Lei and Tu start the podcast out with a brief celebration of hosting their 100th episode. They then move to reflecting on 2022's final China sales numbers.
Tu articulates how amazing it actually was that China was able to achieve sales of >6.7M units despite all of the challenges including a complete shutdown of Shanghai, the automotive market's single largest market.
The convo moves over to Tesla's price cuts, why they did it and what it means for them and their competitors.
The pod ends with Tu discussing the current status of the US's Inflation Reduction Act is, what it means and who it will benefit.
Lei and Tu start the podcast out with a brief celebration of hosting their 100th episode. They then move to reflecting on 2022's final China sales numbers.
Tu articulates how amazing it actually was that China was able to achieve sales of >6.7M units despite all of the challenges including a complete shutdown of Shanghai, the automotive market's single largest market.
The convo moves over to Tesla's price cuts, why they did it and what it means for them and their competitors.
The pod ends with Tu discussing the current status of the US's Inflation Reduction Act is, what it means and who it will benefit.
CEM #100 Transcript
Recorded 1/12/23
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 it 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. Lei, can you please introduce yourself?
Lei Xing:
Good afternoon. This is your co-host Lei Xing, former chief editor of China Auto Review, and this is episode #100. This is, so just to kind of, before we begin today's episode on the topics, this is our 100th live episode, and we just published our 100th published episode, which is also our 12th MAX episode with Zach Anderson, the CTO of ClearMotion. So tune in to that. But I think it's worth spend a couple of minutes. This is a major, major milestone for us. I mean we started this before JIDU was around. Think of one company, right? How many brands that emerged, right, countless, since we started this, right?
Tu Le:
Come and gone.
Lei Xing:
Yeah, and we did, there was that data from the Buzzsprout. We did 64 episodes, published, in 2022, 3,332 minutes.
Tu Le:
There had to been at least that many minutes edited out, because we also talked to people and answered questions. We had conversations. Sometimes the live shows would be up to two, 2.5 hours, right? So.
Lei Xing:
Yeah. And 85 countries reached.
Tu Le:
85 countries. I'm impressed myself with that statistic. I was like, wow.
Lei Xing:
Yeah, you know, I’m not sure China EVs are in 85 countries, but at least China EVs & More is in 85 countries.
Tu Le:
That's a lot of passport stamps, dude.
Lei Xing:
Boy, it's been an awesome journey man.
Tu Le:
2023 is going to be bigger and better. I got some ideas, you got some ideas. We're going to go after. So.
Lei Xing:
Yeah and we still have some exciting MAX episodes coming up from my trip to CES which we talked about last episode. So let's go into this week's headlines a little bit. So NEV sales are out. No surprises, I think, for any of you that's been listening to our show. WM Motor gets that interesting lifeline and Xpeng CEO rumored change. We'll talk about that a little bit. NIO rumored to launch that RMB1 million premium off road brand Planeter. Planeter, in Chinese it’s Zhixing.
Tu Le:
What's the Zhixing? The yisi? What does it mean? Zhixing?
Lei Xing:
It means to reach the stars. And then companies like Denza, Hongqi (Red Flag), Chang’an, separately, they announced big plans, models and sales plans.
Tu Le:
Hongqi’s getting aggressive.
Lei Xing:
Yeah, and we saw some data from Volkswagen Group, the ABBs on their sales numbers in China.
Tu Le:
Really quickly for those that are paying attention. Hongqi is basically China's Lincoln and Cadillac combined. It's a national brand of the government basically.
Lei Xing:
Yeah, and a couple announcements by Pony.ai basically moving into the ADAS supply.
Tu Le:
Not surprising.
Lei Xing:
Yeah, from a robotaxi pure play, so kind of going back downwards, I guess?
Tu Le:
And getting more Chinese with the partnership with Horizon or German depending on how you want to see it.
Lei Xing:
And CATL announced that massive what, RMB31.5 billion net income, net profit?
Tu Le:
Life is good right now at CATL unless you're at the European office.
Lei Xing:
Well, I know where you're getting that, but we don't know the details, but it's good and bad. So quickly.
Tu Le:
I just hear things.
Lei Xing:
2022 NEV sales, your takeaway.
Tu Le:
So almost 100% growth, despite two months of the largest market being completely shut down, and that's from a sales and manufacturing standpoint. 6.88. Did you write?
Lei Xing:
6.887. Let’s make it 6.9.
Tu Le:
That’s retail?
Lei Xing:
That's wholesale, including exports. So these are the caveats, including inventory. This is the official CAAM data.
Tu Le:
That's why I was asking, because I think the retail sales number is a little bit smaller. So I think that makes sense that it would be a little bit higher on the wholesale side. So I think that the challenging market wasn't that challenging for the big, the biggest and best players, the fact that BYD was still able to get close to 300,000 units out in a month. And Tesla, they didn't seem to have any supply issues or it was on the demand side that they had the problems. And so I think that the not so much startups anymore, the NIOs, the Xpengs, the Li Autos, they still had some fits and starts, but we would expect that because you see that from Rivian and from Lucid as well. But overall, what an amazing number, because I was part of the struggles and experienced the struggles for the better part of last year myself. And it was real, it was extreme and it was tough on everyone in China. So despite all of that, could have lost momentum, lost concentration, lost focus, 6.88, amazing number.
Lei Xing:
From my side, in retrospect, it was really a roller coaster year from looking at the market and the expectations of how it would play out. So at the beginning of the year, we said it was easily going to go over 6 million. And then in April, we weren't sure if it's going to get to 6 million at all. And then boom, right? The second, once, even the consumption tax, half off that kicked in June for ICE PVs kicked in. It didn't affect NEV sales, right? It continued to chug along And I said quite a while ago, I was expecting more than 6.8 million units. That's exactly what happened. And the penetration, right? If we count everything, was over 25% as expected. Just phenomenal, right? 20% target reached, crushed, 3 years ahead of time. And now we're seeing some numbers of…
Tu Le:
Lei let me stop you right there and remember everyone that it's not only the final goods of the finished goods of the vehicles, right? It means that the battery cells need to be fabbed. It means that the modules need to be put together and then packaged into a battery pack as well. It's the entire supply chain that needs to work to get to that 6.9 number. And that's why I believe it's so amazing to Lei and I that there wasn't one kink in the chain that caused any type of major stoppage of production throughout the year with the exception of the Shanghai shutdown. So I wanted to place emphasis on the entire supply chain just worked for the most part.
Lei Xing:
If we look, expand this into the entire three year pandemic, the only month that was really disastrous was at the beginning of the pandemic, right? February of 2020. But that was, that tanked. Other than that, it was, right, it was pretty good. Now, the export we mentioned was included in the 6.9 million. So it's important to point out this caveat. Three, more than 3 million autos were exported according to CAAM and roughly a quarter of that were NEVs. So to keep in mind.
Tu Le:
Which at the beginning of the year was a lot of Tesla, too.
Lei Xing:
So to compare, we must also talk about what were registered. So the Ministry of Public Security gave a more realistic number of what actually went into customer hands, which were 5.35 million registered. And that's 23% of the 23 million autos registered. Anyway you look at it, the 20% target
Tu Le:
Was smashed.
Lei Xing:
Was crushed.
Tu Le:
What Lei’s referring to is the target that was set 3 or 4 years ago by the Chinese government that by 2025, 20% of all vehicle sales in China would be NEVs. So we've hit that target with 3 years to spare.
Lei Xing:
Yeah, and also from the parc numbers from MPS: 13.1 million NEVs on the roads as of the end of 2022. That's 4.1% of the 319 million total vehicles on the roads, and 80% of all of those 13.1 million or 10.45 million, are BEVs.
Tu Le:
And to give everyone a sense of scale, there are about 400 million cars in the United States, in various degrees on the road, in total, since the beginning and around 350 million in the EU region. So although larger population, China has a long way to go from if China ever gets to the number of vehicles per person rate that the United States and the European union has, because it's less than half right now, then it's going to be close to a billion cars in China in the next 20, 30 years, so.
Lei Xing:
Yeah, mind boggling. Again, going back to CAAM numbers, just to recap the last 3 years, 2020: 1.37 million, 5.4% penetration; 2021: 3.52, 13.%; 2022: 6.9, 25.6%. So it's basically doubling the last 2 years in a pandemic.
Tu Le:
I actually think that the slowing economy is going to be more of a challenge than the supply chain and COVID stuff that happened in 2022. I'm not super optimistic about the beginning of ‘23 for China. So.
Lei Xing:
So here's where I wanted to kind of talk to you and debate about the favorable and let's say the pros and cons for what you would expect in 2023. So I tweeted 10 million, 35% penetration, barring any major “black swan” events. So what is your prediction?
Tu Le:
So I have not, I'm late again on my newsletter, but as you tweeted that I was typing this at almost the exact same moment: the China NEV market hits around 9 million units and will be almost 40%, a 40% take rate for 2023 in China. That's what I have predicted. I think that ICE sales stagnate even further. And so they creates that 40, that high take rate of 40%. But I think the China market continues to struggle, not getting back to that normal growth we saw before COVID until at least 2024. So.
Lei Xing:
Surely we can't expect another doubling. Otherwise, it…
Tu Le:
Yeah, that would be just, there's not enough, there's not enough battery capacity and vehicle capacity for that I don’t think.
Lei Xing:
But if you look at the historical growth of the China market, NEVs or total, it always end up surprising people or
Tu Le:
Oh without question.
Lei Xing:
Or end up more than what people expect. So that's one factor. One of the wild cards I was thinking of for, that would affect 2023, is this opening up play, so where people spend their money? If they can get out vacation, go overseas, it might be a factor that's different from years, at least during the Pandemic, right?
Tu Le:
I'm wondering if there will be around the Q2 time frame, a reconciliation of subsidies or some sort of stimulus for the purchase of EVs in China, because 2022 did end with the end of those subsidies that the automotive companies like a BYD received from the Chinese government. So.
Lei Xing:
Right, I don't expect those subsidies to return, but will there be other measures? Possibly, on both ICE and NEV side.
Tu Le:
The only way, I won't say the only, the easiest way to see that number getting past 9 million is a huge price war between all the players, which is not out of the question. So we've already seen Tesla last week, poke the bear.
Lei Xing:
Yes. You know, I was on a conference call, it was a consulting conference, especially on Tesla, what they did. I said this tactic is something that they always pull, but also considering that this is a special January, because the Chinese New Year arriving early and people sometimes tend to make purchases right before the new year, right? So this is a tactic kind of to build on that momentum, sort of so that the numbers won't look at as bad.
Tu Le:
Or before that window closes, right? Before the sales drop off a cliff, because of Chinese New Year, they wanted to squeeze in as many sales as they could, right?
Lei Xing:
And we've heard they've gotten what, 30,000 orders in 3 days? It's not surprising at all. I mean it is pretty cheap.
Tu Le:
But they also know that this to me indicates that they don't have any cavalry coming in towards the end of the year. So they're trying to still pull out that tail as far as they can. Because June July time frame there's going to be even more competition against Tesla. End of summer specifically JIDU Auto, a few other brands. I think BMW is coming with more reinforcements into the market. So later in the year is going to be crazy difficult for Tesla without new product to sell at a high rate. And the other thing Lei, too that I think is important, is that this tactic of price reduction is not unique to Tesla. This is a tried and true tactic of the automotive space. What Tesla is differently is that they use it quite often. Normally, automakers don't want to do that because number one, what we're seeing it pisses your customers off who just bought the car a day before. Number two, it screws up, screws with your residuals. I just don't think the traditional automakers react that quickly to the market as much as Tesla does, right? So.
Lei Xing:
And funny, I was asked a question, is BYD a threat to Tesla? And I was like, hell yeah, every day and twice on Sunday, like this is from the American investment community. So I think there's still, right, not understanding that this competition is affecting Tesla. So that was so funny.
Tu Le:
You and I have talked about this for the better part of 18 months, right? If you don't understand Tesla in China, you don't understand Tesla. It's important that you get the full picture, because most of the Twitter followers, they can recite what the sales numbers are in China, but they don't get what's going on, really, right? So it's hard for them to really get their head and they have to be willing to be objective about this too, right? So Tesla is their worst market right now. It's going to be for the foreseeable future because they have 1.2 million units that they need to do something with. There's a high likelihood that less than maybe half of those units actually get sold into China with the current 3 and Y, so.
Lei Xing:
Right. So it was interesting to see that Wall Street article quoting Motor Intelligence numbers. So roughly in the U.S. last year was just over 800,000 BEVs, roughly. So I think Tesla share was like 65% or something. So roughly I think in the U.S. and China retail sales, not exports, they are roughly about the same, 400,000 to 500,000 range, and then rest is the rest of the world. One of the charts I tweeted that was done by NIO: Wuling Hongguang MINIEV is the number one and then Model Y is number two. That's retail, right? So Tesla is still a huge, covers a huge market share, at least in terms of model rankings.
Tu Le:
And the other big caveat or asterisk that I want to add is that none of this surprises me, none of this really surprises you, what surprises you about Tesla, the demand falling off a cliff is how fast it happened. And I think that Tesla underestimated the speed of the China market and the number of competitors that were coming online and thought they had more time to bring a refresh on board, bring a potentially new product. They are likely internally looking at that product plan and pulling in anything they can to update their current lineup of vehicles because the S and X, they don't move the needle in China. It's going to either need to be a new product that's sub-RMB300,000 or it's going to need to be major refreshes to both the Model Y and the Model 3.
Lei Xing:
How is that, let me ask you this: how is that Indonesian rumored plan is going to affect Giga Shanghai?
Tu Le:
So this is the thing, right, with Southeast Asia. They are more of a two-wheeled, generally speaking, outside of Singapore, Vietnam, Thailand, Indonesia, their citizens normally get around on two wheels. The salaries aren't there yet for the purchase of passenger vehicles. The infrastructure isn't great for them. So in order for that factory to succeed, it would have to be small to begin with. And the product would likely need to be, again, sub-RMB300,000 in order to sell in enough volume across Southeast Asia, at least in the initial years that the factory’s online to make any sense. And so Tesla is having conversations with India, with Indonesia, and they're just trying to leverage what they can. With India, it’s a little bit tougher, right? Because you would actually prefer to be in India, because there's 4.4 million vehicles sold there last year. So India last year overtook Japan to be the 4th largest passenger vehicle market in the world. But India would never ever allow Tesla to ship made in China Model 3s without some sort of tariff on it into the China market and a heavy tariff. And so, if I'm Elon, I’m either looking at a 1.2 billion, 1.5 billion person market in India or ASEAN, right? Because if I build in Indonesia, I have nickel, number one. Then number two, I can ship across ASEAN, which has 400 or 800 million people or 700 million people in it, rght? So there's options there, but the price point needs to be much lower than the average selling price of a Chinese, made in China Model 3 and Model Y in my opinion, at least in the next few years, right? Because the growth in the, in the EV sector, for Southeast Asia and South Asia is going to be in two wheels. That's the massive growth. That's the opportunity. So, Elon, I think it's important for them to make these long term plays. I get that, but I don't know how much of it is posturing to try to leverage into getting a better factory deal in Mexico, you know what I mean.
Lei Xing:
So it'll definitely be interesting to see the capacity utilization how that will play out in Giga Shanghai this year, considering there's been some what planned shutdowns or demand going away and export markets, let's say, in the future, if Indonesia comes online, right, then it'll take away some of the Shanghai exports. So I think that's something to watch this year.
Tu Le:
Let me give you a steep peak because my first big bold prediction for 2023 and this might not be very popular. But for those who don't listen or who don't subscribe to my newsletter, please do because this is my first big bold prediction. Tesla is going to need a hug after 2023 ends. Berlin plus Austin plus Fremont plus Shanghai minus no new products, minus late refresh products equals price cuts in the U.S., Japan, South Korea, Singapore, and Australia markets and a valuation closer to $200 billion than $300 billion by the end of the year. The big asterisk I have is unless they refresh both the Model Y and the Model 3 before June 2023, and or launch a Model 2, or mass market product that's less than $30,000, which now could cannibalize the sales of the RMB229,000 made in China Model 3.
Lei Xing:
You know what. I don't believe there will be a Model 2 on the market this year. So one more asterisk is Cybertruck, whether they're going to ramp that up and, this year at all, right. That's a big asterisk.
Tu Le:
My assumption is that it'll launch, but it won't launch until after June. And it's going to help the U.S. market, but.
Lei Xing:
One more thing, I'll add one more: maybe you can add in two: Tesla will reduce prices again in China.
Tu Le:
Oh yeah, I should have added China.
Lei Xing:
So put that in there.
Tu Le:
I should explicitly write that.
Lei Xing:
Because they have that car dstill to play, I’m telling you.
Tu Le:
Oh yeah, without question and remember. So the thing is with the in the traditional automotive space for the folks that are new to following the automotive sector. It's always sometimes cheaper to sell at a loss than to shut the factory down. So Tesla still has margin. We both believe that to reduce pricing in China, to stop the bleeding when it comes to their customer, potential customers going somewhere else to purchase a vehicle. But we also have to remember that the Shanghainese government created requirements for Shanghai Giga from a productivity standpoint, from a number of employees employed standpoint and output standpoint. If Tesla goes below those, then they might not be able to take advantage of those tax abatements that were offered to them for Shanghai Giga for building there, right? So there's a few different things going on. So it's not just that they need to sell more cars. It's that if they don't sell more cars or at least produce more cars, it could create penalties and issues in other parts of their business. So.
Lei Xing:
That's where I was getting to, what the capacity utilization factor this year. So anyways.
Tu Le:
That's why if, I didn't make that connection clear enough, and that's why I said Japan, South Korea, Singapore, Australia would see lowered pricing as well because without Europe being their export market, they'll need to export more into those other markets that they currently ship into. So that's what I meant by that. So I’m going to ask you, man, your thoughts on WM and your thoughts on Xpeng.
Lei Xing:
You know, it's the beginning of the year. There's always executive shuffles, people moving around. And Xpeng is in that phase of reorg anyways, right? And they have not outright denied this rumor. In fact, they're telling the media that we are looking for talent. And we will have more to announce when it's official. My take is, I think this He Xiaopeng is going to have some of his responsibilities given to whoever this new person coming in is, might not be Wang (Fengying), it might be her, but and him focusing on something else maybe. And interesting to see that now you have this tech company or smart EV startups looking for traditional legacy talent, having had that experience. That's what I'm seeing. He'll still be around, but just in a different role.
Tu Le:
So, to key in on what you just said, we are moving now Lei into the traditional automotive sector phase of the show, okay? Because now it's about executing on the products that you have, course correcting on the products that fail in the market, and are reacting very quickly. And you need to really have a manufacturing understanding, a sourcing and a supply chain understanding to really be able to manage all the big decisions that have to be made in order to make sure that when sales fall off a cliff, you can react pretty quickly, right? And so I think that if we look back at Tesla, they didn't really get serious until they hired the ex-Ford finance executive. I forget, he's an Indian guy, but he became the CFO of Tesla. And that's really when they also brought in some other folks that had automotive background. And we saw Tesla mature a bit when it came to manufacturing and kind of managing operations. And so this is not unusual. What we'll see is likely more. And I was told that I wasn't told that He Xiaopeng was looking for a replacement, but I was told that management wasn't feeling very comfortable with their position in the organization. So with their positions in the organization, so.
Lei Xing:
The other move that is official that doesn't get a lot of noise about is this new hire, Frankie Yi, the new vice president of sales and marketing from Geely. This is a guy that spanned his probably most of his career at Geely brand, smart, LYNK & CO, I'm not sure Volvo, maybe a little bit at Volvo. So another traditional sales marketing guy now hired into Xpeng and the guy that he replaced is moving on to AVATR as the CMO. So I mean it's one of those things that merry go around, what do you call it that the people moving around?
Tu Le:
Moving musical chairs.
Lei Xing:
Yeah, musical chairs. So don't think this is bad news for Xpeng. It's just putting figuring out the responsibilities and who may be better at what I guess how it is.
Tu Le:
And also I'm a case in point, I've worked at Ford and I've worked at GM and I've worked at Lear. So having people move from automotive company to automotive company is not unusual. It actually happens in high tech in Silicon Valley as well. With Google employees, they'll have worked at Amazon, they'll have worked at Apple, they'll have worked at Facebook or Meta or whatever. So not unusual because they have the experience or the companies that hire them believe that they have the necessary experience to right the ship or help them right the ship. So it's a bit incestuous, though, because there are some head scratching moves where you might have heard somebody's reputation wasn't so great, and then they get this high profile job at a company. And you're like, that wasn't a good hire. We shall see, I don't know anything about those two guys. You probably know a lot more than I do. If you hear anything, let me know if not. You know with Xpeng, though, everything kind of failed at the same time, which is very challenging for them, right?
Lei Xing:
Yeah, right. They're facing the most head winds among the Big 3 anyways, right?
Tu Le:
And it was a global kind of tripping up, because their international launch didn't go as well as they'd liked either, right?
Lei Xing:
Right. And WM Motor, I think you know what, the most, the weirdest thing is this Apollo FMG, guess who owns it: it’s Freeman (Shen).
Tu Le:
I knew. I knew it was freaking…
Lei Xing:
I was digging into some background, and this is a company that he is a, I think he is an independent what non-executive director or something. I'm not sure if I get the translation right, but it's a weird setup. It's a weird arrangement, which leads me to believe that WM Motor is not going anywhere, even with this, so called acquisition.
Tu Le:
There's no true VC or private equity firm that would touch them. Let me tell you that, right?
Lei Xing:
It'll buy them some time, but I think the inevitable is where we're, right, where we're seeing that. So I don't know, they just don't have the products, and they can't manufacture.
Tu Le:
And they got two factories that they need to pay for. Three? Two at least, right? In Wenzhou alone. Yeah it's a shame because they were the most efficient coming out of the gate three years ago, four years ago.
Lei Xing:
And I heard there was a lot of infighting among the different executives. I think one of their founders left, right? Sometime last year.
Tu Le:
A lot of finger pointing, man, when things aren’t going well, people get fingers pointed at.
Lei Xing:
And look at what I tweeted below yours on what Freeman put up on Weibo. Something along the lines of “survive like a cattle.” I don't know that has any resonance in English.
Tu Le:
Meiyou, Meiyou yisi (no meaning).
Lei Xing:
It is basically survival. That’s it. That's what he is pointing at.
Tu Le:
So 2023 is going to be a long year for WM is how I looked at that.
Lei Xing:
Right. All of their products flopped, right? They had the sedan, was it the M7 or something? Nothing there. The W6. It's nothing.
Tu Le:
And they sold early to fleet for some reason. And then
Lei Xing:
I heard, if I remember correctly, they probably done, I don't know, at most 30,000 units in whole of 2022. Disastrous. If you want to keep going, right?
Tu Le:
Yeah dude, that's, it's, yeah, you're not going to be in business very long if you do that. So. But anything else?
Lei Xing:
The only other thing was going back to the sales a little bit. Volkswagen Group, I tweeted their kind of sales. I think the suspense this year, right? They did three, as a group, they did 3.8 million in 2022 in China. The VW brand was just under 2.4 million. Now, those numbers are probably going to be exceeded by BYD this year. That's the potential we're looking at. They’ll still remain the number one foreign automaker.
Tu Le:
But hanging by their teeth.
Lei Xing:
Yeah, right, Skoda. They are still being discussed whether to back out at all or completely.
Tu Le:
Which is weird for Skoda because they are doing really well in India.
Lei Xing:
That's their focus probably going forward. And I mean their NEV sales, BEV sales are all double digit or triple digit growth. That's a good part, but.
Tu Le:
Low base.
Lei Xing:
Low base. Then we saw some ABB sales with the exception of BMW they didn't announce, the other two didn't announce NEV sales in China.
Tu Le:
Well 41,886 units across five products. The i3, which is the 3 Series electric equivalent, sold about 13,000 of those. So just over 25%. I don't know. And that's they sold 800,000 units total in China. I want to say, Lei?
Lei Xing:
Who?
Tu Le:
BMW.
Lei Xing:
Yeah, close to 800,000, just below 800,000.
Tu Le:
So that's less than 5% or around 5%. What are you, what do you think, the BMW management is thinking? Do you think that was a good year? Do you they think that was a bad year?
Lei Xing:
Both BMW and Benz were over 700,000, or three-quarters of a million units. I'd say that's pretty good. But Audi, remember, Audi they were targeting 1 million units by 2025, I think, and they were at just over 640,000. I don't know if they'll get there.
Tu Le:
Audi’s weird, because it has that connection to the government for so long, right? So it's hard for me to reconcile Audi being a standalone premium brand without associating it for such a long time with being the A6 the government vehicle. So I don't know if the Chinese consumer can disassociate themselves with that either to be quite frank. But I think that ABB with the 41,000, I think that with BMW selling 41,000, 42,000 cars, NEVs, BEVs in China and 2022. I think that's very disappointing for them. And remember, they hit this number only after they reduced price on two of their products, right? So.
Lei Xing:
It's pretty clear that these premium brands, traditional foreign premium brands their EV sales in China will be significantly lower than these startups that are competing directly with them for some time to come, so.
Tu Le:
We need to call their electric versions of their cars the next potential BYD killer now we can't call it a Tesla killer. What else, do I have anything?
Lei Xing:
And then the others just Denza made some announcement about their plans and new products. Basically Denza the five letters will each come out with different EV and then Hongqi, right? Their target is to sell a million vehicles in 2025, half of those are NEVs.
Tu Le:
Oh, man. So.
Lei Xing:
Then they launched three new concepts.
Tu Le:
But the crazy thing is, Lei, is that they talk about these companies talk about their ridiculous numbers, but by 2030, the Chinese market could hit 30 million units, right?
Lei Xing:
What I'm saying is if you add up all these targets announced by these individual companies, it'll be way more than the total market of what we would expect.
Tu Le:
They add up to like 70 million units. No, I get it, man, I get it. And guess what? There's not enough batteries, there's not enough chips.
Lei Xing:
I think the point that we stress today is, again, regardless of the subsidies, regardless of these black swan events and headwinds, there's no turning around that this market is becoming an NEV market, dominated market, right? There's no time turning back. People are going to buy NEVs regardless. They are becoming Vs.
Tu Le:
And peoples and analysts, OEM leadership, tier-1 leadership should study very closely the China market and the speed at which it converted and pivoted, because Europe and the United States is going to do the exact same thing. The United States is a bit slower than Europe, but remember that Europe has committed to 2035, eliminating the sales of ICE and diesel fuel vehicles. So the EU the only way that happens is filling the void in the market segments and the product pipeline with Chinese EVs. So something's got to give either the foreign legacies, the French automakers, the German automakers, and the Italian automakers that are selling in Europe. They need to increase the number of products that they'll be launching. Or you can expect the European consumer buying and buying a lot more Chinese electric vehicles in the next several years. Full stop.
Lei Xing:
Yeah. And then Chang’an, look at what they announced AVATR and Shenlan. These are both two brands announced after we started doing this pod, they're gunning for 100,000 units and 400,000 units, respectively in 2023, just very ambitious. And then you think you know, these these legacies, how can they catch up? How can they, right?
Tu Le:
The evolution that they are all trying to initiate or catalyze or accelerate at their companies is not fast enough, and it doesn't evolve them enough. They need to make drastic moves and they needed to make them yesterday. That's with management, that's with the number of employees that's with how they're deciding to work across their functions. Top down, they need to reassess, and it's not a McKinsey exercise. It's not spending $2.5 million on a McKinsey study to see how to optimize themselves for the electric vehicle market in the United States and Europe. It's literally just like what I'm going to cut an arm off. And I'm going to reassess. That's, to me, I'm fearful, because they just need to move faster. They need to be more drastic with their decision making. So that's my, that's me jumping on the soapbox. And if we look globally, guys, what's going to happen is the United States. The U.S. legacies are going to get addicted to these low prices that CATL is pushing worldwide. And the IRA is going to blow up, because the United States is, the U.S. government is not going to finalize or freeze the language on the rare earth and the component pricing and how much you receive in subsidies until march, right? So they have a long time to assess, and I know they're also reaching out to analysts and legacy automakers to get their feedback. But there's, this is a slippery slope for the U.S. government. It's a slippery slope for the U.S. legacies. If we open that door to China EV battery cells, without some sort of lift or some tariff, we're never going to get it out of our supply chain. Because they’ll always go lower. You guys have followed China for a very long time. The Chinese companies will always go lower in pricing and in cost, so.
Lei Xing:
It'll be interesting this year whether one or two China EV Inc. will follow the steps of VinFast and make some kind of announcement on U.S. entry officially. So that's something to watch out.
Tu Le:
You have to read my newsletter because I made a prediction on that, too. So.
Lei Xing:
Good!
Tu Le:
I didn't name who, but I have my guesses, but it's inevitable, right? There's the U.S., although it was what, 14 million, 13.5 million last year?
Lei Xing:
13.7 million, I think was the number?
Tu Le:
Yeah, so it's still the second largest market in the world. So remember, I said earlier that India became 4th. So right now, it's the U.S. or it's China, the U.S. and then who’s third, it’s Germany, and then India, and then Japan. So the U.S. is a must enter region for China EV Inc., full stop. The sooner the better, because I think GM’s portfolio on paper is pretty well rounded out. We see that Kia and Hyundai last year were, had two of the top 10 EVs, right?
Lei Xing:
All of a sudden, the last couple of days since I’ve come back from CES i've seen tons of IONIQ 5s and Kia EV6s around the neighborhood, small town, right? I'm living a small town. So.
Tu Le:
So the Kias and the Hyundais currently do not receive any IRA money, that might change.
Lei Xing:
Well if you leas them, you do. At least that’s the language.
Tu Le:
We will see. But it's not hit the dealer level yet, because it might be that there's a way to account for it in your taxing, in your income taxes or your tax returns. But it's not on the pricing side. So because Lei, I've been looking around a little bit, so..
Lei Xing:
I'm glad I got it over with last June, so.
Tu Le:
I don't have anything else, man. So what do you think we close up shop on our 100th episode.
Lei Xing:
Sure. We'll probably, housekeeping. So next week should be at the same time. And then the following week is the Chinese HNew Year week. So we'll probably stop for a week.
Tu Le:
Because you are Chinese and I’m Vietnamese and we both celebrate Chinese New Year. That's the one holiday that the Vietnamese and the Chinese celebrate together.
Lei Xing:
So I guess, and then once we come back, we will see some of the January numbers. But I don't have anything else.
Tu Le:
All right, then, hey, everyone, thanks for listening and good morning, good afternoon, good evening. See you guys.
Lei Xing:
All right, thank you. Talk to you guys. Bye bye.
Tu Le:
That brings us to the end of this week show. Lei and I thank you for tuning in. My name is Tu Le and you can find me on twitter @sinoautoinsight. You can find Lei on twitter @leixing77. If you wouldn't mind rating and or reviewing us on Apple Podcast, Spotify or wherever you grab your podcast from, we'd appreciate that as well. Even better if you enjoy this show, please tell your friends about it. Please join this again next week as we track down all the latest news on China EVs & More.