Episode #113 - Special AutoShanghai2023 Edition

This episode is a complete download from Tu & Lei re: 2023 Shanghai Auto show. It's also Lei unpacking his experience returning to China after 39 months away. 

There was so much to unpack, it took them over an hour! This is a for certain not to miss episode!

Transcript

CEM #113 Auto Shanghai 2023 Special Transcript
Recorded 4/24/23 

Tu Le:
Hi everyone and welcome to China EVs & More where my co-host Lei Xing and I will go over the last 2 weeks of most important and interesting news coming out of the China EV, AV and mobility sectors. We'll open the room up at around the 40-minute mark to anyone who's keen to ask us any questions. What Lei and I discuss today is based on our opinions, our expert 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 organization 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, it was good seeing you last week. We had a whirlwind week meeting new friends, seeing products and I am especially anxious and curious to hear your perspective after visiting China after almost 3.5 years of not being able to come.

So. Can you please introduce yourself?

Lei Xing:
A lot to take in, a lot to take in. Good evening from my side. My name is Lei, and I am the former chief editor of China Auto Review. This is episode #113 and I got to correct you. You said last 2 weeks, but really there's one thing that happened the last two weeks: Auto Shanghai. Cause I don't remember anything else. Every image, sights and sound that I've seen and heard are still in front of my eyes and next to my ears. Even though I’ve returned to the U.S., really, it's difficult to put in words what just happened, right, the last week. And I know that a pity that we weren't able to do is us being both in China, doing an episode, recording an episode. So that's the only pity. But I mean, last September, my trip to Detroit, I mean that was something, but nothing compares to Shanghai, right? Oh my goodness, where do we even begin, right? And I need to catch my breath.

Tu Le:
Let me start because I hadn't been in China for about 7 months. So I was curious to see Shanghai because as most of you know who listen to the podcast in the past, Shanghai is one of my favorite cities, it's one of the liveliest cities I’ve ever been to and had the pleasure of living in for a short period of time. But when I got here, there was a bit of COVID residue. The energy was there, but not as high. There does seem to be still a bit of distrust between the city and its people. Most foreigners have left, I won't say most, a great deal of foreigners have left. I think it'll take some time for Shanghai to really truly completely get back on its feet. But Shanghai is also a very resilient city, the largest city in the world, one of the most dynamic in the world and it's going to be fine long term, but there's a lot going on. And the excitement of the auto show really brought back and ignited some of that excitement in the city. So it was good to see. And the story behind the story Lei, you and I and all the rest of the KOLs we were, we had the pleasure of meeting this trip. We were a little bit anxious because we were unable initially to get our passes. Everybody has a unique story. And I will say that there were one or two EV company， pretty high up in the food chain of these EV companies for communications, that they were not actually able to get in for a day or two. And so I feel lucky that I got my pass and was able to get in on Tuesday and walk around on Wednesday as well. So maybe you can tell a little bit about when you got in, what you saw, how amazing and or shocked you were. I don't want to put words in your mouth. So why don't you go ahead and take over and describe to everybody what you saw?

Lei Xing:
Yeah maybe we break this special episode into maybe three parts. First we can talk about just kind of the scale of Auto Shanghai and second, who were there, whether it's the brands or the CEOs, as much as who weren't there, I think were telling.

Tu Le:
I think also importantly Lei, is which media were there and which media were not.

Lei Xing:
Yeah, and then third, just we go into the models, the memorable models that I think you and I think are worth talking about. So in terms of scale, I went to New York Auto Show right before Shanghai. And I said, if Shanghai is the main course, New York Auto Show would be the breadbasket. And boy, was it a main course, and then some. The sheer size of the exhibition halls? I would describe it as the Titanic of auto shows, right? This is, I believe, so 2015, 17, 19, 21, 23. So this is the 5th time that the show is being held at this National Exhibition and Convention Center. This flower shaped venue.

Tu Le:
Massive, massive venue.

Lei Xing:
Next to, outside of the Hongqiao Airport and Railway Station. And there were 13 halls altogether. So nine dedicated to passenger vehicles, three dedicated to suppliers, tech companies, totaling 360,000 square meters.

Tu Le:
And Lei, let me stop you there. It's very important to note that there were tech companies, sensor companies stacked up against traditional automotive companies. So they're all kind of bled together. There wasn't this line of demarcation said that you fit into this bucket, and then you fit into this bucket, right?

Lei Xing:
Right. And then, so again, basically, the New York Auto Show is just one of those 13 halls. So it's basically 13 New York Auto Shows in one shot. The official numbers: 1,200 models, 1,413 vehicles in total, so out of all of those 513 were NEVs. But you and I, I mean we felt like everything we saw were NEVs.

Tu Le:
The ICE vehicles were kind of swept under the rug.

Lei Xing:
So total of 271 NEV models and 151 press conferences and there are actually 12,000 media representatives. I wonder, whether those 12,000 media representatives include those countless internet cewebrities or KOLs doing live streaming on the two media days. I wonder. 

Tu Le:
It has to. It has to. So I will note that the foreign media that wanted to come in, and get a 5-day visa to cover the show. Many of them ended up getting their visa unless you were part of an American media organization. So you could be Asian, live in Hong Kong or somewhere else. But if you work for Bloomberg, Wall Street Journal, or New York Times, it was about impossible to get a visa. I think that was really, really unfair and stood out, which is unfortunate.

Lei Xing:
Yeah. And then Polestar had 80,000 tulips at their booth. I estimated 10,000, I underestimated.

Tu Le:
So did you see my tweet to Nick? He asked you if you could verify it. I was like he counted every single one.

Lei Xing:
Yeah, I mean there was a bit of everything, the massive scale.

Tu Le:
Just like last time it was in Shanghai, there was one piece of controversy, and all the media are saying BMW, but it was actually MINI, not BMW, right?

Lei Xing:
And the latest from that incident is while other booths are now trying to give away free ice cream, the organizers have called off. So they're stopping everybody from doing this because I heard that BMW or MINI complained. So this is being stopped. No brand is allowed to give away ice cream.

Tu Le:
But explain what happened.

Lei Xing:
I mean this, at the MINI booth, there were these two ladies working there supposedly giving out free ice cream.

Tu Le:
And they weren't foreigners, they were local Chinese.

Lei Xing:
Right, so I guess a Chinese went up and then the ladies said there were no more ice creams and then later on a foreigner, supposedly an employee of BMW came to the booth and were given ice creams. And somehow this was shot on video. It brewed up into a huge firestorm.

Tu Le:
Oh man it was on social with a quickness.

Lei Xing:
And I'm thinking somebody must have planned this.

Tu Le:
The other thing too Lei, is that we have to be quite frank. The foreign legacies needed some incentive for people to go visit their booths, because it was hall 3.1 where NIO, Xpeng, Li Auto, AITO...

Lei Xing:
It was 6.1.

Tu Le:
6.1, that it was elbow to elbow. And at 8:30 in the morning Li Auto booth was packed for the press conference, and then everybody shifted to Xpeng, then everybody shifted to NIO. It was a mass of humanity going back and forth. And then ZEEKR was there too. 6.1 was the hall to really spend the time in and the carpet in 6.1 probably needs to be replaced because, and it could use hall 3.1 where all the foreign legacies were to reuse that carpet, to replace the 6.1 hall carpet. That's how bad the traffic was, so.

Lei Xing:
So for the second straight Auto Shanghai, we had some kind of incident. Two years ago was the lady dancing on the Tesla.

Tu Le:
Let me add this with that. I was actually told, a rumor was that Tesla was not invited, was uninvited to the show. That's what I heard.

Lei Xing:
Even though Tesla wasn't exhibiting, they made news, right? They made news with the SpaceX launch, the price drop and the earnings. That was right during the auto show, beginning of the auto show. I mean it was so big that I walked basically 20,000 steps (a day) and the 2.5 days I was there and I still didn't get to visit every booth. That's how crazy it was.

Tu Le:
That was never going to happen for me, so.

Lei Xing:
I think if you wanted to do that, you probably have to spend one day at every hall to really see and feel everything. But that was, I think was in terms of size, opening up, coming out of the pandemic, the buzz, it was just mad. I mean it was, yeah.

Tu Le:
And I will say when the system works, it works really well. The passport, the QR scanning, pre- registration, and the face recognition. It's a little scary because they're registering your face for this auto show. But when it works, it works really well. And I didn't have to wait in line very long. And I didn't go through that huge snake line in the other entrance. For me, I got there early on Tuesday because you know I was interviewed by CNBC so that was quite an experience. I got to see people setting up. I got to see the “Bao’an” or which translates to literally security guard. They were entering the halls. There were hundreds, if not thousands of them, and I tweeted some behind the scenes photos of my interview. They were about 10 meters away from me, doing their calisthenics and pep rally. And they were yelling and screaming while I was interviewing. And so I give myself a lot of credit for this calmness during this pressure, because they were yelling so loud. And I'm on live tv getting interviewed and I can barely hear the anchors what they're saying. 

Lei Xing:
You did a good job, so.

Tu Le:
Thank you. But that was the funniest thing because I had to show people that okay, this is actually not as calm and easy as you guys think it is. I thought it was really funny. The producers were kind enough to take some pictures of me with the “Bao’an” about 10, 15 meters away. So.

Lei Xing:
Yeah I saw your tweet. So in the previous Auto Shanghai, this type of technologies, technology wasn't used, right? Is that correct? It’s kind of…

Tu Le:
Right the last one in Shanghai it was a little clunkier, so this is much more streamlined. But the actual ticket, the actual getting the tickets was much more really different, so.

Lei Xing:
So what happens, I think there's a step by step process. You had to get the badge itself, the physical badge. Then on the badge a there's a QR code you scan. You got to enter your personal information into the WeChat mini app. And then for foreigners, you had to go to a facial scan first. Once you get all that taken care of, you just walk right into the gate, it'll scan your face and you go in.

Tu Le:
And for the newbees, for veterans like me who learned his lesson very early on in the process of living in China. If you don't put your name as it is in your passport, it will reject. You got to put your surname, your first name, your last, your middle name. Everything needs to be the exact same way. If it's not an exact match, they were rejected. So that's happened to me on flights. That's happened to me on railroad, because I have a really weird name, because some systems don't want to take “le” as my last name, it is only two letters.

Lei Xing:
I'm not too far from you. I only add an “i” next to mine.

Tu Le:
Right. But that “i” is a big difference. That's 50% more, right? And then sometimes I’ll have to put, because my first name is also two letters. I'll have to put “Tu Truong” as my first name. And then I get question because on my passport, it says my middle name is Truong. They're like, it’s “buyiyang” “buyiyang” (different), and I’m like, come on, dude. So anyways.

Lei Xing:
Come to think of it, I think administratively or management wise, actually it was well managed, I think.

Tu Le:
If you were able to get a ticket.

Lei Xing:
I mean what happened in 2021, I think there was much scrutiny and trying to have control on who really gets to enter and stopping the “Huangnius” from, the scalpers, from reselling the badges. And have you seen, have you, when you walk out at the end of the day, there's still scalpers coming up to you and say, hey, do you have the used badges, right? So I don't know how they do it, but so in that sense, I think it was well done.

Tu Le:
We've talked about the lead up. And so one thing, let's end it on this. And then we'll actually talk about the show. The people that were there before, during and after. I reached, so Russell Flannery, who's the senior editor at Forbes, he reached out to me and wanted my take on what I thought I’d see for the show. And I gave him four things. I gave him more mature designs for EVs on the exterior and interior. And I think we saw that, I think that the initial designs on EV interiors was a normal analog interior with like an iPad bolted on to the middle of the center console. Now they're much more integrated. The screens are larger, longer. I think they just flow a little bit better. So I think there's a check there. We saw that. Number two, the second thing I said was we'll see much more AI and voice and gesture and more of technology being utilized in the interior to create better engagement. And I think generally, we saw that. Number three, I said that a ADAS systems would move into the mass market segments. We saw that I think there were over 80 or 70 or 90 cars with LiDAR in them now. And then the fourth thing I said, and I said this more tongue in cheek is will the empire strike back? I meant, how are the foreign legacies going to show up? And they did not, effectively. 

Lei Xing:
They tried.

Tu Le:
So I’ll let you take over. Well, one or two of them did, but none of the vehicles with the exception of the ID.7 really got any coverage. I can't think of any foreign legacy vehicle that got any airtime besides the ID.7. And most of that was, I think, pretty flat. What were you anticipating? And what did you see?

Lei Xing:
One summary I would say is Chinese brand EVs revealed or launched, countless. Foreign brands, just a handful. And I can give you this handful right now: it’s the ID.7, Polestar 4, EX90 I wouldn't even consider because it was revealed much before,

Tu Le:
It was already launched.

Lei Xing:
Buick Electra E5, the Mercedes-Maybach EQS SUV, there's the two Toyota bZ concepts, there's the Kia EV5 concept, and there's the Honda e:NP2/S2 models. And I think that's it. I can't remember any other ones that were really significantly talked about.

Tu Le:
The other notable announcement was about an ICE vehicle and it was from Lincoln who said that they were going to build the Lincoln Nautilus in China and ship it to the U.S. That was kind of the only other notable thing I remember.

Lei Xing:
And then there's the refresh of the Porsche Cayenne, which is very important model for the Chinese market, before it goes into the full BEV version by mid-decade. But what I wanted to share was before Shanghai, I spent a day in Beijing and I know you're in Beijing. It felt just like home, I had Peking Duck with my father-in-law and then he cooked…

Tu Le:
Where did you go? Dadong? 

Lei Xing:
No, it's the Ziguanyuan, yeah, that's a local favorite. So you need to go if you're still there for a few days. And then he cooked a nice dinner for me that night. And then the afternoon I went to Salona Mall to check out all the showrooms. And it so happened that Peter Nota, the board member of BMW Group for sales and marketing had an entourage visiting the NIO showroom. So I took a little video and I posted on Twitter, and they later went to Xpeng. So I thought that was interesting because for the German companies, these board members, they were in China ahead of the Shanghai Auto Show to learn, to be shocked as I was, to hear, to touch, right? To feel, to talk.

Tu Le:
And let's be clear on this Lei. And I joked around this, I joked about this on Twitter. They stand out like a sore thumb in the auto show, because they're wearing their white button-down suit shirt without a tie in their suit. They were visibly impressed, concerned, curious, and exasperated all at the same time. You could see that from them, because there was always three or four people together, and you always knew who the senior man was. They finally get it, I think.

Lei Xing:
Yeah, they get it. And you saw that through the BMW, they had a brand night. I'm just going to read off some of the slogans they put up on the slides. They said: what moves Chinese customers today will move the world tomorrow; What works in China works all over the world; It's why we not only say, but truly feel that BMW is at home in China; more impact of our R&D in China, more China in our worldwide R&D organization; China is the place to be. Then after all of that there's the BMW MINI ice cream gate. I mean how ironic is that, right?

Tu Le:
I got to tell you Lei, watching Volkswagen, some of their tweets and some of their announcements, watching BMW with what you just said. They've been reading my newsletter, they've been listening to our podcast because guess what, we've been preaching this shit forever, right? We preached this shit for years.

Lei Xing:
Yeah, so Volkswagen announced the 100 %TechCo, it’s not yet ready. I think it's next year.

Tu Le:
Yeah, so that to me, I tweeted about that. There was a Volkswagen Group tweet that says we're going to move 30% faster. And we're starting in 2024. I was like, why can't you start tomorrow, number one, and I wrote okay, is 30% really that impressive if you need to move more than 50% faster.

Lei Xing:
I think you can see very clearly these, especially the German companies, they're trying to move fast, they're trying to catch up, they're trying to, they understand what's going on, they have these actions in place, but…

Tu Le:
Diess knew it already. That's the problem with Volkswagens specifically. Diess knew it already. So they wasted another year, because Blume is like saying, effectively, he's not saying the same thing, but he's doing the same thing. It's frustrating to see.

Lei Xing:
And then at the Denza press conference, they put up a slogan on one of the slides, saying: the traditional premium is about logos, NEV premium is about technology. That was, I actually did go into one of the Denzas on display and just tried to feel everything inside why it’s such a, I think it's the top selling electric MPV right now, and everything just worked, everything just comfortable.

Tu Le:
Here's a quick anecdote of foreign versus Chinese domestic. I went over and checked out Audi, checked out SAIC Audi and stuff like that. And Audi's booth, immaculate, beautiful cars. I'm a huge fan of the RS e-tron and went over there and wanted to sit in it. Nobody in line. I just put my bag down, sit in it, sat in it, took some pictures of the interior, no problem, meiwenti. And then I go over to ZEEKR in hall 6.1. I waited 10 minutes to get into the ZEEKR 009 MPV, 10 minutes.

Lei Xing:
Yeah the ZEEKR X I couldn't get in, because there was a lot of people looking at it, as well as the BYD Seagull, which I think is one of the most talked about models this year because of the $11,000.

Tu Le:
So in addition to getting taking 10 minutes to get into the 009, which is a beautiful executive MPV where the rear seats recline. They have these leg rests and we're talking I could consider getting one if somebody wanted to drive me around, right?

Lei Xing:
What did you say in your tweet? The electric MPV is the new sedan or something.

Tu Le:
So I was kind of joking around because a few years ago when the EV companies kicked off, a lot of them had launched with sedans. So I tweeted that the electric MPV is the new electric midsize sports sedan. And so because everybody is launching, Li Auto, Xpeng, and Buick with their EV GL8. So and Denza. So that's going to be a super crowded market. So for a niche vehicle that is high margin, though.

Lei Xing:
And then the Americans, Buick is really the only one that showed really anything significant with the first model with the Ultium platform. And other than that, right, Ford, I mean Jim Farley was in China, but chose not to go to the show. I think he was just visiting JMC and Chang’an right. And then he left.

Tu Le:
They didn't really have anything to show anything significant, so.

Lei Xing:
So, right. They have pickups, they have Broncos, they had a new, what's the new pickup that they're localizing production?

Tu Le:
I forget what it’s called, but I know what you're talking about.

Lei Xing:
But it's interesting that you make that move at this point in time when NEVs are everything, right? And then Stellantis, I remember nothing about Stellantis.

Tu Le:
I don't even remember walking by them to be quite frank.

Lei Xing:
It’s pretty much Peugeot and Citroën. But I don't think there's anything.

Tu Le:
But let me, back to Farley real quick. There was a Reuters article I think 2 or 3 days ago, he was at a charity event. He was back in the U.S and Dearborn. He said they're going to have to reassess their brand strategy in China. I think that was significant. He called out, if you want to see the dynamism, the competitiveness, the beautiful vehicles, you got to go to China. And then he also said, and he praised BYD and effectively said, BYD is what Tesla wants to be. And you guys are missing out. So it's a Reuters article. Let me see you keep talking. I'll try to find the title of the article, but it is an eye opener, right?

Lei Xing:
I tweeted that in my LinkedIn comment, that this is a watershed moment in a couple of ways, the show itself, I think it's turned completely toward NEVs, there was no, nothing significant ICE launches. I think that's pretty new. And second, I said, the Chinese have leapt forward over the foreigners in design, technology, innovation and quality.

Tu Le:
And desire and desirability.

Lei Xing:
I don't know if they still realize that, the foreign legacies, but that's what I've seen with my own eyes.

Tu Le:
I knew you believed me Lei. I knew you believed me. And you took my word for it, but you have to be here and be odd because when we started this podcast, I was the only one that was really calling out how different and how much trouble the foreign legacies were in, so.

Lei Xing:
After two years of doing this pod, I finally kind of feel like I'm qualified to say things because I've been there and done that, I've seen first-hand, how do you put 5% penetration versus 25% penetration in a short 3 years into perspective? You go into Beijing, and you going to Shanghai and you see what's on the roads, then you get it, right? But Shanghai obviously is a special case because of the license plate, but still, I mean, my goodness.

Tu Le:
Looking at one of our guests, I know he tweeted a response to something I wrote, and Sasha, you are absolutely right. NIO and Xpeng do have challenges, they're not profitable. But I think collectively, the China EV Inc. is really, really putting so much pressure. It wasn't just symbolic that in 2022, collectively, the Chinese domestic automakers outsold the foreign automakers for the first time ever. That is really indicative of where the market is going. And now the media are on board, foreign media on board saying, they're probably not going to get back that share they've lost over the last few years here in China. So.

Lei Xing:
Yeah they're trying hard, but I also said that window is closing, it’s really closing and really there's, you mentioned, there's really two numbers to remember in China right now: 50% NEV penetration within Chinese brands and 50% share of Chinese brands in the overall passenger vehicle market. So the two 50% really is all you have to remember right now about the market. 

Tu Le:
Worth noting, util now ABB has had some cushion. They've had challenges with their EV products, but they are really going to face in the next 12, 18, 20 months, a ton more intense competition. And I think they still aren't ready, meaning that the products that they're launching aren't ready to really compete against the best of the NIOs, the HiPhis, the Yangwangs. And so they could be in a lot of trouble. Porsche is the only indestructible brand currently in China. They've never had anything but growth year over year since they've entered the market. But I spoke, I had two meetings, and they were like roundtable, off the record round tables with executives. And that wanted to listen and hear my perspectives on particular products, particular market segments. There were a few German executives in these meetings, and I said, if Porsche sneezes, Volkswagen Group is in a ton of trouble. So.

Lei Xing:
Can you hear me? Yeah, yeah, yeah. No, I was just thinking because you mentioned Volkswagen Group, their Q1 BEV sales in China was 21,500, down a quarter. Group, that's group, not VW brand. So I don't know if it will improve.

Tu Le:
We have to remember that it's not the logo anymore, as you had stated. If you look at the Tesla Model S Plaid, it is much easier if the powertrain is electric to create a performance version of a current vehicle. So, how does Porsche really, don't get me wrong, I love Porsches, but I'm an old school automotive guy, and I would always, if I could afford one, I'd always have a Porsche in my garage. But the Chinese consumer, they don't appreciate the Porsche brand like you and I would. So if there was a domestic player that had a 2.5-second, look at the Lotus Eletre, like the performance version goes 0 to 60 in like 2 point something seconds. And that, for sure, is likely going to eat into some of the Macan and the Cayenne sales, for sure, right? So that should worry the heck out of the Porsche guys because you and I have joked around about this a lot. I sent my kids to a local school in Beijing and every other car was either a G500 Mercedes G500 wagon, a Porsche Cayenne, a Porsche Macan, or a Land Rover Range Rover, so that Lotus is poised to really take on the traditional Germans, on the midsize premium SUV segment, and it should scare that crap out of Porsche.

Lei Xing:
Yeah, the renaissance of the Lotus brand with China now as an anchor, it seems to be going pretty well. But then again, there's the, we talked about this many times that the internal cannibalization of those three models, the 3 and EX 90.

Tu Le:
Yeah the Polestar 3, the Volvo EX90 and the Lotus Eletre I think single handedly they should all do pretty well in the China market, but they will take sales from each other. They'll collectively take sales from the traditional Porsche buyers here in China specifically. I think UK buyers will be open minded about purchasing a Lotus SUV, I think that Europe could also be pretty open minded because it's still a performance vehicle. It's a good looking SUV, it's not a family SUV by any stretch of the imagination. But I think it looks pretty good and it seems to perform well. If the quality and reliability is there, I think it'll do pretty significantly in Europe in the next 24-30 months. So.

Lei Xing:
What would you say are some of the I guess product trends that you saw at the show?

Tu Le:
So I’m going to point at two things Lei, and I want to hear your comments because we went to the Xpeng event on Sunday night, got to meet Jay, got to meet Phate, we get to meet Phate, Keith Bradsher from the New York Times was there. So for me, it was great. Know these people digitally, get to meet them in person, thought that was a highlight for me. I think it was important for Xpeng to really separate themselves from the show a little bit and spotlight. And it wasn't about the G6 at all. This media event was more about the SEPA2.0 system. When we had the opportunity, the privilege to sit down with Brian, who is, Brian Gu, who is the vice chairman of Xpeng. The dude is a communicator. The dude is really well polished. And he's knowledgeable. I mean he's a PhD., he's a doctor, and he's an ex-banker and answering the questions enough to where it's not just empty rhetoric, but enough, but not enough to where it gets more scrutiny, right? And the things that stood out to me was Xpeng talking about reducing powertrain costs by 25-30% or something like that? 

Lei Xing:
25%. 

Tu Le:
Yeah, I mean that's significant. That's game changing, right? That's Tesla like cost savings for their single chassis front and rear. The other thing that really didn't get a lot of airtime that I thought was significant was Li Auto giving away AD MAX for free, for life. 

Lei Xing:
Yeah, mic drop!

Tu Le:
I thought that was really significant. Nobody picked up on that because it's going to change the calculus in some carmakers here, at least in China, because they were counting on subscription fees for ADAS systems for the life of the vehicle, right? So that's going to change strategies for sure. And then actually I'll bring up two other things Lei, or one other thing. You had said in our last podcast that these price cuts due to the price war for these new vehicles were already embedded. I've used that in a couple of statements already. So thank you. And I've credited you for that. So, for instance, I don't believe the ZEEKR X in December or November from the brand team or the product team thought pricing should be a RMB190,000. I'm thinking they probably thought RMB220, 230, maybe, but they went to RMB190. So to your point, they cut the price probably before they launched it. The second vehicle that I thought was seemed like that's pretty competitive pricing was the Buick E5 RMB230,000, really, really competitive. Do I think that it probably needs to be lower? Yes. Because I got into it, I got in it. It's, nice EV but it doesn't stand out, and the price of entry of a midsize EV that is not super significant in any way, is probably RMB200,000.

Lei Xing:
You know, so there's a joke, I don't know whether you’ve heard of the joke on the three GM brands in China. It goes: the Chevrolet has gone down the drains, Buick has become Chevrolet, and Cadillac has become Buick. Yeah, it is crude, but I mean that's almost feels like what happened, right? That the brand dilution has been significant.

Tu Le:
And I have to tell you, I did speak with a few people with their crosstown rival. And they are really waiting on Dearborn to show them that they are committed to the China market because Farley came here. One of the reasons you said was to meet up with JMC, but the other reason was to reassure the Chinese staff that they are committed to the China market.

Lei Xing:
And I think I mentioned this too, I also heard that Doug Field was in China as well. And they may have visited quite a few of these startups just to learn, discuss whatever, how far they are ahead, let's say, on the vertically integration of e-motors, let's say a NIO for example, that they do their own XPT motors and they are way ahead of Ford in that respect. 

But back to the product trends, I think there are a few, I think one that stood out was these GT models, right? So there’s the NETA GT, there's the iCAR GT, there's the Hyper GT I think that's an area worth looking at, because the foreigners are not touching that at all. But Chinese are kind of experiencing with that segment. MPVss obviously. And then there's these PHEVs or EREVs. Let's say a good example would be the WEY Lanshan, the Blue Hill, Lanshan DHT PHEV, that's going competing directly against Li Auto. And then you have the Galaxy L7, which is also a PHEV. 

Tu Le:
Job one just rolled off the line.

Lei Xing:
So there are a lot of these type of, I think PHEVs are still an important kind of segment that will grow. Then again, Xpeng, this competition on this, all-scenario NOA, NGP, whatever you want to call it.

Tu Le:
There are multiple companies that have said they can use standard definition mapping now, so.

Lei Xing:
Yeah so the Li Auto’s lifetime free NOA in fact, effectively is a price cut right, again. And then you have companies like QCraft, did you, you did, right? Test it out?

Tu Le:
I did.

Lei Xing:
Their highway NOA, they're also launching the city NOA either with LiDAR or without LiDAR. Then the de-HD mapping that Brian Gu talked about to reduce cost, that's going to happen. And he also kind of mentioned wherever there's an opportunity that we may not need LiDARs, again is to reduce cost.

Tu Le:
So the irony of it is that they're leaning into or moving towards the Tesla philosophy a little bit.

Lei Xing:
Yeah the vision philosophy. Yeah, and then other than that, I actually I think there were some sleepers, not automotive related, but for example, CATL made quite a few announcements. Their Qilin battery on the Li Auto, the condensed battery. There is some sodium ion chatter.

Tu Le:
The aviation battery. 

Lei Xing:
Yeah so I actually spent some time at CATL so checked out the, basically the Qilin battery, ZEEKR 009 is the first to use it. They want long range for that battery, whereas Li Auto wants fast charging. So they're tuning that battery differently for these two customers. And then condensed battery like, is that mystery of the next, I guess, breakthrough that basically is what, deciding the end of the ICE age or something, right?

Tu Le:
You know, good friend of the show, good friend of yours and mine, Steve Levine, he was pinging us during the CATL news conference wondering about the sodium ion battery.

Lei Xing:
So sodium ion there weren't, I mean Chery, right, announced Chery is the first one to use it. There was rumor that BYD was going to use it, which is interesting, because they're kind of competitors. But the only thing I heard from the tech people on site was there's still some upstream material bottlenecks for that sodium ion. But apparently that's going into production later this year.

Tu Le:
For those not that familiar, to, not to oversimplify this, but sodium takes out the lithium obviously on the battery, the range is lower, it's cheaper. One of the big reasons because there's no lithium and it holds its charge better in the wintertime. But because of the lack of range, what we'll likely see in the initial set is on the lower price, lowest priced vehicles that aren’t going to, that the customers aren't going to buy it because it has a long range. So think Wuling Hongguang MINIEV, BYD Seagull, So I had heard that by the end of this year, sodium ion would begin production in some of these vehicles。

Lei Xing:
Yes with a caveat. So that Chery new model with the sodium ion that will be kind of like an optional limited quantity thing rather than…

Tu Le:
Did you hear dual chemistry though? Like it was going to be sodium ion and another chemistry within the pack?

Lei Xing:
No, I didn't hear about that. But just to compare, the Qilin battery has a 255 Wh/kg, and the condensed battery is double that, basically. So I mean 255 Wh/kg, that's already pretty huge in terms of density.

Tu Le:
I did want to mention that before the auto show, prior to the auto show, I got to go visit JIDU Auto again, good friend of the show Frank Wu, head of design for JIDU Auto, he gave me a personal tour of the headquarters the Robo Base, thought it was really cool. One thing I did notice that stood out to me while touring JIDU Auto is that and maybe you've experienced this in the past when you visited companies. But I felt this every single time I would go to a tech company or when I worked at some Chinese tech startups, is there's always this like tense atmosphere. And it was never quite, very, very good. It was like a little bit fear, a little bit tense. And so when I went to JIDU Auto, because they consider themselves a technology company, not an automotive company. I felt this, not laid back, but more confident vibes in the just looking at people talking, drinking coffee in the common areas. It was like they were very hopeful. And you'll get an opportunity to do this next time you're in town. He took me into the design studio. I couldn't take any pictures, obviously, but I came away very, very impressed. They're going to, a year from delivering their first ROBO-01, they're going to be delivering the ROBO-02. They've been doing, they've been able to do this in less than two years, which is really impressive. And the ROBO-01, if they can execute flawlessly, that's going to be a game changer from a technology, voice control standpoint. So I'm looking, very much looking forward to next time I'm in town, maybe getting a test drive of one of them, so.

Lei Xing:
I think they've been quiet lately. It's down to execution phase now. After all the talk the talk, right? So I don't expect, nothing better out of them.

Tu Le:
The other thing that you'll get to do next time in the summer is test out one of Baidu’s no safety driver robotaxis.

Lei Xing:
I've already made a raincheck.

Tu Le:
So it was funny because our contacts reached out to me and asked when I was going to be in Beijing. So I set it up and they were hosting some Tsinghua University students, international students. They invited me to sit and talk to the students about the EV space and things like that. And little did I know they also invited a good friend, Duncan Clark, the writer, author of the House that Jack Built. He started an advisory firm years ago here in China in Beijing. He's old China hand, old Beijing hand. Bumping into him was a really pleasant surprise. Anybody who wants to know Jack's back story. There's two pieces of media that I think you should watch. There is a documentary that was made by Porter Erisman. At the time, he was the highest ranking, non-chinese at Alibaba. When they had hundreds and hundreds of employees. He's completely fluent in mandarin. And Jack allowed him to follow Jack into meetings and stuff like that. Filmed a documentary. It's a documentary called Crocodiles in the Yangtze. So Porter Erisman, Crocodiles in the Yangtze, if you want to see Alibaba’s initial days. And then obviously Duncan Clark's book, The House that Jack Built. These are two great books about how Jack built, Jack Ma built Alibaba. Anyways. I digress. Let's move back to cars. I was really impressed with this latest version of the no safety driver. So I've been able to do that the Cruise in San Francisco and Baidu here with no safety driver and man, it just makes things more real for sure. We drove for, we rode around for about 25 minutes in each one.

Lei Xing:
So I just realized that on the day I was in Beijing, I think they have, Baidu has some anniversary over at Shougang Park of their things over there, but so back to the show, so CATL has spent some time also, checked out the EVOGO battery swap, took some videos, and then the other one is really Findreams, BYD’s Findreams. They have the Findreams battery, Findreams Technology, and the Findreams Powertrain. They had a booth. I posted some video, just all different things that they make, that people don't realize that how vertically integrated they are. And I was joking with the people saying that the only thing you don't make are tires, everything else you make, right? And third, I think a sleeper booth that people probably overlooked is ECARX with Meizu, I think I spent some time listening to the people talking about their phones, the Flyme Auto stuff, how that works. It was a learning experience to, you know their Antora chip set that they announced. This is the de-Qualcomming and de-NVIDIA thing going on. Seriously, that's what they're trying to do, basically. So I spend some time there.

Tu Le:
ECARX is the technology company that Geely had invested in or owned. And they've recently IPOed. ECARX is currently supplying to, and it's not clear what they're supplying, but

Lei Xing:
Well, they just announced the Flyme Auto on the Polestar 4, think about that, right? This is kind of the Geely Group ecosystem that you're now seeing, right?

Tu Le:
It's what CARIAD wants to be, basically.

Lei Xing:
ECARX is supposedly founded by Li Shufu and Ziyu, the other guy, and a bunch of these other similar companies that I didn't get a chance to see, but that may be more important as to what's going on in the China EV space, not just the cars themselves, right? But the technology innovation behind the China EV Inc., and I would call these the China Tech Inc. right?

Tu Le:
And the bifurcation and separation of some of that technology, from western brands. So the last thing that I'll talk about is visiting NIO's largest delivery center. They had invited a bunch of foreign media to kind of take a tour. It was pretty impressive seeing all those NIO vehicles, but you kind of got to wonder, they they're very polished brand, but they just need to step it up, and they need to bring that operational game up. I don't know what the deal is, so.

Lei Xing:
Well, you know, I'd say it, it's going to be a demand problem plus, if not a supply problem. Also, another anecdote is, when I visited Solana, the new NIO house at the Solana Mall, I was talking with a fellow and he added me on WeChat. I was saying that my father might be in for a new car. And he’s like keep asking me before May 31, there's this incentive in Beijing. So if you want me to show your father around, please I’d be happy... That was interesting, but I think going back to, man, we've been talking for over an hour now, but shocked, I was shocked, right? You were probably less shocked because you were part of the action for better of two years. But I think the other word I would put in is one of concern. So after seeing, walking the show and seeing all these brands, I feel some of them are, let's say the Yuanhang Autos, the Dayun Autos, the Skyworth, these kind of the fringe brands, and these foreign executives will be asking what are their brand propositions? I tend to agree with them on that part a little bit because there's so many brands, right? They're doing a lot of good things, innovative things, but there's no way that every single one of these brands survive.

Tu Le:
We know that ENOVATE, we know that Hengchi, the WM and NIUTRON, these four are on their last legs, at least. And these are only the notable brands that some western folks have heard of. And there are probably brands I've never heard of, that I've never seen that are on their last legs too. So.

Lei Xing:
Yeah, just today I was reading the Evergrande Auto sold some of their assets for RMB2. RMB2, it’s not a typo. So I don't know what happened there, but if we talk about these smart EV startups, I think Li Auto is the one that stands out because of their…

Tu Le:
Strong, strong. 

Lei Xing:
Proposition and focus. They kind of teased that new MPVish BEV model, spaceship kind of looking, and they're going to move into the RMB200,000-300,000 space soon. And with their own charging network, right, their own architecture, focused on the families, right?

Tu Le:
So I was supposed to go to Li Auto this week before I leave for Shanghai. But my contact got COVID. So I have to wait. I'm okay.

Lei Xing:
I think I’m ok as well.

Tu Le:
COVID went around at the show.

Lei Xing:
Yeah, but I mean it's a different mindset when you hear people getting COVID than maybe a year ago, right?

Tu Le:
Man, it was. Yeah.

Lei Xing:
So I've already made mention to Li Auto that I wanted, I don't know, maybe an L7 when I go back in the summer. I think I can have it for like 5 days, and they're like, you have to post something on some platforms. Hopefully I'll get an AVATR 11 for a few weeks just to drive it, experience it because that's one of the models that supposedly has the best city level kind of NOA, NCA, whatever, really spend some time to really experience and drive these vehicles. And I do need to update or renew my China license.

Tu Le:
So I'll be honest, I’ve gotten offers to test drive cars, but my thing was where would I park it? So I just didn't want to pay all this money to park these cars anyways.

Lei Xing:
I'll pay to park these cars, right, so.

Tu Le:
So there are a few cars that, I did want to see the L7. But unfortunately I won't be able to do that till probably summer time, but I do have a couple site visits coming up this week that I’m pretty excited about. One of them, one of the companies starts with a B and ends with a YD. I think I'll get a chance to test drive some cars down there and visit talk to a few people. So I'm pretty pretty stoked about that. And I will also try to take a ride in another autonomous vehicle. So for those research firms that rate autonomous vehicles, maybe they should stop and fly over here and try some of these autonomous vehicles out before they claim to be the definitive judge of how good autonomous vehicles are globally and rating them. So I won't mention any names, but I'll have ridden in three autonomous vehicles, hopefully by the time I head back to the U.S. And so maybe they should hire me because it's completely nonsense that they are being used as any type of comprehensive judge of autonomous vehicles globally.

Lei Xing:
So hopefully I'll complete that, what do you call it, a trifecta? So Cruise, we've done Cruise in the U.S., and then I'm looking forward to maybe Baidu in the summer, and maybe one of the others. 

Tu Le:
You're going to be impressed with Baidu. You're going to be impressed with Baidu for sure.

Lei Xing:
Yeah, and one of the companies down from south China.

Tu Le:
I've ridden, the one thing I will say, I've ridden in probably a couple dozen DiDis now, at least a couple dozen, and for the fleet vehicles, it is awkward because of the flat rear seat how in an ICE vehicle, it digs, it goes farther than the floor. And so your knees can bend properly while your feet are flat on the floor. But in the EVs on the fleet side, whether it's a Roewe, whether it's some of these other brands. I've been in a Geometry, I've been in a Roewe, I've been in a few other EVs, Beijing Auto. They have this flat, and it makes your knees kind of stick up and it's not super comfortable so that needs to be addressed. But the battery pack won't let them do that. So they need to figure that out from a design standpoint.

Lei Xing:
And hopefully DiDi as well. Did you go? You probably didn't have chance to check out the DiDi booth. They showed that weird looking concept, Neuron something? 

Tu Le:
Next time I'm here there are other companies that I’ll go visit and talk to. I wanted to spend more time with fewer companies than just say, take a picture and say I've went here and went here. So, anyways.

Lei Xing:
They do have, DiDi does have the XC90s running in certain sections of Shanghai. You can hail them I think in the DidDi app.

Tu Le:
One other thing that I'll say is I do like the Polestar 4, I think it will sell well, no rear window is a weird thing, but it looks better than the Polestar 2. It's going to be a fairly competitive price at around 60,000-Euro here?

Lei Xing:
I think it’s around RMB300,000 some. I think the price was announced yesterday or something.

Tu Le:
So I think it should do well. But surprisingly the Polestar 2 doesn't sell well at all. So.

Lei Xing:
Not in China.

Tu Le:
Not in China, in Europe it does. But again, don't be surprised when you hear about these established brands that are very familiar to western folks that are just getting hammered here. And because as you now have experienced Lei, the number of green plates, the number of brands, the number of products, that stuff is real man. It is intense and cutthroat, but hey, do you have anything else? Because I think we should open the room up for anyone who has any questions or comments.

Lei Xing:
No, I think we've covered a lot of things. We can’t be exhaustive. I mean there's so much else to talk about.

Tu Le:
But we'll have some residual for next week, but and there will likely be more fallout from some of what's going on. But if anyone has any questions or comments, please feel free to raise your hands. And Jack, we got to meet Jack. I got to meet Jack for the first time last week. I think that dinner with all the KOLs was really, really cool, got to shake hands and share a pint with all those guys. So.

Lei Xing:
That's the best thing, is to see these people that you've talked only online and then seeing some of the older friends and making some new friends, that's, you can't beat that, and do it in Shanghai. Shanghai, after what Shanghai went through a year ago is just special, right? It's just special. You appreciate everything.

Tu Le:
Definitely, one of, the dinner is definitely one of the highlights I'll have from the three weeks, three weeks plus that I'll have been here. And just cheerleader, want all of them to do well. Some of them are really significant KOLs. Good for them. But again, if anyone has any questions or comments, feel free to raise your hands, we’ll bring you up and get your question answered. 

So anything else that I'm thinking of. Oh Did you see Xpeng? Had they like a digital cartoon that was posted on Douyin that kind of made fun of Tesla? I don’t know if you saw that, I'll send it to you. There is two people driving a G6 and they were talking about NOA stuff. And so because remember that Tesla doesn't have FSD launched here, they only have autopilot. And so there's speculation that Tesla wants to launch FSD but they're not sure if the Chinese government will allow them to. That's all completely speculative, but it is something that is worth talking about. There is it looks like the Gotion factory in Michigan is also going to move forward. There were formal announcements of, I think the incentive plan for them, still very, very controversial and Ford announcing that they're exporting the Nautilus. Now, this is no different than the current GM shipping the Buick Envision to the U.S. from China, but there was some push back on that, right?

Lei Xing:
And also Volkswagen in Anhui exporting the Cupra Tavascan that was confirmed.

Tu Le:
Yes. And we know that Volkswagen will also be shipping Chinese product to the European markets starting in 2024. So that's probably one of them. There could be others or there will be others. I'm just not sure which ones yet. But actually, let me ask you, because we did not talk about the ID.7. Did you get a chance to sit in it?

Lei Xing:
Yes. I got a chance to, I’ll post a little bit of video of the interior. Actually, it's a great step up from the 4 and the 6. I think it's well done, but the execution again is and in the HMI and whether that's going to be buggy or not, I think that's very important.

Tu Le:
So I talked to a few people, insiders, man, and they weren't so high on it. They'd still, they just don't think it'll come, be able to compete here. So no, just remember, I talked about the iPad screen. If you look at the interior of the ID.7, it still looks like a bolted on on iPad, as opposed to like being fully integrated into the front console. But anyways, go ahead. Sorry.

Lei Xing:
No, I think it was okay, I think it was well done. I think it was, I like it better than the 3, 4, 6.

Tu Le:
Yes, I agree with you on that, but I don't think that's really saying that much.

Lei Xing:
So I just remembered the other one was about this LiDAR competition. You mentioned so many vehicles with LiDAR. So now the next innovation is putting LiDARs, integrating onto the screen. So we've seen Innovusion and Hesai announcing deal with Fyao Glass, which is basically the biggest glass supplier in the world, basically integrating the LiDARs into the windshield rather than putting on top of the roof. So I think that's kind of the next innovation coming. And then basically, Luminar, right. They announced their kind of the entry, one million vehicles equipped with Luminar LiDAR by 2028, and then they're producing in China with the TPK so that was announced. So I met Tom our guest in Shanghai. So.

Tu Le:
Yeah, I stopped him because he was following Austin around. He was, Austin was noticeably walking around each of the halls for Tuesday and Wednesday. So he was definitely looking at and taking advantage of being able to see and touch and feel all these different cars in one place, so. The one thing that Frank also really emphasized is that if you look at the NIOs, they still have those horns on the top of the front windshield, because of the LiDARs and the camera. And Frank said, he had designed and worked with his engineers to incorporate the LiDAR into the front headlights. They have a field of view that has more than 180 or 130 or something like that, which most LiDARs don't have. That's how they were able to incorporate it more into the design of the vehicle as opposed to bolting it on and trying to hide them with the black plastic or the black finish. So these are just some of the new ways that you're going to see these Chinese companies really try to hide the technology. Whereas two or three years ago, they wanted to emphasize that almost make it look robotic. Now, again, we're talking about maturity and design maturity. So look out for that. Once the ROBO-01, I think, starts delivery in Q3 of ‘24, you'll notice that there are no bumps on the hood of the vehicle. All right, man, I think we're good. Maybe next week, we try to head back to the normal schedule, although I'll still be…

Lei Xing: 
Wait, when, you’ll still be in China or you coming back next week?

Tu Le:
Dude, I'm trying to. So May holiday. I forgot about, I told you this, right? And so I'm trying to get an earlier flight. So, but Lufthansa is going to charge me an arm and leg. So I might have to stick around Hong Kong. And if so, maybe we do the show a day early. So I'm not in the air when our normal time pops up, but I need to look at my schedule to make sure. I think I arrive back in the U.S. 8 days from now on Thursday. And if that's the case, maybe we can do a Thursday night eastern podcast?

Lei Xing:
Yeah, so I'll work with you, so. I’m flexible. 

Tu Le:
Because if we look, a lot of our KOLs are listening to this podcast. Jay has been on, Mark’s been on, so that's been pretty cool. But we'll figure it out. 

Lei Xing:
Okay. And meanwhile have fun and I know you got a lot coming up. There's a couple of AMCHAM events and then you go down to Shenzhen. Good luck.

Tu Le:
Man, I'll have a good update for you, for everyone next week as well. So cool, man. I'm glad you finally experienced what we've been talking about. And I think it's kind of really sunk in for you. And so I hope you now know why I dunk on these companies because they didn't get what I saw and they are starting to or at least media has now acknowledged how far ahead or how far behind.

Lei Xing:
I think they realize, they've been shocked as I have. So just to put it that way. And now they got to work, see how to turn this around if they can at all.

Tu Le:
And it can't be incremental, it needs to be high risk, high reward type of moves, strategic moves, business moves in order to even attempt to get one or two steps closer, because if Volkswagen can't create a new entity, if it takes Volkswagen in a year to create a new entity, then they have no hope of catching up. So they talk about moving faster, but it's going to take them a year to open this new entity up. So that to me is talking out of both sides of your mouth. Anyways. Let's end it there Lei, hey, good seeing you, hanging out with you. Meeting, new friends, current friends. And let's keep on informing everybody, man. I think the Shanghai Auto Show really cemented in the west, at least this huge competition that's going on and the disadvantages that the foreign legacies have of competing here. So, two hours men, good job.

Lei Xing:
I've seen everything, I've experienced everything, touched, felt, saw, heard, everything.

Tu Le:
Now we're the same. Now we are the same.

Lei Xing:
Just a word of wisdom, three words: go to China.

Tu Le:
That's it. Farley said it too. So Farley said it too. And cool, man, we'll talk soon. Good morning, good afternoon and good evening, everyone. We will talk with you next week.

Lei Xing:
Talk to you all next time. 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.