everyone next week.
Lei Xing:
Likewise. Thank you for joining. We'll 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.